UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANIES
Investment Company Act File Number 811-22321
MAINSTAY FUNDS TRUST
(Exact name of Registrant as specified in charter)
51 Madison Avenue, New York, NY 10010
(Address of principal executive offices) (Zip code)
(Address of principal executive offices) (Zip code)
J. Kevin Gao, Esq.
169 Lackawanna Avenue
Parsippany, New Jersey 07054
(Name and address of agent for service)
169 Lackawanna Avenue
Parsippany, New Jersey 07054
(Name and address of agent for service)
Registrant’s telephone number, including area code: (212)576-7000
Date of fiscal year end: October 31
Date of reporting period: October 31, 2011
FORM N-CSR
Item 1. Reports to Stockholders.
MainStay 130/30 Funds
Message from the President and Annual Report
October 31, 2011
MainStay 130/30 Core Fund
MainStay 130/30 International Fund
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
MainStay 130/30 Core Fund | 5 | |
MainStay 130/30 International Fund | 30 | |
Notes to Financial Statements | 59 | |
Report of Independent Registered Public Accounting Firm | 70 | |
Federal Income Tax Information | 71 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 71 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 71 | |
Board Members and Officers | 72 | |
Investors should refer to each Fund’s Summary Prospectus and/or Prospectus and consider each Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information. You may obtain copies of each Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read each Fund’s Summary Prospectus and/or Prospectus carefully before investing.
MainStay 130/30 Core Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (6/29/07) | Ratio2 | ||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | 1 | .92% | –6 | .59% | 2 | .53% | ||||||||
Excluding sales charges | 7 | .86 | –5 | .36 | 2 | .53 | ||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | 2 | .11 | –6 | .41 | 2 | .32 | ||||||||
Excluding sales charges | 8 | .05 | –5 | .18 | 2 | .32 | ||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | 6 | .05 | –6 | .06 | 3 | .26 | ||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 7 | .05 | –6 | .06 | 3 | .26 | |||||||||
Class I Shares | No Sales Charge | 8 | .42 | –4 | .95 | 2 | .04 | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
Russell 1000® Index4 | 8 | .01% | –1 | .74% | ||||
Average Lipper Extended U.S. Large-Cap Core Fund5 | 5 | .97 | –4 | .51 | ||||
4. | The Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000® Index represents approximately 92% of the Russell 3000® Index. The Russell 1000® Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an Index. |
5. | The average Lipper extended U.S. large-cap core fund is representative of funds that combine long and short stock selection to invest in a diversified portfolio of U.S. large-cap equities, with a target net exposure of 100% long. Typical strategies vary between 110% long and 10% short to 160% long and 60% short. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay 130/30 Core Fund
Cost in Dollars of a $1,000 Investment in MainStay 130/30 Core Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 929.00 | $ | 10.99 | $ | 1,013.80 | $ | 11.47 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 930.40 | $ | 9.73 | $ | 1,015.10 | $ | 10.16 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 925.90 | $ | 14.66 | $ | 1,010.00 | $ | 15.30 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 931.80 | $ | 8.57 | $ | 1,016.30 | $ | 8.94 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (2.26% for Investor Class, 2.00% for Class A, 3.02% for Class C and 1.76% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Industry Composition as of October 31, 2011 (Unaudited)
Oil, Gas & Consumable Fuels | 12.0 | % | ||
Software | 7.0 | |||
IT Services | 6.3 | |||
Computers & Peripherals | 6.1 | |||
Health Care Providers & Services | 5.0 | |||
Media | 4.8 | |||
Pharmaceuticals | 4.6 | |||
Specialty Retail | 4.6 | |||
Diversified Financial Services | 4.5 | |||
Energy Equipment & Services | 4.4 | |||
Insurance | 4.4 | |||
Chemicals | 4.0 | |||
Commercial Banks | 3.4 | |||
Semiconductors & Semiconductor Equipment | 3.4 | |||
Hotels, Restaurants & Leisure | 3.3 | |||
Internet Software & Services | 3.3 | |||
Machinery | 3.1 | |||
Biotechnology | 3.0 | |||
Beverages | 2.7 | |||
Food & Staples Retailing | 2.4 | |||
Capital Markets | 2.2 | |||
Communications Equipment | 2.1 | |||
Diversified Telecommunication Services | 2.1 | |||
Metals & Mining | 2.1 | |||
Road & Rail | 2.1 | |||
Aerospace & Defense | 2.0 | |||
Diversified Consumer Services | 2.0 | |||
Industrial Conglomerates | 2.0 | |||
Food Products | 1.8 | |||
Tobacco | 1.8 | |||
Life Sciences Tools & Services | 1.6 | |||
Real Estate Investment Trusts | 1.5 | |||
Health Care Equipment & Supplies | 1.4 | |||
Electronic Equipment & Instruments | 1.3 | |||
Auto Components | 1.1 | |||
Internet & Catalog Retail | 1.1 | |||
Wireless Telecommunication Services | 1.1 | |||
Consumer Finance | 1.0 | |||
Household Products | 1.0 | |||
Construction & Engineering | 0.9 | |||
Multi-Utilities | 0.9 | |||
Multiline Retail | 0.9 | |||
Air Freight & Logistics | 0.7 | |||
Airlines | 0.6 | |||
Household Durables | 0.6 | |||
Leisure Equipment & Products | 0.6 | |||
Personal Products | 0.6 | |||
Professional Services | 0.6 | |||
Textiles, Apparel & Luxury Goods | 0.6 | |||
Automobiles | 0.5 | |||
Electrical Equipment | 0.5 | |||
Paper & Forest Products | 0.5 | |||
Real Estate Management & Development | 0.5 | |||
Trading Companies & Distributors | 0.5 | |||
Commercial Services & Supplies | 0.4 | |||
Electric Utilities | 0.4 | |||
Containers & Packaging | 0.3 | |||
Building Products | 0.2 | |||
Gas Utilities | 0.2 | |||
Health Care Technology | 0.2 | |||
Independent Power Producers & Energy Traders | 0.2 | |||
Marine | 0.0 | ‡ | ||
Short-Term Investment | 0.0 | ‡ | ||
Other Assets, Less Liabilities | 0.0 | ‡ | ||
Investments Sold Short | –35.0 | |||
100.0 | % | |||
See Portfolio of Investments beginning on page 12 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | ExxonMobil Corp. | |
2. | Apple, Inc. | |
3. | International Business Machines Corp. | |
4. | Chevron Corp. | |
5. | Microsoft Corp. | |
6. | Pfizer, Inc. | |
7. | Oracle Corp. | |
8. | Wells Fargo & Co. | |
9. | Google, Inc. Class A | |
10. | JPMorgan Chase & Co. |
8 MainStay 130/30 Core Fund
Top Five Short Positions as of October 31, 2011
1. | Goodyear Tire & Rubber Co. (The) | |
2. | Under Armour, Inc. Class A | |
3. | Gentex Corp. | |
4. | WABCO Holdings, Inc. | |
5. | Genworth Financial, Inc. Class A |
mainstayinvestments.com 9
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Harvey J. Fram, CFA, and Mona Patni of Madison Square Investors LLC, the Fund’s Subadvisor.
How did MainStay 130/30 Core Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay 130/30 Core Fund returned 7.86% for Investor Class shares, 8.05% for Class A shares and 7.05% for Class C shares for the 12 months ended October 31, 2011. Over the same period, the Fund’s Class I shares returned 8.42%. All share classes outperformed the 5.97% return of the average Lipper1 extended U.S. large-cap core fund for the 12 months ended October 31, 2011. Class A and Class I shares outperformed—and Investor Class and Class C shares underperformed—the 8.01% return of the Russell 1000® Index2 for the 12 months ended October 31, 2011. The Russell 1000® Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
Short positions contributed much more than long positions to the Fund’s outperformance of the Russell 1000® Index. (Contributions take weightings and total returns into account.) While earnings-based momentum factors in our model were positive, industry-based momentum suffered. Within the valuation factors of our model, operating cash flow–based multiples worked better than free cash flow multiples.3 The earnings quality factor of our model showed a positive return for the 12 months ended October 31, 2011.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the sectors that provided the strongest contributions to the Fund’s performance relative to the Russell 1000® Index were health care, financials and information technology. Health care advanced on a strong recovery among managed health care stocks that had become undervalued in the wake of last year’s health care reform legislation. Stock selection in information technology helped the Fund’s relative performance, and having an underweight position relative to the benchmark in financials contributed positively, in light of the weak performance of financial stocks overall.
An underweight position in the energy sector detracted from the Fund’s performance relative to the Russell 1000® Index. Unfavorable stock selection in the telecommunication services and consumer discretionary sectors also detracted from relative performance.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
On an absolute basis, the strongest contributors to the Fund’s performance were computers & peripherals company Apple; IT services company International Business Machines; and oil, gas & consumable fuels company Chevron. Apple continued to impress investors with solid earnings and revenues from a suite of products that enjoys a loyal customer base. IBM’s technological leadership and stable customer base in products and services also allowed the company to deliver steady recurring earnings and revenues. Chevron delivered strong results during this period boosted by strong oil prices and refining margins, gains on asset sales, and positive foreign exchange effects.
Holdings that detracted the most from the Fund’s absolute performance included a short position in food products company Green Mountain Coffee Roasters, a long position in diversified financial services company Bank of America and a short position in semiconductor company Varian Semiconductor Equipment. A short position in Green Mountain Coffee Roasters hurt the Fund’s performance when the stock surged more than 40% in a single day after the company agreed to distribute Starbucks coffee. As of the end of the reporting period, our model continued to regard the valuation of Green Mountain Coffee Roasters’ stock as too high relative to the company’s cash flow and revenues. Bank of America was hurt by continued fallout from the mortgage crisis and by the economic situation in Europe, and an overweight position hurt the Fund’s performance. Varian Semiconductor, which has emerged as the leader in the ion implant segment of the chip equipment industry, performed quite well over the reporting period, and a short position in the stock had a negative impact on the Fund’s performance.
Did the Fund make any significant purchases or sales during the reporting period?
Among the Fund’s purchases during the reporting period were shares of computers & peripherals company Apple and oil, gas & consumable fuels company Occidental Petroleum. Apple continued to benefit from recurring consumer purchases. Occidental Petroleum benefited from acquisitions of proven properties that could offer future production growth and additional reserves by using enhanced oil-recovery techniques.
Among the stocks sold by the Fund during the reporting period were food & staples retailer Wal-Mart Stores and diversified financial services company Bank of America. Wal-Mart’s sales remained skewed toward consumers seeking lower-cost goods. Many of these consumers may be affected by reductions in
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Russell 1000® Index.
3. Operating cash flow measures revenues minus operating expenses, or the cash a company generates from running its business. Free cash flow measures operating cash flow minus operating expenses. A company with high expenditures may appear cheaper (or have a lower multiple) on an operating cash flow basis than on a free cash flow basis. Each measure helps select different types of stocks, and the Fund’s model uses both measures for diversification purposes.
10 MainStay 130/30 Core Fund
government expenditures and a low-growth economic environment. These factors detracted from the company’s top-line prospects and Wal-Mart’s stock performance. Bank of America’s stock suffered from continuing mortgage fallout and concerns about European debt.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund sectors that saw the most substantial weighting increases relative to the Russell 1000® Index were health care and information technology. Over the same period, we decreased the Fund’s weightings in industrials and telecommunication services.
How was the Fund positioned at the end of October 2011?
As of October 31, 2011, the Fund was overweight relative to the Russell 1000® Index in the information technology and energy sectors. As of the same date, the Fund was underweight in utilities and industrials.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 11
Portfolio of Investments†††October 31, 2011
Shares | Value | |||||||
Common Stocks 135.0%† | ||||||||
Aerospace & Defense 2.0% | ||||||||
General Dynamics Corp. | 1,456 | $ | 93,461 | |||||
Goodrich Corp. | 2,603 | 319,206 | ||||||
Honeywell International, Inc. (a) | 49,467 | 2,592,071 | ||||||
ITT Corp. (a) | 47,019 | 2,144,066 | ||||||
L-3 Communications Holdings, Inc. | 4,852 | 328,868 | ||||||
Textron, Inc. (a) | 96,611 | 1,876,186 | ||||||
United Technologies Corp. (a) | 2,094 | 163,290 | ||||||
7,517,148 | ||||||||
Air Freight & Logistics 0.7% | ||||||||
FedEx Corp. (a) | 30,899 | 2,528,465 | ||||||
Airlines 0.6% | ||||||||
Copa Holdings S.A. Class A | 5,794 | 400,192 | ||||||
Southwest Airlines Co. (a) | 91,794 | 784,839 | ||||||
United Continental Holdings, Inc. (b) | 59,576 | 1,151,008 | ||||||
2,336,039 | ||||||||
Auto Components 1.1% | ||||||||
Autoliv, Inc. (a) | 22,549 | 1,302,656 | ||||||
Federal-Mogul Corp. (a)(b) | 18,546 | 312,686 | ||||||
Lear Corp. (a) | 28,322 | 1,328,585 | ||||||
TRW Automotive Holdings Corp. (a)(b) | 33,683 | 1,418,054 | ||||||
4,361,981 | ||||||||
Automobiles 0.5% | ||||||||
Harley-Davidson, Inc. (a) | 53,698 | 2,088,852 | ||||||
Beverages 2.7% | ||||||||
Coca-Cola Co. (The) (a) | 31,557 | 2,155,974 | ||||||
Coca-Cola Enterprises, Inc. (a) | 43,305 | 1,161,440 | ||||||
Constellation Brands, Inc. Class A (a)(b) | 36,537 | 738,778 | ||||||
Dr. Pepper Snapple Group, Inc. (a) | 38,313 | 1,434,822 | ||||||
PepsiCo., Inc. (a) | 75,003 | 4,721,439 | ||||||
10,212,453 | ||||||||
Biotechnology 3.0% | ||||||||
Amgen, Inc. (a) | 53,308 | 3,052,949 | ||||||
Amylin Pharmaceuticals, Inc. (b) | 13,425 | 154,656 | ||||||
Biogen Idec, Inc. (a)(b) | 21,816 | 2,538,510 | ||||||
Celgene Corp. (b) | 2,472 | 160,260 | ||||||
Gilead Sciences, Inc. (a)(b) | 68,983 | 2,873,832 | ||||||
Myriad Genetics, Inc. (a)(b) | 77,534 | 1,649,923 | ||||||
United Therapeutics Corp. (a)(b) | 24,151 | 1,056,123 | ||||||
11,486,253 | ||||||||
Building Products 0.2% | ||||||||
Fortune Brands Home & Security, Inc. (b) | 51,241 | 744,532 | ||||||
Masco Corp. | 3,583 | 34,397 | ||||||
778,929 | ||||||||
Capital Markets 2.2% | ||||||||
American Capital Ltd. (b) | 65,496 | 508,904 | ||||||
Ameriprise Financial, Inc. | 400 | 18,672 | ||||||
Bank of New York Mellon Corp. (The) (a) | 76,453 | 1,626,920 | ||||||
BlackRock, Inc. | 476 | 75,108 | ||||||
Charles Schwab Corp. (The) (a) | 133,115 | 1,634,652 | ||||||
Franklin Resources, Inc. | 708 | 75,494 | ||||||
Janus Capital Group, Inc. | 13,586 | 89,124 | ||||||
Northern Trust Corp. (a) | 27,754 | 1,123,204 | ||||||
Raymond James Financial, Inc. (a) | 22,347 | 678,679 | ||||||
State Street Corp. (a) | 50,616 | 2,044,380 | ||||||
Waddell & Reed Financial, Inc. Class A | 14,167 | 392,851 | ||||||
8,267,988 | ||||||||
Chemicals 4.0% | ||||||||
Airgas, Inc. | 1,613 | 111,216 | ||||||
Cabot Corp. (a) | 16,497 | 497,879 | ||||||
CF Industries Holdings, Inc. (a) | 9,303 | 1,509,598 | ||||||
Cytec Industries, Inc. | 3,527 | 157,551 | ||||||
Eastman Chemical Co. (a) | 46,317 | 1,819,795 | ||||||
Ecolab, Inc. (a) | 31,014 | 1,669,794 | ||||||
Lyondell Chemical Co. (a) | 47,957 | 1,575,867 | ||||||
Monsanto Co. (a) | 29,655 | 2,157,401 | ||||||
Mosaic Co. (The) | 38,268 | 2,240,974 | ||||||
PPG Industries, Inc. (a) | 1,580 | 136,528 | ||||||
Rockwood Holdings, Inc. (a)(b) | 39,214 | 1,805,413 | ||||||
W.R. Grace & Co. (b) | 31,425 | 1,313,251 | ||||||
Westlake Chemical Corp. (a) | 8,547 | 352,222 | ||||||
15,347,489 | ||||||||
Commercial Banks 3.4% | ||||||||
BB&T Corp. | 4,417 | 103,093 | ||||||
Comerica, Inc. | 23,822 | 608,652 | ||||||
East West Bancorp, Inc. (a) | 14,630 | 284,846 | ||||||
First Citizens BancShares, Inc. Class A (a) | 3,594 | 586,002 | ||||||
Huntington Bancshares, Inc. | 1,634 | 8,464 | ||||||
KeyCorp (a) | 217,056 | 1,532,415 | ||||||
PNC Financial Services Group, Inc. (a) | 13,643 | 732,766 | ||||||
Popular, Inc. (b) | 268,118 | 498,699 | ||||||
Regions Financial Corp. | 356,916 | 1,402,680 | ||||||
SunTrust Banks, Inc. | 6,761 | 133,395 | ||||||
TCF Financial Corp. | 1,347 | 14,332 | ||||||
U.S. Bancorp | 4,200 | 107,478 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
12 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Commercial Banks (continued) | ||||||||
X Wells Fargo & Co. (a) | 218,928 | $ | 5,672,424 | |||||
Zions Bancorp. (a) | 77,874 | 1,351,893 | ||||||
13,037,139 | ||||||||
Commercial Services & Supplies 0.4% | ||||||||
Cintas Corp. | 26,615 | 795,522 | ||||||
Copart, Inc. (b) | 917 | 39,935 | ||||||
KAR Auction Services, Inc. (b) | 20,941 | 287,939 | ||||||
Waste Management, Inc. | 13,464 | 443,370 | ||||||
1,566,766 | ||||||||
Communications Equipment 2.1% | ||||||||
Brocade Communications Systems, Inc. (b) | 94,390 | 413,428 | ||||||
Cisco Systems, Inc. (a) | 233,591 | 4,328,441 | ||||||
EchoStar Corp. Class A (a)(b) | 41,314 | 1,089,037 | ||||||
Motorola Mobility Holdings, Inc. (a)(b) | 20,002 | 777,678 | ||||||
QUALCOMM, Inc. (a) | 14,640 | 755,424 | ||||||
Tellabs, Inc. (a) | 157,806 | 683,300 | ||||||
8,047,308 | ||||||||
Computers & Peripherals 6.1% | ||||||||
X Apple, Inc. (a)(b) | 31,984 | 12,946,484 | ||||||
Dell, Inc. (a)(b) | 128,946 | 2,038,636 | ||||||
EMC Corp. (b) | 2,531 | 62,035 | ||||||
Hewlett-Packard Co. (a) | 135,010 | 3,592,616 | ||||||
Lexmark International, Inc. Class A (b) | 32,817 | 1,040,299 | ||||||
NCR Corp. (b) | 735 | 13,994 | ||||||
NetApp, Inc. (a)(b) | 42,706 | 1,749,238 | ||||||
SanDisk Corp. (a)(b) | 9,353 | 473,916 | ||||||
Western Digital Corp. (a)(b) | 50,189 | 1,337,035 | ||||||
23,254,253 | ||||||||
Construction & Engineering 0.9% | ||||||||
Fluor Corp. (a) | 26,378 | 1,499,589 | ||||||
KBR, Inc. (a) | 57,906 | 1,616,156 | ||||||
URS Corp. (b) | 13,248 | 472,954 | ||||||
3,588,699 | ||||||||
Consumer Finance 1.0% | ||||||||
American Express Co. (a) | 62,550 | 3,166,281 | ||||||
Capital One Financial Corp. (a) | 4,892 | 223,369 | ||||||
Discover Financial Services | 26,909 | 633,976 | ||||||
4,023,626 | ||||||||
Containers & Packaging 0.3% | ||||||||
Packaging Corp. of America | 19,034 | 496,407 | ||||||
Sealed Air Corp. | 21,236 | 378,001 | ||||||
Silgan Holdings, Inc. | 275 | 10,323 | ||||||
Temple-Inland, Inc. | 3,158 | 100,456 | ||||||
985,187 | ||||||||
Diversified Consumer Services 2.0% | ||||||||
Apollo Group, Inc. Class A (a)(b) | 43,055 | 2,038,654 | ||||||
Career Education Corp. (a)(b) | 94,398 | 1,522,640 | ||||||
DeVry, Inc. (a) | 33,847 | 1,275,355 | ||||||
H&R Block, Inc. (a) | 128,955 | 1,971,722 | ||||||
ITT Educational Services, Inc. (a)(b) | 15,144 | 938,322 | ||||||
7,746,693 | ||||||||
Diversified Financial Services 4.5% | ||||||||
Bank of America Corp. (a) | 212,224 | 1,449,490 | ||||||
CBOE Holdings, Inc. | 10,260 | 268,094 | ||||||
Citigroup, Inc. | 61,280 | 1,935,835 | ||||||
Interactive Brokers Group, Inc. (a) | 68,809 | 1,058,283 | ||||||
X JPMorgan Chase & Co. (a) | 154,674 | 5,376,468 | ||||||
Leucadia National Corp. (a) | 36,832 | 988,203 | ||||||
Moody’s Corp. (a) | 63,433 | 2,251,237 | ||||||
NASDAQ OMX Group, Inc. (The) (a)(b) | 79,181 | 1,983,484 | ||||||
NYSE Euronext (a) | 75,490 | 2,005,769 | ||||||
17,316,863 | ||||||||
Diversified Telecommunication Services 2.1% | ||||||||
AT&T, Inc. (a) | 111,072 | 3,255,520 | ||||||
Verizon Communications, Inc. (a) | 134,094 | 4,958,796 | ||||||
8,214,316 | ||||||||
Electric Utilities 0.4% | ||||||||
FirstEnergy Corp. | 27,536 | 1,238,019 | ||||||
N.V. Energy, Inc. | 5,967 | 95,711 | ||||||
Northeast Utilities | 55 | 1,901 | ||||||
Progress Energy, Inc. | 1,415 | 73,721 | ||||||
1,409,352 | ||||||||
Electrical Equipment 0.5% | ||||||||
Emerson Electric Co. (a) | 29,552 | 1,422,042 | ||||||
Thomas & Betts Corp. (a)(b) | 13,126 | 652,231 | ||||||
2,074,273 | ||||||||
Electronic Equipment & Instruments 1.3% | ||||||||
Jabil Circuit, Inc. (a) | 105,024 | 2,159,293 | ||||||
Tech Data Corp. (b) | 33,435 | 1,644,333 | ||||||
Vishay Intertechnology, Inc. (a)(b) | 95,758 | 1,029,399 | ||||||
4,833,025 | ||||||||
Energy Equipment & Services 4.4% | ||||||||
Diamond Offshore Drilling, Inc. (a) | 16,078 | 1,053,752 | ||||||
Halliburton Co. | 77,449 | 2,893,495 | ||||||
Helmerich & Payne, Inc. (a) | 26,488 | 1,408,632 | ||||||
Nabors Industries, Ltd. (a)(b) | 121,385 | 2,224,987 | ||||||
National-Oilwell Varco, Inc. | 810 | 57,777 | ||||||
Oceaneering International, Inc. (a) | 35,093 | 1,467,940 | ||||||
Patterson-UTI Energy, Inc. (a) | 94,760 | 1,925,523 | ||||||
RPC, Inc. | 27,722 | 514,798 | ||||||
Schlumberger, Ltd. (a) | 14,040 | 1,031,519 | ||||||
SEACOR Holdings, Inc. (a) | 11,456 | 975,478 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Energy Equipment & Services (continued) | ||||||||
Superior Energy Services, Inc. (a)(b) | 56,489 | $ | 1,588,471 | |||||
Unit Corp. (a)(b) | 32,337 | 1,586,453 | ||||||
16,728,825 | ||||||||
Food & Staples Retailing 2.4% | ||||||||
Costco Wholesale Corp. (a) | 11,956 | 995,337 | ||||||
Kroger Co. (The) (a) | 48,051 | 1,113,822 | ||||||
Safeway, Inc. (a) | 102,464 | 1,984,728 | ||||||
SUPERVALU, Inc. (a) | 133,678 | 1,072,097 | ||||||
Wal-Mart Stores, Inc. (a) | 18,564 | 1,052,950 | ||||||
Walgreen Co. (a) | 72,284 | 2,399,829 | ||||||
Whole Foods Market, Inc. | 7,397 | 533,472 | ||||||
9,152,235 | ||||||||
Food Products 1.8% | ||||||||
ConAgra Foods, Inc. (a) | 23,834 | 603,715 | ||||||
Dean Foods Co. (a)(b) | 167,174 | 1,624,931 | ||||||
Flowers Foods, Inc. (a) | 63,844 | 1,289,010 | ||||||
Ralcorp Holdings, Inc. (b) | 415 | 33,549 | ||||||
Smithfield Foods, Inc. (a)(b) | 51,124 | 1,168,695 | ||||||
Tyson Foods, Inc. Class A (a) | 112,355 | 2,168,452 | ||||||
6,888,352 | ||||||||
Gas Utilities 0.2% | ||||||||
Atmos Energy Corp. | 4,427 | 151,935 | ||||||
National Fuel Gas Co. | 378 | 23,167 | ||||||
ONEOK, Inc. | 6,082 | 462,536 | ||||||
637,638 | ||||||||
Health Care Equipment & Supplies 1.4% | ||||||||
C.R. Bard, Inc. (a) | 17,291 | 1,486,162 | ||||||
Cooper Cos., Inc. (The) (a) | 7,859 | 544,629 | ||||||
Covidien PLC (a) | 15,755 | 741,115 | ||||||
Hill-Rom Holdings, Inc. (a) | 37,981 | 1,278,820 | ||||||
Kinetic Concepts, Inc. (b) | 2,147 | 146,833 | ||||||
St. Jude Medical, Inc. | 10,247 | 399,633 | ||||||
Zimmer Holdings, Inc. (a)(b) | 12,309 | 647,823 | ||||||
5,245,015 | ||||||||
Health Care Providers & Services 5.0% | ||||||||
Aetna, Inc. (a) | 34,305 | 1,363,967 | ||||||
AMERIGROUP Corp. (a)(b) | 23,797 | 1,323,827 | ||||||
AmerisourceBergen Corp. (a) | 55,520 | 2,265,216 | ||||||
Cardinal Health, Inc. | 1,536 | 67,999 | ||||||
CIGNA Corp. (a) | 27,620 | 1,224,671 | ||||||
Community Health Systems, Inc. (b) | 11,073 | 193,556 | ||||||
Coventry Health Care, Inc. (a)(b) | 48,221 | 1,533,910 | ||||||
HCA Holdings, Inc. (b) | 31,967 | 749,626 | ||||||
Humana, Inc. (a) | 16,501 | 1,400,770 | ||||||
LifePoint Hospitals, Inc. (b) | 1,325 | 51,225 | ||||||
Lincare Holdings, Inc. (a) | 44,726 | 1,053,297 | ||||||
McKesson Corp. (a) | 32,073 | 2,615,553 | ||||||
Medco Health Solutions, Inc. (b) | 3,779 | 207,316 | ||||||
Omnicare, Inc. | 5,798 | 172,896 | ||||||
UnitedHealth Group, Inc. (a) | 61,706 | 2,961,271 | ||||||
WellPoint, Inc. (a) | 29,268 | 2,016,565 | ||||||
19,201,665 | ||||||||
Health Care Technology 0.2% | ||||||||
Cerner Corp. (b) | 9,353 | 593,261 | ||||||
Emdeon, Inc. Class A (b) | 750 | 14,227 | ||||||
607,488 | ||||||||
Hotels, Restaurants & Leisure 3.3% | ||||||||
Brinker International, Inc. (a) | 70,364 | 1,611,336 | ||||||
Darden Restaurants, Inc. (a) | 35,397 | 1,694,808 | ||||||
International Game Technology (a) | 127,992 | 2,251,379 | ||||||
Las Vegas Sands Corp. (b) | 6,066 | 284,799 | ||||||
Marriott International, Inc. Class A | 2,709 | 85,334 | ||||||
McDonald’s Corp. (a) | 9,873 | 916,708 | ||||||
Panera Bread Co. Class A (a)(b) | 1,633 | 218,316 | ||||||
Penn National Gaming, Inc. (b) | 38,509 | 1,386,324 | ||||||
Wendy’s Co. (The) (a) | 216,539 | 1,095,687 | ||||||
WMS Industries, Inc. (b) | 21,282 | 466,289 | ||||||
Wyndham Worldwide Corp. | 1,121 | 37,744 | ||||||
Wynn Resorts, Ltd. (a) | 15,548 | 2,064,774 | ||||||
Yum! Brands, Inc. (a) | 7,035 | 376,865 | ||||||
12,490,363 | ||||||||
Household Durables 0.6% | ||||||||
Garmin, Ltd. (a) | 29,398 | 1,010,997 | ||||||
Harman International Industries, Inc. | 14,139 | 610,239 | ||||||
Leggett & Platt, Inc. (a) | 37,625 | 823,988 | ||||||
2,445,224 | ||||||||
Household Products 1.0% | ||||||||
Clorox Co. (The) | 5,174 | 346,347 | ||||||
Procter & Gamble Co. (The) (a) | 53,610 | 3,430,504 | ||||||
3,776,851 | ||||||||
Independent Power Producers & Energy Traders 0.2% | ||||||||
AES Corp. (The) (a)(b) | 40,977 | 459,762 | ||||||
NRG Energy, Inc. (b) | 11,322 | 242,517 | ||||||
702,279 | ||||||||
Industrial Conglomerates 2.0% | ||||||||
3M Co. (a) | 19,469 | 1,538,440 | ||||||
Danaher Corp. | 6,484 | 313,501 | ||||||
General Electric Co. (a) | 199,859 | 3,339,644 | ||||||
Tyco International, Ltd. (a) | 57,085 | 2,600,222 | ||||||
7,791,807 | ||||||||
Insurance 4.4% | ||||||||
ACE, Ltd. (a) | 17,216 | 1,242,134 | ||||||
Aflac, Inc. | 64 | 2,886 | ||||||
Allied World Assurance Co. Holdings, Ltd. (a) | 19,168 | 1,113,661 |
The notes to the financial statements are an integral part of,
14 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Insurance (continued) | ||||||||
American Financial Group, Inc. (a) | 24,871 | $ | 891,128 | |||||
American International Group, Inc. (b) | 14,459 | 356,993 | ||||||
Arch Capital Group, Ltd. (b) | 4,090 | 147,117 | ||||||
Berkshire Hathaway, Inc. Class B (a)(b) | 26,147 | 2,035,805 | ||||||
Chubb Corp. (The) | 939 | 62,960 | ||||||
Endurance Specialty Holdings, Ltd. (a) | 24,264 | 902,621 | ||||||
Fidelity National Financial, Inc. Class A | 23,917 | 369,279 | ||||||
Hartford Financial Services Group, Inc. (The) (a) | 80,005 | 1,540,096 | ||||||
Kemper Corp. | 5,181 | 139,317 | ||||||
Lincoln National Corp. | 51,084 | 973,150 | ||||||
Principal Financial Group, Inc. (a) | 79,836 | 2,058,172 | ||||||
Prudential Financial, Inc. (a) | 10,089 | 546,824 | ||||||
Reinsurance Group of America, Inc. | 309 | 16,139 | ||||||
StanCorp Financial Group, Inc. | 64 | 2,172 | ||||||
Travelers Cos., Inc. (The) (a) | 45,857 | 2,675,756 | ||||||
Validus Holdings, Ltd. (a) | 58,762 | 1,607,728 | ||||||
16,683,938 | ||||||||
Internet & Catalog Retail 1.1% | ||||||||
Amazon.com, Inc. (a)(b) | 5,109 | 1,090,822 | ||||||
Expedia, Inc. (a) | 47,610 | 1,250,239 | ||||||
Liberty Interactive Corp. (a)(b) | 95,361 | 1,566,781 | ||||||
Netflix, Inc. (b) | 475 | 38,988 | ||||||
Priceline.com, Inc. (b) | 876 | 444,763 | ||||||
4,391,593 | ||||||||
Internet Software & Services 3.3% | ||||||||
AOL, Inc. (a)(b) | 71,988 | 1,016,471 | ||||||
eBay, Inc. (b) | 43,817 | 1,394,695 | ||||||
X Google, Inc. Class A (a)(b) | 9,292 | 5,506,811 | ||||||
IAC/InterActiveCorp (a)(b) | 47,698 | 1,947,509 | ||||||
Monster Worldwide, Inc. (b) | 117,336 | 1,083,011 | ||||||
VistaPrint N.V. (a)(b) | 35,532 | 1,240,778 | ||||||
WebMD Health Corp. (b) | 15,993 | 574,948 | ||||||
12,764,223 | ||||||||
IT Services 6.3% | ||||||||
Accenture PLC Class A (a) | 52,943 | 3,190,345 | ||||||
Alliance Data Systems Corp. (a)(b) | 21,235 | 2,175,313 | ||||||
Amdocs, Ltd. (a)(b) | 63,798 | 1,915,216 | ||||||
Booz Allen Hamilton Holding Corp. (a)(b) | 46,620 | 737,062 | ||||||
Computer Sciences Corp. (a) | 34,751 | 1,093,266 | ||||||
DST Systems, Inc. (a) | 33,413 | 1,676,999 | ||||||
Global Payments, Inc. (a) | 27,080 | 1,243,514 | ||||||
X International Business Machines Corp. (a) | 46,449 | 8,575,879 | ||||||
Lender Processing Services, Inc. (a) | 23,383 | 410,372 | ||||||
NeuStar, Inc. Class A (b) | 338 | 10,745 | ||||||
SAIC, Inc. (b) | 42,183 | 524,335 | ||||||
Total System Services, Inc. | 32,097 | 638,409 | ||||||
Western Union Co. (The) (a) | 101,315 | 1,769,973 | ||||||
23,961,428 | ||||||||
Leisure Equipment & Products 0.6% | ||||||||
Polaris Industries, Inc. (a) | 34,790 | 2,203,599 | ||||||
Life Sciences Tools & Services 1.6% | ||||||||
Agilent Technologies, Inc. (a)(b) | 63,141 | 2,340,637 | ||||||
Bio-Rad Laboratories, Inc. Class A (b) | 2,111 | 210,150 | ||||||
Charles River Laboratories International, Inc. (a)(b) | 38,277 | 1,235,581 | ||||||
Covance, Inc. (a)(b) | 39,182 | 1,987,703 | ||||||
Pharmaceutical Product Development, Inc. | 1,500 | 49,485 | ||||||
Thermo Fisher Scientific, Inc. (b) | 4,447 | 223,551 | ||||||
6,047,107 | ||||||||
Machinery 3.1% | ||||||||
AGCO Corp. (a)(b) | 46,969 | 2,058,651 | ||||||
Caterpillar, Inc. (a) | 34,292 | 3,239,222 | ||||||
CNH Global N.V. (a)(b) | 3,174 | 118,009 | ||||||
Dover Corp. | 990 | 54,975 | ||||||
Harsco Corp. (a) | 67,712 | 1,560,762 | ||||||
Navistar International Corp. (a)(b) | 20,836 | 876,571 | ||||||
PACCAR, Inc. (a) | 57,985 | 2,507,271 | ||||||
Parker Hannifin Corp. | 8,205 | 669,118 | ||||||
Wabtec Corp. (a) | 11,962 | 803,607 | ||||||
11,888,186 | ||||||||
Marine 0.0%‡ | ||||||||
Kirby Corp. (b) | 740 | 45,540 | ||||||
Media 4.8% | ||||||||
Cablevision Systems Corp. Class A | 11,049 | 159,879 | ||||||
CBS Corp. Class B (a) | 87,501 | 2,258,401 | ||||||
Charter Communications, Inc. Class A (b) | 19,479 | 894,865 | ||||||
Comcast Corp. Class A (a) | 74,995 | 1,758,633 | ||||||
DIRECTV Class A (a)(b) | 63,879 | 2,903,939 | ||||||
DISH Network Corp. Class A (a)(b) | 77,405 | 1,870,879 | ||||||
Gannett Co., Inc. (a) | 75,584 | 883,577 | ||||||
Interpublic Group of Cos., Inc. (The) | 4,674 | 44,310 | ||||||
John Wiley & Sons, Inc. Class A | 5,465 | 259,915 | ||||||
McGraw-Hill Cos., Inc. (The) (a) | 50,181 | 2,132,693 | ||||||
Time Warner Cable, Inc. (a) | 25,617 | 1,631,547 | ||||||
Viacom, Inc. Class B | 5,643 | 247,446 | ||||||
Virgin Media, Inc. (a) | 72,788 | 1,774,571 | ||||||
Walt Disney Co. (The) | 11,772 | 410,607 | ||||||
Washington Post Co. Class B (a) | 2,994 | 1,018,439 | ||||||
18,249,701 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Metals & Mining 2.1% | ||||||||
Alcoa, Inc. | 246 | $ | 2,647 | |||||
Cliffs Natural Resources, Inc. (a) | 31,160 | 2,125,735 | ||||||
Freeport-McMoRan Copper & Gold, Inc. (a) | 58,708 | 2,363,584 | ||||||
Newmont Mining Corp. (a) | 13,413 | 896,391 | ||||||
Nucor Corp. (a) | 47,286 | 1,786,465 | ||||||
Steel Dynamics, Inc. | 1,233 | 15,400 | ||||||
Walter Energy, Inc. (a) | 10,354 | 783,280 | ||||||
7,973,502 | ||||||||
Multi-Utilities 0.9% | ||||||||
Alliant Energy Corp. (a) | 20,258 | 826,121 | ||||||
Ameren Corp. | 512 | 16,322 | ||||||
CenterPoint Energy, Inc. (a) | 98,195 | 2,046,384 | ||||||
DTE Energy Co. (a) | 7,724 | 402,498 | ||||||
Public Service Enterprise Group, Inc. | 1,991 | 67,097 | ||||||
3,358,422 | ||||||||
Multiline Retail 0.9% | ||||||||
Big Lots, Inc. (a)(b) | 34,916 | 1,315,984 | ||||||
Dillard’s, Inc. Class A (a) | 30,971 | 1,595,936 | ||||||
Dollar General Corp. (b) | 506 | 20,068 | ||||||
Macy’s, Inc. | 63 | 1,923 | ||||||
Target Corp. | 8,844 | 484,209 | ||||||
3,418,120 | ||||||||
Oil, Gas & Consumable Fuels 12.0% | ||||||||
Alpha Natural Resources, Inc. (b) | 17,917 | 430,725 | ||||||
Anadarko Petroleum Corp. | 1,638 | 128,583 | ||||||
Apache Corp. | 8,565 | 853,331 | ||||||
X Chevron Corp. (a) | 77,789 | 8,171,734 | ||||||
ConocoPhillips (a) | 68,829 | 4,793,940 | ||||||
X ExxonMobil Corp. (a) | 169,885 | 13,266,320 | ||||||
Hess Corp. (a) | 28,491 | 1,782,397 | ||||||
HollyFrontier Corp. (a) | 61,408 | 1,884,612 | ||||||
Marathon Oil Corp. (a) | 69,429 | 1,807,237 | ||||||
Marathon Petroleum Corp. (a) | 44,289 | 1,589,975 | ||||||
Murphy Oil Corp. (a) | 37,381 | 2,069,786 | ||||||
Occidental Petroleum Corp. (a) | 45,999 | 4,275,147 | ||||||
Plains Exploration & Production Co. (b) | 12,367 | 389,560 | ||||||
Tesoro Corp. (a)(b) | 79,680 | 2,066,899 | ||||||
Valero Energy Corp. (a) | 98,685 | 2,427,651 | ||||||
45,937,897 | ||||||||
Paper & Forest Products 0.5% | ||||||||
Domtar Corp. (a) | 24,729 | 2,025,552 | ||||||
Personal Products 0.6% | ||||||||
Herbalife, Ltd. (a) | 36,391 | 2,269,343 | ||||||
Pharmaceuticals 4.6% | ||||||||
Abbott Laboratories | 10,726 | 577,810 | ||||||
Eli Lilly & Co. (a) | 61,543 | 2,286,938 | ||||||
Endo Pharmaceuticals Holdings, Inc. (b) | 14,463 | 467,300 | ||||||
Forest Laboratories, Inc. (a)(b) | 33,038 | 1,034,089 | ||||||
Johnson & Johnson (a) | 51,994 | 3,347,894 | ||||||
Merck & Co., Inc. (a) | 34,483 | 1,189,663 | ||||||
X Pfizer, Inc. (a) | 332,059 | 6,395,456 | ||||||
Warner Chilcott PLC Class A (a)(b) | 116,920 | 2,118,590 | ||||||
17,417,740 | ||||||||
Professional Services 0.6% | ||||||||
Towers Watson & Co. Class A (a) | 32,341 | 2,124,804 | ||||||
Real Estate Investment Trusts 1.5% | ||||||||
Annaly Capital Management, Inc. (a) | 136,610 | 2,301,878 | ||||||
Apartment Investment & Management Co. Class A (a) | 52,502 | 1,295,224 | ||||||
Douglas Emmett, Inc. | 23,958 | 467,181 | ||||||
Duke Realty Corp. | 15,055 | 184,875 | ||||||
Equity Residential | 58 | 3,403 | ||||||
Essex Property Trust, Inc. | 805 | 114,922 | ||||||
Public Storage | 332 | 42,845 | ||||||
Rayonier, Inc. (a) | 26,182 | 1,092,575 | ||||||
Simon Property Group, Inc. | 774 | 99,413 | ||||||
Taubman Centers, Inc. | 903 | 55,291 | ||||||
UDR, Inc. | 547 | 13,637 | ||||||
5,671,244 | ||||||||
Real Estate Management & Development 0.5% | ||||||||
CBRE Group, Inc. (b) | 21,369 | 379,941 | ||||||
Jones Lang LaSalle, Inc. (a) | 25,595 | 1,653,949 | ||||||
2,033,890 | ||||||||
Road & Rail 2.1% | ||||||||
Con-way, Inc. (a) | 59,173 | 1,743,828 | ||||||
CSX Corp. (a) | 120,636 | 2,679,326 | ||||||
Hertz Global Holdings, Inc. (a)(b) | 30,322 | 351,735 | ||||||
Kansas City Southern (b) | 662 | 41,819 | ||||||
Norfolk Southern Corp. (a) | 16,204 | 1,198,934 | ||||||
Ryder System, Inc. (a) | 34,020 | 1,732,979 | ||||||
Union Pacific Corp. | 1,257 | 125,159 | ||||||
7,873,780 | ||||||||
Semiconductors & Semiconductor Equipment 3.4% | ||||||||
Applied Materials, Inc. | 3,149 | 38,796 | ||||||
Avago Technologies, Ltd. | 13,451 | 454,240 | ||||||
Broadcom Corp. Class A (b) | 10,517 | 379,559 | ||||||
Fairchild Semiconductor International, Inc. (a)(b) | 85,138 | 1,274,516 | ||||||
Intel Corp. (a) | 75,456 | 1,851,690 | ||||||
Lam Research Corp. (a)(b) | 6,738 | 289,667 | ||||||
LSI Corp. (a)(b) | 302,738 | 1,892,112 | ||||||
Marvell Technology Group, Ltd. (a)(b) | 40,407 | 565,294 |
The notes to the financial statements are an integral part of,
16 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Semiconductors & Semiconductor Equipment (continued) | ||||||||
Maxim Integrated Products, Inc. (a) | 6,289 | $ | 164,520 | |||||
Micron Technology, Inc. (a)(b) | 318,884 | 1,782,562 | ||||||
NVIDIA Corp. (a)(b) | 136,497 | 2,020,156 | ||||||
ON Semiconductor Corp. (a)(b) | 151,346 | 1,145,689 | ||||||
Teradyne, Inc. (a)(b) | 80,167 | 1,147,991 | ||||||
13,006,792 | ||||||||
Software 7.0% | ||||||||
Activision Blizzard, Inc. (a) | 160,096 | 2,143,685 | ||||||
Adobe Systems, Inc. (b) | 7,033 | 206,841 | ||||||
Autodesk, Inc. (a)(b) | 68,605 | 2,373,733 | ||||||
BMC Software, Inc. (a)(b) | 51,721 | 1,797,822 | ||||||
Cadence Design Systems, Inc. (a)(b) | 194,493 | 2,153,038 | ||||||
Electronic Arts, Inc. (b) | 17,214 | 401,947 | ||||||
X Microsoft Corp. (a) | 287,694 | 7,661,291 | ||||||
X Oracle Corp. (a) | 173,286 | 5,678,582 | ||||||
Symantec Corp. (a)(b) | 93,396 | 1,588,666 | ||||||
Synopsys, Inc. (a)(b) | 74,925 | 2,008,739 | ||||||
VMware, Inc. Class A (b) | 8,107 | 792,459 | ||||||
26,806,803 | ||||||||
Specialty Retail 4.6% | ||||||||
Aaron’s, Inc. (a) | 55,022 | 1,472,389 | ||||||
Advance Auto Parts, Inc. | 7,351 | 478,330 | ||||||
American Eagle Outfitters, Inc. (a) | 13,730 | 180,275 | ||||||
AutoZone, Inc. (a)(b) | 544 | 176,033 | ||||||
Bed Bath & Beyond, Inc. (a)(b) | 10,649 | 658,534 | ||||||
Best Buy Co., Inc. | 16,843 | 441,792 | ||||||
Chico’s FAS, Inc. (a) | 119,985 | 1,483,015 | ||||||
Dick’s Sporting Goods, Inc. (a)(b) | 47,083 | 1,840,474 | ||||||
DSW, Inc. Class A (a) | 30,530 | 1,597,940 | ||||||
Foot Locker, Inc. (a) | 89,652 | 1,959,793 | ||||||
GameStop Corp. Class A (a)(b) | 52,843 | 1,351,195 | ||||||
Gap, Inc. (The) (a) | 69,493 | 1,313,418 | ||||||
Guess?, Inc. | 3,077 | 101,510 | ||||||
Limited Brands, Inc. (a) | 1,955 | 83,498 | ||||||
PetSmart, Inc. (a) | 34,877 | 1,637,475 | ||||||
RadioShack Corp. (a) | 51,385 | 611,995 | ||||||
Ulta Salon Cosmetics & Fragrance, Inc. (b) | 55 | 3,701 | ||||||
Williams-Sonoma, Inc. (a) | 56,319 | 2,114,215 | ||||||
17,505,582 | ||||||||
Textiles, Apparel & Luxury Goods 0.6% | ||||||||
Coach, Inc. | 17,905 | 1,165,078 | ||||||
NIKE, Inc. Class B | 1,146 | 110,417 | ||||||
PVH Corp. | 1,272 | 94,650 | ||||||
Ralph Lauren Corp. | 1,926 | 305,830 | ||||||
VF Corp. | 3,684 | 509,202 | ||||||
2,185,177 | ||||||||
Tobacco 1.8% | ||||||||
Lorillard, Inc. (a) | 18,876 | 2,088,818 | ||||||
Philip Morris International, Inc. (a) | 67,393 | 4,708,749 | ||||||
6,797,567 | ||||||||
Trading Companies & Distributors 0.5% | ||||||||
GATX Corp. | 4,755 | 180,595 | ||||||
W.W. Grainger, Inc. (a) | 10,487 | 1,796,528 | ||||||
1,977,123 | ||||||||
Wireless Telecommunication Services 1.1% | ||||||||
MetroPCS Communications, Inc. (a)(b) | 124,003 | 1,054,025 | ||||||
NII Holdings, Inc. (a)(b) | 37,783 | 889,034 | ||||||
Sprint Nextel Corp. (a)(b) | 202,250 | 519,783 | ||||||
Telephone and Data Systems, Inc. (a) | 44,318 | 1,027,291 | ||||||
United States Cellular Corp. (a)(b) | 14,862 | 592,548 | ||||||
4,082,681 | ||||||||
Total Common Stocks (Cost $503,180,845) | 515,392,173 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 0.0%‡ | ||||||||
Repurchase Agreement 0.0%‡ | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $135,418 (Collateralized by a Federal Home Loan Mortgage Corp. security with a rate of 0.90% and a maturity date of 9/12/14, with a Principal Amount of $140,000 and a Market Value of $140,282) | $ | 135,418 | 135,418 | |||||
Total Short-Term Investment (Cost $135,418) | 135,418 | |||||||
Total Investments, Before Investments Sold Short (Cost $503,316,263) (d) | 135.0 | % | 515,527,591 | |||||
Shares | ||||||||
Investments Sold Short (35.0%) Common Stocks Sold Short (34.6%) | ||||||||
Aerospace & Defense (0.8%) | ||||||||
Huntington Ingalls Industries, Inc. (b) | (52,253 | ) | (1,541,463 | ) | ||||
Spirit Aerosystems Holdings, Inc. Class A (b) | (80,048 | ) | (1,366,419 | ) | ||||
(2,907,882 | ) | |||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks Sold Short (continued) | ||||||||
Airlines (0.1%) | ||||||||
AMR Corp. (b) | (179,531 | ) | $ | (472,166 | ) | |||
Auto Components (1.5%) | ||||||||
Gentex Corp. | (64,029 | ) | (1,928,554 | ) | ||||
Goodyear Tire & Rubber Co. (The) (b) | (151,567 | ) | (2,176,502 | ) | ||||
Visteon Corp. (b) | (29,520 | ) | (1,641,902 | ) | ||||
(5,746,958 | ) | |||||||
Automobiles (0.6%) | ||||||||
Tesla Motors, Inc. (b) | (29,174 | ) | (856,841 | ) | ||||
Thor Industries, Inc. | (51,953 | ) | (1,373,637 | ) | ||||
(2,230,478 | ) | |||||||
Beverages (0.0%)‡ | ||||||||
Beam, Inc. | (3,480 | ) | (172,016 | ) | ||||
Biotechnology (1.5%) | ||||||||
BioMarin Pharmaceutical, Inc. (b) | (54,721 | ) | (1,866,533 | ) | ||||
Dendreon Corp. (b) | (127,721 | ) | (1,397,268 | ) | ||||
Human Genome Sciences, Inc. (b) | (117,234 | ) | (1,202,821 | ) | ||||
Pharmasset, Inc. (b) | (2,607 | ) | (183,533 | ) | ||||
Vertex Pharmaceuticals, Inc. (b) | (28,541 | ) | (1,129,938 | ) | ||||
(5,780,093 | ) | |||||||
Building Products (0.4%) | ||||||||
Lennox International, Inc. | (42,301 | ) | (1,361,669 | ) | ||||
Capital Markets (1.0%) | ||||||||
E*TRADE Financial Corp. (b) | (152,260 | ) | (1,652,021 | ) | ||||
Greenhill & Co., Inc. | (3,546 | ) | (133,968 | ) | ||||
Jefferies Group, Inc. | (106,314 | ) | (1,409,724 | ) | ||||
Morgan Stanley | (32,541 | ) | (574,023 | ) | ||||
(3,769,736 | ) | |||||||
Chemicals (0.5%) | ||||||||
Intrepid Potash, Inc. (b) | (29,266 | ) | (814,473 | ) | ||||
Scotts Miracle-Gro Co. (The) Class A | (20,789 | ) | (1,008,474 | ) | ||||
(1,822,947 | ) | |||||||
Commercial Banks (1.0%) | ||||||||
CapitalSource, Inc. | (74,806 | ) | (475,766 | ) | ||||
CIT Group, Inc. (b) | (48,494 | ) | (1,690,016 | ) | ||||
Synovus Financial Corp. | (1,089,497 | ) | (1,634,245 | ) | ||||
(3,800,027 | ) | |||||||
Commercial Services & Supplies (0.1%) | ||||||||
Avery Dennison Corp. | (18,661 | ) | (496,383 | ) | ||||
Communications Equipment (1.5%) | ||||||||
Acme Packet, Inc. (b) | (36,090 | ) | (1,306,819 | ) | ||||
Ciena Corp. (b) | (112,000 | ) | (1,476,160 | ) | ||||
F5 Networks, Inc. (b) | (5,930 | ) | (616,423 | ) | ||||
Polycom, Inc. (b) | (26,792 | ) | (442,872 | ) | ||||
Riverbed Technology, Inc. (b) | (68,174 | ) | (1,880,239 | ) | ||||
(5,722,513 | ) | |||||||
Construction & Engineering (1.4%) | ||||||||
Aecom Technology Corp. (b) | (77,294 | ) | (1,616,991 | ) | ||||
Jacobs Engineering Group, Inc. (b) | (45,428 | ) | (1,762,606 | ) | ||||
Quanta Services, Inc. (b) | (44,845 | ) | (936,812 | ) | ||||
Shaw Group, Inc. (The) (b) | (48,917 | ) | (1,137,809 | ) | ||||
(5,454,218 | ) | |||||||
Construction Materials (0.3%) | ||||||||
Vulcan Materials Co. | (31,378 | ) | (981,818 | ) | ||||
Consumer Finance (0.1%) | ||||||||
Green Dot Corp. Class A (b) | (11,410 | ) | (372,765 | ) | ||||
Containers & Packaging (0.0%)‡ | ||||||||
Rock-Tenn Co. Class A | (64 | ) | (3,788 | ) | ||||
Distributors (0.1%) | ||||||||
LKQ Corp. (b) | (16,468 | ) | (480,536 | ) | ||||
Electrical Equipment (0.7%) | ||||||||
Babcock & Wilcox Co. (b) | (25,155 | ) | (553,159 | ) | ||||
GrafTech International, Ltd. (b) | (93,068 | ) | (1,462,098 | ) | ||||
Polypore International, Inc. (b) | (10,918 | ) | (572,649 | ) | ||||
(2,587,906 | ) | |||||||
Electronic Equipment & Instruments (2.0%) | ||||||||
Amphenol Corp. Class A | (25,515 | ) | (1,211,708 | ) | ||||
Avnet, Inc. (b) | (8,165 | ) | (247,481 | ) | ||||
FLIR Systems, Inc. | (51,821 | ) | (1,362,892 | ) | ||||
IPG Photonics Corp. (b) | (26,493 | ) | (1,400,420 | ) | ||||
National Instruments Corp. | (53,950 | ) | (1,441,005 | ) | ||||
Trimble Navigation, Ltd. (b) | (46,374 | ) | (1,873,973 | ) | ||||
(7,537,479 | ) | |||||||
Energy Equipment & Services (0.5%) | ||||||||
CARBO Ceramics, Inc. | (7,941 | ) | (1,078,785 | ) | ||||
FMC Technologies, Inc. (b) | (14,478 | ) | (648,904 | ) | ||||
Tidewater, Inc. | (386 | ) | (19,003 | ) | ||||
(1,746,692 | ) | |||||||
Food Products (0.6%) | ||||||||
Archer-Daniels-Midland Co. | (45,080 | ) | (1,304,615 | ) | ||||
Bunge, Ltd. | (18,344 | ) | (1,133,109 | ) | ||||
(2,437,724 | ) | |||||||
The notes to the financial statements are an integral part of,
18 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks Sold Short (continued) | ||||||||
Health Care Equipment & Supplies (0.4%) | ||||||||
Edwards Lifesciences Corp. (b) | (22,442 | ) | $ | (1,692,576 | ) | |||
Health Care Providers & Services (1.0%) | ||||||||
Brookdale Senior Living, Inc. (b) | (3,167 | ) | (52,509 | ) | ||||
Catalyst Health Solutions, Inc. (b) | (22,823 | ) | (1,254,580 | ) | ||||
Health Net, Inc. (b) | (53,134 | ) | (1,476,594 | ) | ||||
Tenet Healthcare Corp. (b) | (111,886 | ) | (529,221 | ) | ||||
VCA Antech, Inc. (b) | (24,737 | ) | (502,656 | ) | ||||
(3,815,560 | ) | |||||||
Hotels, Restaurants & Leisure (0.4%) | ||||||||
Bally Technologies, Inc. (b) | (28,093 | ) | (1,018,933 | ) | ||||
Choice Hotels International, Inc. | (7,814 | ) | (279,663 | ) | ||||
Dunkin’ Brands Group, Inc. (b) | (7,263 | ) | (211,426 | ) | ||||
(1,510,022 | ) | |||||||
Household Durables (1.7%) | ||||||||
D.R. Horton, Inc. | (14,794 | ) | (164,657 | ) | ||||
Jarden Corp. | (921 | ) | (29,500 | ) | ||||
Lennar Corp. Class A | (95,806 | ) | (1,584,631 | ) | ||||
Newell Rubbermaid, Inc. | (16,482 | ) | (243,934 | ) | ||||
NVR, Inc. (b) | (2,698 | ) | (1,734,139 | ) | ||||
Pulte Group, Inc. (b) | (296,332 | ) | (1,535,000 | ) | ||||
Toll Brothers, Inc. (b) | (70,412 | ) | (1,227,985 | ) | ||||
(6,519,846 | ) | |||||||
Independent Power Producers & Energy Traders (0.4%) | ||||||||
GenOn Energy, Inc. (b) | (440,819 | ) | (1,344,498 | ) | ||||
Insurance (1.4%) | ||||||||
Genworth Financial, Inc. Class A (b) | (297,513 | ) | (1,898,133 | ) | ||||
MBIA, Inc. (b) | (179,059 | ) | (1,575,719 | ) | ||||
Old Republic International Corp. | (164,371 | ) | (1,453,040 | ) | ||||
White Mountains Insurance Group, Ltd. | (1,430 | ) | (600,600 | ) | ||||
(5,527,492 | ) | |||||||
Internet Software & Services (0.1%) | ||||||||
Yahoo!, Inc. (b) | (15,650 | ) | (244,766 | ) | ||||
IT Services (0.4%) | ||||||||
Cognizant Technology Solutions Corp. Class A (b) | (2,311 | ) | (168,125 | ) | ||||
FleetCor Technologies, Inc. (b) | (34,450 | ) | (963,222 | ) | ||||
Genpact, Ltd. (b) | (15,516 | ) | (250,584 | ) | ||||
(1,381,931 | ) | |||||||
Life Sciences Tools & Services (0.2%) | ||||||||
Bruker Corp. (b) | (30,424 | ) | (439,018 | ) | ||||
Mettler-Toledo International, Inc. (b) | (950 | ) | (145,920 | ) | ||||
PerkinElmer, Inc. | (65 | ) | (1,344 | ) | ||||
(586,282 | ) | |||||||
Machinery (1.2%) | ||||||||
Flowserve Corp. | (6,129 | ) | (568,097 | ) | ||||
Manitowoc Co., Inc. (The) | (33,041 | ) | (366,094 | ) | ||||
Terex Corp. (b) | (103,979 | ) | (1,730,211 | ) | ||||
WABCO Holdings, Inc. (b) | (38,386 | ) | (1,927,361 | ) | ||||
(4,591,763 | ) | |||||||
Media (1.3%) | ||||||||
AMC Networks, Inc. (b) | (4,372 | ) | (142,615 | ) | ||||
DreamWorks Animation SKG, Inc. Class A (b) | (73,730 | ) | (1,367,691 | ) | ||||
Lamar Advertising Co. Class A (b) | (16,303 | ) | (366,654 | ) | ||||
Liberty Media Corp.—Liberty Capital Class A (b) | (23,152 | ) | (1,778,537 | ) | ||||
Liberty Media Corp.—Liberty Starz Class A (b) | (2,937 | ) | (200,597 | ) | ||||
Morningstar, Inc. | (17,143 | ) | (1,010,923 | ) | ||||
(4,867,017 | ) | |||||||
Metals & Mining (2.6%) | ||||||||
AK Steel Holding Corp. | (177,309 | ) | (1,476,984 | ) | ||||
Allegheny Technologies, Inc. | (40,529 | ) | (1,880,546 | ) | ||||
Allied Nevada Gold Corp. (b) | (21,020 | ) | (798,340 | ) | ||||
Carpenter Technology Corp. | (27,684 | ) | (1,570,236 | ) | ||||
Commercial Metals Co. | (34,110 | ) | (423,987 | ) | ||||
Molycorp, Inc. (b) | (35,155 | ) | (1,345,382 | ) | ||||
Schnitzer Steel Industries, Inc. Class A | (8,620 | ) | (403,416 | ) | ||||
Southern Copper Corp. | (1,646 | ) | (50,499 | ) | ||||
Titanium Metals Corp. | (92,721 | ) | (1,553,077 | ) | ||||
United States Steel Corp. | (23,195 | ) | (588,225 | ) | ||||
(10,090,692 | ) | |||||||
Office Electronics (0.0%)‡ | ||||||||
Zebra Technologies Corp. Class A (b) | (2,097 | ) | (74,947 | ) | ||||
Oil, Gas & Consumable Fuels (2.2%) | ||||||||
Brigham Exploration Co. (b) | (12,601 | ) | (458,865 | ) | ||||
Cobalt International Energy, Inc. (b) | (140,980 | ) | (1,454,914 | ) | ||||
Continental Resources, Inc. (b) | (5,595 | ) | (339,337 | ) | ||||
El Paso Corp. | (3,748 | ) | (93,738 | ) | ||||
EXCO Resources, Inc. | (60,758 | ) | (766,158 | ) | ||||
Kinder Morgan, Inc./Delaware | (5,351 | ) | (153,039 | ) | ||||
Kosmos Energy, Ltd. (b) | (70,159 | ) | (1,087,465 | ) | ||||
Quicksilver Resources, Inc. (b) | (136,671 | ) | (1,052,367 | ) | ||||
Range Resources Corp. | (6,929 | ) | (476,992 | ) | ||||
SandRidge Energy, Inc. (b) | (162,287 | ) | (1,243,118 | ) | ||||
Southern Union Co. | (277 | ) | (11,642 | ) | ||||
Teekay Corp. | (55,623 | ) | (1,432,848 | ) | ||||
(8,570,483 | ) | |||||||
Professional Services (0.1%) | ||||||||
Manpower, Inc. | (8,417 | ) | (363,109 | ) | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks Sold Short (continued) | ||||||||
Real Estate Investment Trusts (0.0%)‡ | ||||||||
Chimera Investment Corp. | (450 | ) | $ | (1,355 | ) | |||
General Growth Properties, Inc. | (409 | ) | (6,012 | ) | ||||
(7,367 | ) | |||||||
Real Estate Management & Development (0.2%) | ||||||||
Howard Hughes Corp. (The) (b) | (17,565 | ) | (842,769 | ) | ||||
Semiconductors & Semiconductor Equipment (2.3%) | ||||||||
Advanced Micro Devices, Inc. (b) | (303,217 | ) | (1,767,755 | ) | ||||
Atmel Corp. (b) | (152,856 | ) | (1,614,159 | ) | ||||
Cree, Inc. (b) | (45,258 | ) | (1,205,673 | ) | ||||
First Solar, Inc. (b) | (17,228 | ) | (857,438 | ) | ||||
MEMC Electronic Materials, Inc. (b) | (174,768 | ) | (1,046,860 | ) | ||||
Silicon Laboratories, Inc. (b) | (29,105 | ) | (1,244,239 | ) | ||||
Skyworks Solutions, Inc. (b) | (46,714 | ) | (925,404 | ) | ||||
(8,661,528 | ) | |||||||
Software (1.1%) | ||||||||
Ariba, Inc. (b) | (37,582 | ) | (1,190,598 | ) | ||||
Informatica Corp. (b) | (6,204 | ) | (282,282 | ) | ||||
Red Hat, Inc. (b) | (5,846 | ) | (290,254 | ) | ||||
Rovi Corp. (b) | (23,891 | ) | (1,183,560 | ) | ||||
Salesforce.com, Inc. (b) | (10,180 | ) | (1,355,670 | ) | ||||
(4,302,364 | ) | |||||||
Specialty Retail (0.9%) | ||||||||
CarMax, Inc. (b) | (59,230 | ) | (1,780,454 | ) | ||||
Tiffany & Co. | (18,720 | ) | (1,492,545 | ) | ||||
(3,272,999 | ) | |||||||
Textiles, Apparel & Luxury Goods (0.6%) | ||||||||
Deckers Outdoor Corp. (b) | (2,916 | ) | (336,040 | ) | ||||
Under Armour, Inc. Class A (b) | (23,972 | ) | (2,023,476 | ) | ||||
(2,359,516 | ) | |||||||
Thrifts & Mortgage Finance (1.0%) | ||||||||
BankUnited, Inc. | (64,603 | ) | (1,407,699 | ) | ||||
Capitol Federal Financial, Inc. | (12,497 | ) | (138,592 | ) | ||||
Hudson City Bancorp, Inc. | (168,931 | ) | (1,055,819 | ) | ||||
TFS Financial Corp. (b) | (146,028 | ) | (1,344,918 | ) | ||||
(3,947,028 | ) | |||||||
Trading Companies & Distributors (0.3%) | ||||||||
Air Lease Corp. (b) | (55,138 | ) | (1,231,231 | ) | ||||
Wireless Telecommunication Services (0.1%) | ||||||||
Clearwire Corp. Class A (b) | (173,397 | ) | (332,922 | ) | ||||
Crown Castle International Corp. (b) | (311 | ) | (12,863 | ) | ||||
SBA Communications Corp. Class A (b) | (4,917 | ) | (187,289 | ) | ||||
(533,074 | ) | |||||||
Total Common Stocks Sold Short (Proceeds $143,444,314) | (132,224,654 | ) | ||||||
Exchange Traded Fund Sold Short (0.4%) (c) | ||||||||
S&P 500 Index—SPDR Trust Series 1 | (11,817 | ) | (1,482,443 | ) | ||||
Total Exchange Traded Fund Sold Short (Proceeds $1,497,438) | (1,482,443 | ) | ||||||
Total Investments Sold Short (Proceeds $144,941,752) | (35.0 | )% | (133,707,097 | ) | ||||
Total Investments, Net of Investments Sold Short (Cost $358,374,511) | 100.0 | 381,820,494 | ||||||
Other Assets, Less Liabilities | 0.0 | ‡ | 49,592 | |||||
Net Assets | 100.0 | % | $ | 381,870,086 | ||||
††† | On a daily basis New York Life Investments confirms that the value of the Fund’s liquid assets (liquid portfolio securities and cash) is sufficient to cover its potential senior securities (e.g., futures, swaps, options) | |
‡ | Less than one-tenth of a percent. | |
(a) | Security, or a portion thereof, is maintained in a segregated account at the Fund’s custodian as collateral for securities sold short (See Note 2(I)). | |
(b) | Non-income producing security. | |
(c) | Exchange Traded Fund—An investment vehicle that represents a basket of securities that is traded on an exchange. | |
(d) | At October 31, 2011, cost is $509,640,356 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 24,272,570 | ||
Gross unrealized depreciation | (18,385,335 | ) | ||
Net unrealized appreciation | $ | 5,887,235 | ||
The following abbreviation is used in the above portfolio:
SPDR—Standard & Poor’s Depositary Receipts
The notes to the financial statements are an integral part of,
20 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 515,392,173 | $ | — | $ | — | $ | 515,392,173 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 135,418 | — | 135,418 | ||||||||||||
Total Investments in Securities | $ | 515,392,173 | $ | 135,418 | $ | — | $ | 515,527,591 | ||||||||
Liability Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities Sold Short (a) | ||||||||||||||||
Common Stocks Sold Short | $ | (132,224,654 | ) | $ | — | $ | — | $ | (132,224,654 | ) | ||||||
Exchange Traded Fund Sold Short | (1,482,443 | ) | — | — | (1,482,443 | ) | ||||||||||
Total Investments in Securities Sold Short | $ | (133,707,097 | ) | $ | — | $ | — | $ | (133,707,097 | ) | ||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 21 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities before investments sold short, at value (identified cost $503,316,263) | $ | 515,527,591 | ||
Cash collateral on deposit at broker | 549 | |||
Receivables: | ||||
Investment securities sold | 6,071,175 | |||
Dividends and interest | 441,433 | |||
Fund shares sold | 214 | |||
Other assets | 159,335 | |||
Total assets | 522,200,297 | |||
Liabilities | ||||
Investments sold short (proceeds $144,941,752) | 133,707,097 | |||
Payables: | ||||
Investment securities purchased | 6,101,287 | |||
Manager (See Note 3) | 308,284 | |||
Broker fees and charges on short sales | 122,010 | |||
Shareholder communication | 29,049 | |||
Professional fees | 26,959 | |||
Dividends on investments sold short | 23,372 | |||
Custodian | 3,973 | |||
Transfer agent (See Note 3) | 2,047 | |||
Trustees | 1,364 | |||
NYLIFE Distributors (See Note 3) | 416 | |||
Accrued expenses | 4,353 | |||
Total liabilities | 140,330,211 | |||
Net assets | $ | 381,870,086 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 48,236 | ||
Additional paid-in capital | 334,751,410 | |||
334,799,646 | ||||
Undistributed net investment income | 948,395 | |||
Accumulated net realized gain (loss) on investments and investments sold short | 22,676,062 | |||
Net unrealized appreciation (depreciation) on investments | 12,211,328 | |||
Net unrealized appreciation (depreciation) on investments sold short | 11,234,655 | |||
Net assets | $ | 381,870,086 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 121,165 | ||
Shares of beneficial interest outstanding | 15,426 | |||
Net asset value per share outstanding | $ | 7.85 | ||
Maximum sales charge (5.50% of offering price) | 0.46 | |||
Maximum offering price per share outstanding | $ | 8.31 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 417,089 | ||
Shares of beneficial interest outstanding | 52,854 | |||
Net asset value per share outstanding | $ | 7.89 | ||
Maximum sales charge (5.50% of offering price) | 0.46 | |||
Maximum offering price per share outstanding | $ | 8.35 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 378,584 | ||
Shares of beneficial interest outstanding | 49,674 | |||
Net asset value and offering price per share outstanding | $ | 7.62 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 380,953,248 | ||
Shares of beneficial interest outstanding | 48,117,799 | |||
Net asset value and offering price per share outstanding | $ | 7.92 | ||
The notes to the financial statements are an integral part of,
22 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 7,485,524 | ||
Interest | 4,279 | |||
Total income | 7,489,803 | |||
Expenses | ||||
Manager (See Note 3) | 3,123,445 | |||
Broker fees and charges on short sales | 1,389,304 | |||
Dividends on investments sold short | 790,256 | |||
Registration | 72,307 | |||
Professional fees | 69,461 | |||
Custodian | 54,521 | |||
Shareholder communication | 52,984 | |||
Transfer agent (See Note 3) | 12,245 | |||
Trustees | 8,957 | |||
Distribution/Service—Investor Class (See Note 3) | 304 | |||
Distribution/Service—Class A (See Note 3) | 715 | |||
Distribution/Service—Class C (See Note 3) | 3,923 | |||
Miscellaneous | 15,975 | |||
Total expenses | 5,594,397 | |||
Net investment income (loss) | 1,895,406 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Security transactions | 61,417,410 | |||
Investments sold short | (16,440,136 | ) | ||
Net realized gain (loss) on investments and investments sold short | 44,977,274 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (30,017,105 | ) | ||
Investments sold short | 16,842,797 | |||
Net change in unrealized appreciation (depreciation) on investments and investments sold short | (13,174,308 | ) | ||
Net realized and unrealized gain (loss) on investments and investments sold short | 31,802,966 | |||
Net increase (decrease) in net assets resulting from operations | $ | 33,698,372 | ||
(a) | Dividends recorded net of foreign withholding taxes in the amount of $1,274. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 23 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,895,406 | $ | 908,053 | ||||
Net realized gain (loss) on investments and investments sold short | 44,977,274 | 14,035,513 | ||||||
Net change in unrealized appreciation (depreciation) on investments and investments sold short | (13,174,308 | ) | 20,613,931 | |||||
Net increase (decrease) in net assets resulting from operations | 33,698,372 | 35,557,497 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (25 | ) | (65 | ) | ||||
Class A | (220 | ) | (320 | ) | ||||
Class C | (101 | ) | — | |||||
Class I | (1,166,377 | ) | (1,164,352 | ) | ||||
Total dividends to shareholders | (1,166,723 | ) | (1,164,737 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 198,184,922 | 144,763,911 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 1,166,595 | 1,084,477 | ||||||
Cost of shares redeemed | (185,599,640 | ) | (35,060,774 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 13,751,877 | 110,787,614 | ||||||
Net increase (decrease) in net assets | 46,283,526 | 145,180,374 | ||||||
Net Assets | ||||||||
Beginning of year | 335,586,560 | 190,406,186 | ||||||
End of year | $ | 381,870,086 | $ | 335,586,560 | ||||
Undistributed net investment income at end of year | $ | 948,395 | $ | 322,269 | ||||
The notes to the financial statements are an integral part of,
24 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
Statement of Cash Flows
for the year ended October 31, 2011
Cash flows used in operating activities: | ||||
Net increase in net assets resulting from operations | $ | 33,698,372 | ||
Adjustments to reconcile net increase in net assets provided by operations to net cash used in operating activities: | ||||
Investments purchased | (659,284,678 | ) | ||
Investments sold | 623,352,356 | |||
Purchases to cover securities sold short | (212,965,063 | ) | ||
Securities sold short | 233,570,631 | |||
Sell of short term investments, net | 706,770 | |||
Increase in investment securities sold receivable | (3,861,655 | ) | ||
Increase in dividends and interest receivable | (82,238 | ) | ||
Increase in cash collateral on deposit at broker | (76 | ) | ||
Increase in other assets | (133,098 | ) | ||
Increase in investment securities purchased payable | 3,923,291 | |||
Increase in broker fees and charges payable on short sales | 122,010 | |||
Decrease in dividends payable for securities sold short | (24,135 | ) | ||
Increase in professional fees payable | 2,579 | |||
Increase in custodian payable | 637 | |||
Increase in shareholder communication payable | 6,956 | |||
Increase in due to Trustees | 712 | |||
Increase in due to manager | 28,911 | |||
Increase in due to transfer agent | 76 | |||
Increase in due to NYLIFE Distributors | 109 | |||
Increase in accrued expenses | 2,137 | |||
Net change in unrealized (appreciation) depreciation on investments | 30,017,105 | |||
Net realized (gain) loss from investments | (61,417,410 | ) | ||
Net change in unrealized (appreciation) depreciation on securities sold short | (16,842,797 | ) | ||
Net realized loss from securities sold short | 16,440,136 | |||
Net cash used in operating activities | (12,738,362 | ) | ||
Cash flows from financing activities: | ||||
Proceeds from shares sold | 198,358,271 | |||
Payment on shares redeemed | (185,619,781 | ) | ||
Cash distributions paid | (128 | ) | ||
Net cash from financing activities | 12,738,362 | |||
Net increase (decrease) in cash: | ||||
Cash at beginning of year | — | |||
Cash at end of year | $ | — | ||
Non cash financing activities not included herein consist of all reinvestment of dividends and distributions of $1,166,595.
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 25 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 7.28 | $ | 6.40 | $ | 6.00 | $ | 8.68 | ||||||||||
Net investment income (loss) (a) | 0.01 | (0.01 | ) | 0.02 | (0.02 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.56 | 0.90 | 0.38 | (2.66 | ) | |||||||||||||
Total from investment operations | 0.57 | 0.89 | 0.40 | (2.68 | ) | |||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.00 | )‡ | (0.01 | ) | — | — | ||||||||||||
Net asset value at end of period | $ | 7.85 | $ | 7.28 | $ | 6.40 | $ | 6.00 | ||||||||||
Total investment return (b) | 7.86 | % | 13.88 | % | 6.67 | %(d) | (30.76 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 0.10 | % | (0.16 | %) | 0.38 | % | (0.37 | %)†† | ||||||||||
Net expenses (excluding short sale expenses) | 1.58 | % | 1.58 | % | 1.60 | % | 1.59 | % †† | ||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 2.27 | % | 2.50 | % | 2.57 | % | 2.59 | % †† | ||||||||||
Short sale expenses | 0.69 | % | 0.92 | % | 0.87 | % | 0.82 | % †† | ||||||||||
Portfolio turnover rate | 145 | % | 117 | % | 163 | % | 244 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 121 | $ | 81 | $ | 53 | $ | 41 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. |
The notes to the financial statements are an integral part of,
26 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 7.31 | $ | 6.41 | $ | 6.00 | $ | 9.64 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.03 | 0.00 | ‡ | 0.05 | (0.02 | ) | (0.00 | )‡ | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.56 | 0.92 | 0.37 | (3.61 | ) | (0.36 | ) | |||||||||||||||
Total from investment operations | 0.59 | 0.92 | 0.42 | (3.63 | ) | (0.36 | ) | |||||||||||||||
Less dividends: | ||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.02 | ) | (0.01 | ) | (0.01 | ) | — | |||||||||||||
Net asset value at end of period | $ | 7.89 | $ | 7.31 | $ | 6.41 | $ | 6.00 | $ | 9.64 | ||||||||||||
Total investment return (b) | 8.05 | % | 14.31 | % | 6.77 | % | (37.57 | %) | (3.60 | %)(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.33 | % | 0.07 | % | 0.83 | % | (0.20 | %) | (0.14 | %)†† | ||||||||||||
Net expenses (excluding short sales expenses) | 1.34 | % | 1.34 | % | 1.46 | % | 1.50 | % | 1.50 | % †† | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 2.03 | % | 2.29 | % | 2.40 | % | 2.60 | % | 2.90 | % †† | ||||||||||||
Short sale expenses | 0.69 | % | 0.95 | % | 0.94 | % | 0.85 | % | 0.53 | % †† | ||||||||||||
Portfolio turnover rate | 145 | % | 117 | % | 163 | % | 244 | % | 59 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 417 | $ | 229 | $ | 138 | $ | 390 | $ | 356 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 27 |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 7.12 | $ | 6.30 | $ | 5.95 | $ | 9.61 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | (0.05 | ) | (0.06 | ) | (0.02 | ) | (0.09 | ) | (0.03 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.55 | 0.88 | 0.37 | (3.57 | ) | (0.36 | ) | |||||||||||||||
Total from investment operations | 0.50 | 0.82 | 0.35 | (3.66 | ) | (0.39 | ) | |||||||||||||||
Less dividends: | ||||||||||||||||||||||
From net investment income | (0.00 | )‡ | — | — | — | — | ||||||||||||||||
Net asset value at end of period | $ | 7.62 | $ | 7.12 | $ | 6.30 | $ | 5.95 | $ | 9.61 | ||||||||||||
Total investment return (b) | 7.05 | % | 13.02 | % | 5.88 | % | (38.15 | %) | (3.80 | %)(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | (0.63 | %) | (0.87 | %) | (0.41 | %) | (1.12 | %) | (0.86 | %)†† | ||||||||||||
Net expenses (excluding short sale expenses) | 2.32 | % | 2.34 | % | 2.35 | % | 2.33 | % | 2.25 | % †† | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 3.02 | % | 3.23 | % | 3.31 | % | 3.41 | % | 3.65 | % †† | ||||||||||||
Short sale expenses | 0.70 | % | 0.89 | % | 0.86 | % | 0.81 | % | 0.53 | % †† | ||||||||||||
Portfolio turnover rate | 145 | % | 117 | % | 163 | % | 244 | % | 59 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 379 | $ | 289 | $ | 370 | $ | 228 | $ | 35 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
28 MainStay 130/30 Core Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 7.33 | $ | 6.43 | $ | 6.02 | $ | 9.65 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.05 | 0.02 | 0.04 | 0.01 | 0.01 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.57 | 0.91 | 0.38 | (3.62 | ) | (0.36 | ) | |||||||||||||||
Total from investment operations | 0.62 | 0.93 | 0.42 | (3.61 | ) | (0.35 | ) | |||||||||||||||
Less dividends: | ||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.03 | ) | (0.01 | ) | (0.02 | ) | — | |||||||||||||
Net asset value at end of period | $ | 7.92 | $ | 7.33 | $ | 6.43 | $ | 6.02 | $ | 9.65 | ||||||||||||
Total investment return (b) | 8.42 | % | 14.53 | % | 7.05 | % | (37.48 | %) | (3.50 | %)(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.61 | % | 0.33 | % | 0.69 | % | 0.07 | % | 0.27 | % †† | ||||||||||||
Net expenses (excluding short sale expenses) | 1.09 | % | 1.09 | % | 1.22 | % | 1.25 | % | 1.25 | % †† | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 1.79 | % | 2.01 | % | 2.08 | % | 2.16 | % | 2.52 | % †† | ||||||||||||
Short sale expenses | 0.70 | % | 0.92 | % | 0.86 | % | 0.81 | % | 0.53 | % †† | ||||||||||||
Portfolio turnover rate | 145 | % | 117 | % | 163 | % | 244 | % | 59 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 380,953 | $ | 334,987 | $ | 189,845 | $ | 84,861 | $ | 24,123 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment 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. | mainstayinvestments.com 29 |
MainStay 130/30 International Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (9/28/07) | Ratio2 | ||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –9 | .58% | –10 | .75% | 3 | .08% | ||||||||
Excluding sales charges | –4 | .32 | –9 | .51 | 3 | .08 | ||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –9 | .36 | –10 | .68 | 2 | .89 | ||||||||
Excluding sales charges | –4 | .08 | –9 | .44 | 2 | .89 | ||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | –6 | .00 | –10 | .24 | 3 | .83 | ||||||||
If Redeemed Within One Year of Purchase | Excluding sales charges | –5 | .06 | –10 | .24 | 3 | .83 | |||||||||
Class I Shares | No Sales Charge | –3 | .87 | –9 | .24 | 2 | .67 | |||||||||
�� |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expenses ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
30 MainStay 130/30 International Fund
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
MSCI EAFE Index4 | –4 | .08% | –7 | .22% | ||||
Average Lipper Long/Short Equity Fund5 | –0 | .26 | –3 | .75 | ||||
4. | The MSCI Europe, Australasia and Far East (“MSCI EAFE®”) Index consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an Index. |
5. | The average Lipper long/short equity fund is representative of funds that employ portfolio strategies combining long holdings of equities with short sales of equity, equity options, or equity index options. The funds may be either net long or net short, depending on the portfolio manager’s view of the market. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 31
Cost in Dollars of a $1,000 Investment in MainStay 130/30 International Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 831.20 | $ | 14.63 | $ | 1,009.20 | $ | 16.05 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 831.40 | $ | 14.22 | $ | 1,009.70 | $ | 15.60 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 828.20 | $ | 18.06 | $ | 1,005.40 | $ | 19.81 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 833.10 | $ | 13.12 | $ | 1,010.90 | $ | 14.39 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (3.17% for Investor Class, 3.08% for Class A, 3.92% for Class C and 2.84% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
32 MainStay 130/30 International Fund
Portfolio Composition as of October 31, 2011 (Unaudited)
Common Stocks | 127.20 | |||
Exchange Traded Funds | 3.30 | |||
convertible preferred stocks | 0.80 | |||
Preferred Stocks | 0.50 | |||
Other Assets, Less Liabilites | 0.40 | |||
Short-Term Investment | 0.10 | |||
Warrants | 0.00 | |||
Investment Sold Short | (32.30 | ) |
See Portfolio of Investments beginning on page 36 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | Nestle S.A. Registered | |
2. | iShares MSCI Emerging Markets Index Fund | |
3. | Novartis A.G. | |
4. | Roche Holding A.G. | |
5. | HSBC Holdings PLC | |
6. | Vodafone Group PLC | |
7. | British American Tobacco PLC | |
8. | Royal Dutch Shell PLC Class A | |
9. | BP PLC | |
10. | AstraZeneca PLC |
Top Five Short Positions as of October 31, 2011
1. | OSAKA Titanium Technologies Co. | |
2. | Karoon Gas Australia, Ltd. | |
3. | Toho Titanium Co., Ltd. | |
4. | Aristocrat Leisure, Ltd. | |
5. | Wacom Co., Ltd/Japan |
mainstayinvestments.com 33
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio manager Andrew Ver Planck of Madison Square Investors LLC, the Fund’s Subadvisor.
How did MainStay 130/30 International Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay 130/30 International Fund returned –4.32% for Investor Class shares, –4.08% for Class A shares and –5.06% for Class C shares for the 12 months ended October 31, 2011. Over the same period, the Fund’s Class I shares returned –3.87%. All share classes underper-formed the –0.26% return of the average Lipper1 long/short equity fund. Class I shares outperformed, Class A shares matched, and Investor Class and Class C shares underperformed the –4.08% return of the MSCI EAFE® Index2 for the 12 months ended October 31, 2011. The MSCI EAFE® Index is the Fund’s broad-based securities-market index. See page 30 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
During the reporting period, our ability to initiate short positions in Europe helped the Fund’s performance relative to the MSCI EAFE® Index. These short positions allowed the Fund to capitalize on the deterioration of European companies exposed to the sovereign debt crisis. Positions in South Korea and China, on the other hand, detracted from the Fund’s relative performance in August, when concerns of a global economic slowdown caused a sharp sell-off in Asian equities.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the sectors that made the strongest positive contributions to the Fund’s performance relative to the MSCI EAFE® Index were financials, health care and utilities. (Contributions take weightings and total returns into account.) Information technology, consumer staples and industrials made the weakest contributions to the Fund’s relative performance.
Which regions were the strongest positive contributors to the Fund’s relative performance and which regions were particularly weak?
The regions that made the strongest positive contributions to the Fund’s performance relative to the MSCI EAFE® Index were Europe, Japan and the Pacific Rim. Emerging markets such as China and Korea detracted the most from the Fund’s performance relative to the MSCI EAFE® Index.
During the reporting period, which individual Fund holdings made the strongest positive contributions to the Fund’s absolute performance and which holdings detracted the most?
The individual holdings that made the strongest positive contributions to the Fund’s absolute performance were short positions in Austrian biotechnology company Intercell, Norwegian offshore oil drilling equipment company Sevan Marine and Greek bank Piraeus. The strongest contributors among the Fund’s long positions were Japanese information technology company Net One Systems, Dutch energy company Royal Dutch Shell and German solar company Solarworld.
Major detractors included short positions in German media company Sky Deutschland, Japanese retailer Start Today and Swiss capital goods company OC Oerlikon. The Fund’s long positions that detracted the most were European banks BNP Paribas, KBC Groep and Societe Generale.
Did the Fund make any significant purchases or sales during the reporting period?
In November 2010, we initiated an overweight long position in Schneider Electric, a French electrical equipment manufacturer. In December 2010, we initiated short positions in Swiss dental equipment and supply company Nobel Biocare and Spanish wind turbine manufacturer Gamesa Corporacion Tecnologica. In January 2011, we established an overweight long position in Origin Energy, an Australian integrated energy company. In October 2011, we initiated overweight long positions in RWE (a German utility conglomerate) and in Bouygues (a French construction and engineering company).
In November 2010, we significantly reduced the Fund’s long positions in U.K. pharmaceutical company GlaxoSmithKline and French energy company Total. We moved to underweight positions relative to the MSCI EAFE® Index in both stocks. In January 2011, we significantly reduced the Fund’s long position in German industrial conglomerate Siemens, moving to an underweight position relative to the MSCI EAFE® Index.
How did the Fund’s sector and country weightings change relative to the MSCI EAFE® during the reporting period?
During the reporting period, the Fund’s most significant sector-weighting increases relative to the MSCI EAFE® Index were in utilities and health care. Over the same period, the most significant sector-weighting decreases relative to the benchmark were in financials and consumer discretionary.
From a country perspective, the Fund’s most significant weighting increases relative to the MSCI EAFE® Index during the reporting period were in Great Britain and Austria. Over the same period, the Fund’s relative country weightings were decreased most significantly in Australia and Finland.
1. See footnote on page 31 for more information on Lipper Inc.
2. See footnote on page 31 for more information on the MSCI EAFE® Index.
34 MainStay 130/30 International Fund
How was the Fund positioned relative to the MSCI EAFE® Index at the end of October 2011?
The Fund’s sector and country positioning is a result of our bottom-up stock selection process rather than a top-down macroeconomic viewpoint. As of October 31, 2011, the Fund held overweight positions relative to the MSCI EAFE® Index in the telecommunication services and materials sectors. As of the same date, the Fund was underweight relative to the MSCI EAFE® Index in consumer staples and financials.
From a country perspective, the Fund held overweight positions relative to the MSCI EAFE® Index in South Korea, China and Norway as of October 31, 2011. On the same date, the Fund was underweight relative to the MSCI EAFE® Index in Switzerland, Australia and Finland.
The opinions expressed are those of the portfolio manager as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 35
Portfolio of Investments†††October 31, 2011
Shares | Value | |||||||
Common Stocks 127.2%† | ||||||||
Australia 13.0% | ||||||||
Aditya Birla Minerals, Ltd. (Metals & Mining) | 25,614 | $ | 25,821 | |||||
Ausdrill, Ltd. (Metals & Mining) | 96,926 | 295,057 | ||||||
Australia & New Zealand Banking Group, Ltd. (Commercial Banks) (a) | 43,332 | 977,262 | ||||||
Beach Petroleum, Ltd. (Oil, Gas & Consumable Fuels) | 194,759 | 238,211 | ||||||
BGP Holdings PLC (Diversified Financial Services) (b)(c) | 106,339 | 11 | ||||||
BHP Billiton, Ltd. (Metals & Mining) (a) | 42,093 | 1,647,899 | ||||||
Caltex Australia, Ltd. (Oil, Gas & Consumable Fuels) (a) | 67,234 | 931,670 | ||||||
Challenger, Ltd. (Diversified Financial Services) (a) | 160,309 | 755,293 | ||||||
Commonwealth Bank of Australia (Commercial Banks) (a) | 2,854 | 146,566 | ||||||
Computershare, Ltd. (IT Services) | 3,210 | 25,392 | ||||||
CSL, Ltd. (Biotechnology) (a) | 22,378 | 670,165 | ||||||
Emeco Holdings, Ltd. (Trading Companies & Distributors) (a) | 587,310 | 601,807 | ||||||
Energy Resources of Australia, Ltd. (Oil, Gas & Consumable Fuels) (a)(d) | 149,521 | 308,260 | ||||||
Iluka Resources, Ltd. (Metals & Mining) (a) | 63,326 | 1,052,722 | ||||||
Imdex, Ltd. (Metals & Mining) | 92,963 | 202,183 | ||||||
Industrea, Ltd. (Machinery) | 68,667 | 91,448 | ||||||
Leighton Holdings, Ltd. (Construction & Engineering) (a) | 48,461 | 1,084,459 | ||||||
Macmahon Holdings, Ltd. (Construction & Engineering) (d) | 126,699 | 80,161 | ||||||
Macquarie Airports (Transportation Infrastructure) (a) | 67,537 | 241,182 | ||||||
Metcash, Ltd. (Food & Staples Retailing) (a) | 30 | 131 | ||||||
Mineral Deposits, Ltd. (Metals & Mining) (d) | 12,733 | 86,057 | ||||||
National Australia Bank, Ltd. (Commercial Banks) (a) | 47,244 | 1,261,057 | ||||||
Newcrest Mining, Ltd. (Metals & Mining) (a) | 9,107 | 320,813 | ||||||
NRW Holdings, Ltd. (Construction & Engineering) (a) | 136,789 | 347,210 | ||||||
OneSteel, Ltd. (Metals & Mining) (a) | 722,338 | 901,774 | ||||||
OZ Minerals, Ltd. (Metals & Mining) (a) | 37,587 | 443,071 | ||||||
Panoramic Resources, Ltd. (Metals & Mining) | 140,136 | 200,907 | ||||||
Ramelius Resources, Ltd. (Metals & Mining) | 79,876 | 102,825 | ||||||
Regis Resources, Ltd. (Metals & Mining) (d) | 90,338 | 283,596 | ||||||
Seven Group Holdings, Ltd. (Trading Companies & Distributors) | 2,102 | 16,760 | ||||||
Sigma Pharmaceuticals, Ltd. (Health Care Providers & Services) | 744,615 | 540,039 | ||||||
Spark Infrastructure Group (Electric Utilities) (a)(e) | 471,407 | 600,613 | ||||||
Stockland (Real Estate Investment Trusts) (a) | 49,498 | 161,734 | ||||||
Telstra Corp, Ltd. (Diversified Telecommunication Services) (a) | 327,469 | 1,065,071 | ||||||
Transpacific Industries Group, Ltd. (Commercial Services & Supplies) (c)(d) | 58,866 | 43,924 | ||||||
Transpacific Industries Group, Ltd. (Commercial Services & Supplies) (d) | 91,568 | 69,913 | ||||||
Western Areas NL (Metals & Mining) | 42,618 | 249,485 | ||||||
Westfield Group (Real Estate Investment Trusts) (a) | 121,853 | 979,914 | ||||||
Westpac Banking Corp. (Commercial Banks) (a) | 64,578 | 1,503,051 | ||||||
18,553,514 | ||||||||
Austria 1.4% | ||||||||
OMV A.G. (Oil, Gas & Consumable Fuels) | 17,282 | 601,535 | ||||||
Raiffeisen International Bank Holding A.G. (Commercial Banks) (a) | 10,596 | 293,095 | ||||||
Strabag SE (Construction & Engineering) (a) | 9,878 | 302,419 | ||||||
Voestalpine A.G. (Metals & Mining) (a) | 21,735 | 745,623 | ||||||
1,942,672 | ||||||||
Belgium 2.0% | ||||||||
Anheuser-Busch InBev N.V. (Beverages) (a) | 24,911 | 1,383,047 | ||||||
Delhaize Group (Food & Staples Retailing) | 5,829 | 381,501 | ||||||
Groupe Bruxelles Lambert S.A. (Diversified Financial Services) (a) | 993 | 76,297 | ||||||
KBC Groep N.V. (Commercial Banks) (a) | 18,719 | 414,562 | ||||||
UCB S.A. (Pharmaceuticals) (a) | 13,081 | 573,640 | ||||||
2,829,047 | ||||||||
Bermuda 2.1% | ||||||||
Cheung Kong Infrastructure Holdings, Ltd. (Electric Utilities) (a) | 61,000 | 325,886 | ||||||
China Green Holdings Ltd/Bermuda (Food Products) | 414,000 | 126,352 | ||||||
Chow Sang Sang Holdings International, Ltd. (Specialty Retail) | 57,000 | 170,596 | ||||||
First Pacific Co., Ltd. (Diversified Financial Services) | 178,000 | 184,197 | ||||||
Giordano International, Ltd. (Specialty Retail) | 986,000 | 741,009 | ||||||
GuocoLeisure, Ltd. (Hotels, Restaurants & Leisure) | 106,000 | 50,956 | ||||||
Johnson Electric Holdings, Ltd. (Electrical Equipment) | 38,000 | 22,144 | ||||||
Orient Overseas International, Ltd. (Marine) (a) | 40,000 | 180,771 | ||||||
Skyworth Digital Holdings, Ltd. (Household Durables) | 562,000 | 290,106 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
36 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Bermuda (continued) | ||||||||
SmarTone Telecommunications Holding, Ltd. (Wireless Telecommunication Services) | 349,500 | $ | 647,450 | |||||
Texwinca Holdings, Ltd. (Textiles, Apparel & Luxury Goods) (a) | 100,000 | 126,783 | ||||||
TPV Technology, Ltd. (Computers & Peripherals) | 298,000 | 85,278 | ||||||
2,951,528 | ||||||||
Brazil 0.2% | ||||||||
Brasil Telecom S.A., ADR (Diversified Telecommunication Services) (f) | 4,700 | 96,585 | ||||||
Braskem S.A., Sponsored ADR (Chemicals) (f) | 2,700 | 48,708 | ||||||
BRF—Brasil Foods S.A., ADR (Food Products) (f) | 2,500 | 52,625 | ||||||
Cia de Saneamento Basico do Estado de Sao Paulo, ADR (Water Utilities) (f) | 1,400 | 75,964 | ||||||
273,882 | ||||||||
Cayman Islands 1.9% | ||||||||
361 Degrees International, Ltd. (Textiles, Apparel & Luxury Goods) | 473,000 | 227,991 | ||||||
AMVIG Holdings, Ltd. (Containers & Packaging) | 118,000 | 73,641 | ||||||
Asia Cement China Holdings Corp. (Construction Materials) | 444,000 | 209,782 | ||||||
Bosideng International Holdings, Ltd. (Textiles, Apparel & Luxury Goods) | 26,000 | 7,078 | ||||||
Chaoda Modern Agriculture Holdings, Ltd. (Food Products) (c) | 38,000 | 7,190 | ||||||
Chaowei Power Holdings, Ltd. (Auto Components) | 223,000 | 104,207 | ||||||
Chigo Holding, Ltd. (Household Durables) | 2,254,000 | 104,357 | ||||||
China Lumena New Materials Corp. (Chemicals) | 560,000 | 119,699 | ||||||
China Shanshui Cement Group (Construction Materials) (a) | 351,000 | 263,158 | ||||||
China Zhongwang Holdings, Ltd. (Metals & Mining) | 33,200 | 10,939 | ||||||
Dongyue Group (Chemicals) | 382,000 | 284,830 | ||||||
Global Bio-Chem Technology Group Co., Ltd. (Food Products) | 1,224,000 | 274,883 | ||||||
Haitian International Holdings, Ltd. (Machinery) | 30,000 | 26,112 | ||||||
Hutchison Telecommunications Hong Kong Holdings, Ltd. (Diversified Telecommunication Services) | 568,000 | 201,376 | ||||||
Lifestyle International Holdings, Ltd. (Multiline Retail) (a) | 41,000 | 109,720 | ||||||
Peak Sport Products Co., Ltd. (Textiles, Apparel & Luxury Goods) | 477,000 | 139,506 | ||||||
Real Nutriceutical Group, Ltd. (Personal Products) | 150,000 | 55,410 | ||||||
Shenzhou International Group Holdings, Ltd. (Textiles, Apparel & Luxury Goods) | 73,000 | 92,365 | ||||||
TCC International Holdings, Ltd. (Construction Materials) | 264,000 | 121,650 | ||||||
TCL Communication Technology Holdings, Ltd. (Communications Equipment) | 33,000 | 16,249 | ||||||
Tianneng Power International, Ltd. (Auto Components) | 544,000 | 252,890 | ||||||
XTEP International Holdings, Ltd. (Textiles, Apparel & Luxury Goods) | 152,000 | 59,110 | ||||||
2,762,143 | ||||||||
China 0.6% | ||||||||
China Construction Bank Corp. Class H (Commercial Banks) | 423,000 | 307,471 | ||||||
China Petroleum & Chemical Corp. Class H (Oil, Gas & Consumable Fuels) | 224,000 | 212,079 | ||||||
CSG Holding Co., Ltd. Class B (Construction Materials) | 76,800 | 65,310 | ||||||
Great Wall Motor Co., Ltd. (Automobiles) | 34,000 | 45,188 | ||||||
Harbin Power Equipment Co., Ltd. (Electrical Equipment) | 58,000 | 58,423 | ||||||
Weiqiao Textile Co. (Textiles, Apparel & Luxury Goods) | 377,000 | 206,101 | ||||||
894,572 | ||||||||
Denmark 0.6% | ||||||||
Coloplast A/S Class B (Health Care Equipment & Supplies) | 2,135 | 310,038 | ||||||
H Lundbeck A/S (Pharmaceuticals) (a) | 29,719 | 598,124 | ||||||
908,162 | ||||||||
Finland 0.0%‡ | ||||||||
Pohjola Bank PLC Class A (Diversified Financial Services) | 1,700 | 19,546 | ||||||
France 8.7% | ||||||||
Arkema S.A. (Chemicals) (a) | 6,100 | 413,282 | ||||||
AXA S.A. (Insurance) (a) | 54,507 | 875,714 | ||||||
BNP Paribas S.A. (Commercial Banks) (a) | 12,815 | 568,205 | ||||||
Bouygues S.A. (Construction & Engineering) | 29,853 | 1,116,225 | ||||||
Christian Dior S.A. (Textiles, Apparel & Luxury Goods) (a) | 6,991 | 986,071 | ||||||
CNP Assurances (Insurance) (a) | 1,828 | 27,948 | ||||||
Derichebourg S.A. (Commercial Services & Supplies) (d) | 46,047 | 181,898 | ||||||
Faurecia (Auto Components) (a) | 16,022 | 422,063 | ||||||
Natixis (Commercial Banks) (a) | 10,739 | 34,020 | ||||||
Peugeot S.A. (Automobiles) (a) | 12,425 | 269,918 | ||||||
Plastic Omnium S.A. (Auto Components) | 15,928 | 443,934 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 37 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
France (continued) | ||||||||
Rallye S.A. (Food & Staples Retailing) | 14,545 | $ | 464,374 | |||||
Safran S.A. (Aerospace & Defense) (a) | 24,909 | 810,718 | ||||||
Sanofi (Pharmaceuticals) (a) | 25,263 | 1,808,409 | ||||||
Societe Generale (Commercial Banks) | 2,637 | 75,613 | ||||||
Total S.A. (Oil, Gas & Consumable Fuels) (a) | 31,535 | 1,649,075 | ||||||
Unibail-Rodamco SE (Real Estate Investment Trusts) (a) | 1,130 | 224,333 | ||||||
Vivendi S.A. (Diversified Telecommunication Services) (a) | 45,753 | 1,024,992 | ||||||
Wendel (Industrial Conglomerates) (a) | 13,793 | 1,020,117 | ||||||
12,416,909 | ||||||||
Germany 9.5% | ||||||||
Allianz SE (Insurance) (a) | 5,587 | 624,151 | ||||||
Balda A.G. (Communications Equipment) (d) | 8,623 | 61,078 | ||||||
BASF S.E. (Chemicals) (a) | 19,378 | 1,408,331 | ||||||
Bayerische Motoren Werke A.G. (Automobiles) (a) | 13,518 | 1,101,663 | ||||||
Bechtle A.G. (IT Services) (a) | 12,439 | 462,564 | ||||||
Bertrandt A.G. (Professional Services) | 1,536 | 85,325 | ||||||
Deutsche Bank A.G. (Capital Markets) (a) | 11,442 | 475,625 | ||||||
Duerr A.G. (Machinery) | 15,110 | 655,417 | ||||||
Fresenius SE (Health Care Providers & Services) (a) | 10,194 | 1,001,992 | ||||||
Hugo Boss A.G. (Textiles, Apparel & Luxury Goods) | 496 | 43,004 | ||||||
Indus Holding A.G. (Industrial Conglomerates) | 6,188 | 161,103 | ||||||
Infineon Technologies A.G. (Semiconductors & Semiconductor Equipment) (a) | 112,818 | 1,006,025 | ||||||
Lanxess A.G. (Chemicals) (a) | 2 | 117 | ||||||
Leoni A.G. (Auto Components) | 4,923 | 205,990 | ||||||
MAN A.G. (Machinery) (a) | 9,611 | 847,524 | ||||||
Muenchener Rueckversicherungs-Gesellschaft A.G. Registered (Insurance) (a) | 2,320 | 311,007 | ||||||
RWE A.G. (Multi-Utilities) (a) | 28,017 | 1,195,577 | ||||||
Siemens A.G. (Industrial Conglomerates) (a) | 8,079 | 846,754 | ||||||
Sixt A.G. (Road & Rail) | 9,188 | 191,806 | ||||||
Stada Arzneimittel A.G. (Pharmaceuticals) (a) | 17,630 | 427,077 | ||||||
Suedzucker A.G. (Food Products) (a) | 33,098 | 966,463 | ||||||
United Internet A.G. (Internet Software & Services) (a) | 30,290 | 595,729 | ||||||
Volkswagen A.G. (Automobiles) (a) | 5,834 | 916,083 | ||||||
13,590,405 | ||||||||
Greece 0.4% | ||||||||
Motor Oil Hellas Corinth Refineries S.A. (Oil, Gas & Consumable Fuels) | 6,765 | 60,914 | ||||||
OPAP S.A. (Hotels, Restaurants & Leisure) (a) | 28,130 | 327,173 | ||||||
Public Power Corp. S.A. (Electric Utilities) (a) | 16,689 | 144,669 | ||||||
532,756 | ||||||||
Hong Kong 2.0% | ||||||||
China Pharmaceutical Group, Ltd. (Pharmaceuticals) | 576,000 | 154,171 | ||||||
CNOOC, Ltd. (Oil, Gas & Consumable Fuels) | 162,000 | 306,193 | ||||||
Dah Chong Hong Holdings, Ltd. (Distributors) (a) | 621,000 | 757,598 | ||||||
Galaxy Entertainment Group, Ltd. (Hotels, Restaurants & Leisure) (a)(d) | 257,000 | 500,928 | ||||||
Lenovo Group, Ltd. (Computers & Peripherals) | 224,000 | 150,681 | ||||||
Melco International Development (Hotels, Restaurants & Leisure) (a) | 114,000 | 88,622 | ||||||
Shun Tak Holdings, Ltd. (Industrial Conglomerates) | 952,000 | 439,028 | ||||||
SJM Holdings, Ltd. (Hotels, Restaurants & Leisure) (a) | 28,000 | 47,354 | ||||||
Sun Hung Kai Properties, Ltd. (Real Estate Management & Development) (a) | 36,000 | 489,430 | ||||||
2,934,005 | ||||||||
India 0.1% | ||||||||
Tata Motors, Ltd., Sponsored ADR (Machinery) (f) | 8,000 | 160,400 | ||||||
Israel 1.1% | ||||||||
Delek Group, Ltd. (Industrial Conglomerates) (a) | 1,054 | 207,421 | ||||||
Israel Chemicals, Ltd. (Chemicals) (a) | 90,336 | 1,076,197 | ||||||
Mizrahi Tefahot Bank, Ltd. (Commercial Banks) (a) | 39,747 | 342,121 | ||||||
1,625,739 | ||||||||
Italy 4.2% | ||||||||
Autostrada Torino-Milano S.p.A. (Transportation Infrastructure) (a) | 18,690 | 195,284 | ||||||
De’Longhi S.p.A. (Household Durables) (a) | 61,612 | 671,410 | ||||||
Enel Green Power S.p.A. (Independent Power Producers & Energy Traders) (a) | 63,423 | 145,029 | ||||||
Enel S.p.A. (Electric Utilities) (a) | 278,842 | 1,310,909 | ||||||
ENI S.p.A. (Oil, Gas & Consumable Fuels) (a) | 67,094 | 1,477,452 | ||||||
Exor S.p.A. (Diversified Financial Services) (a) | 18,499 | 402,906 | ||||||
Fiat S.p.A (Automobiles) (a) | 162,762 | 995,139 | ||||||
Intesa Sanpaolo S.p.A. (Commercial Banks) (a) | 124,028 | 218,832 | ||||||
Telecom Italia S.p.A. (Diversified Telecommunication Services) (a) | 537,627 | 668,024 | ||||||
6,084,985 | ||||||||
Japan 32.2% | ||||||||
Acom Co., Ltd. (Consumer Finance) (d) | 380 | 6,722 | ||||||
Aeon Co., Ltd. (Food & Staples Retailing) (a) | 57,800 | 759,077 | ||||||
Aisin Seiki Co., Ltd. (Auto Components) (a) | 4,700 | 149,311 | ||||||
AOC Holdings, Inc. (Oil, Gas & Consumable Fuels) | 51,000 | 293,552 | ||||||
AOKI Holdings, Inc. (Specialty Retail) | 4,000 | 53,393 |
The notes to the financial statements are an integral part of,
38 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Japan (continued) | ||||||||
AOYAMA TRADING Co., Ltd. (Specialty Retail) (a) | 42,800 | $ | 675,065 | |||||
Canon, Inc. (Office Electronics) (a) | 1,700 | 77,633 | ||||||
Central Glass Co., Ltd. (Building Products) (a) | 119,000 | 533,707 | ||||||
Central Japan Railway Co. (Road & Rail) (a) | 84 | 714,273 | ||||||
Century Tokyo Leasing Corp. (Diversified Financial Services) (a) | 21,600 | 433,454 | ||||||
Chugoku Marine Paints, Ltd. (Chemicals) | 18,000 | 127,440 | ||||||
Coca-Cola West Co., Ltd. (Beverages) | 6,500 | 115,906 | ||||||
Credit Saison Co., Ltd. (Consumer Finance) (a) | 47,900 | 941,387 | ||||||
Daiichikosho Co., Ltd. (Media) | 6,100 | 117,735 | ||||||
eAccess, Ltd. (Internet Software & Services) | 589 | 158,339 | ||||||
East Japan Railway Co. (Road & Rail) (a) | 17,600 | 1,068,751 | ||||||
EDION Corp. (Specialty Retail) | 94,400 | 757,163 | ||||||
Electric Power Development Co., Ltd. (Independent Power Producers & Energy Traders) (a) | 8,700 | 216,774 | ||||||
Fields Corp. (Leisure Equipment & Products) | 37 | 61,383 | ||||||
FUJIFILM Holdings Corp. (Electronic Equipment & Instruments) (a) | 42,100 | 1,032,389 | ||||||
FujiI Media Holdings, Inc. (Media) | 30 | 43,120 | ||||||
Furukawa-Sky Aluminum Corp. (Metals & Mining) | 85,000 | 250,494 | ||||||
Geo Corp. (Specialty Retail) | 441 | 447,586 | ||||||
Godo Steel, Ltd. (Metals & Mining) | 72,000 | 171,651 | ||||||
Gulliver International Co., Ltd. (Specialty Retail) | 4,850 | 215,353 | ||||||
H.I.S Co., Ltd. (Hotels, Restaurants & Leisure) | 7,900 | 204,424 | ||||||
Hitachi Capital Corp. (Consumer Finance) (a) | 16,000 | 196,091 | ||||||
Hitachi Medical Corp. (Health Care Equipment & Supplies) | 14,000 | 152,519 | ||||||
Hitachi, Ltd. (Electronic Equipment & Instruments) (a) | 223,000 | 1,196,892 | ||||||
Hokuetsu Kishu Paper Co., Ltd. (Paper & Forest Products) (a) | 105,000 | 690,844 | ||||||
Hokuhoku Financial Group, Inc. (Commercial Banks) (a) | 32,000 | 59,796 | ||||||
Idemitsu Kosan Co., Ltd. (Oil, Gas & Consumable Fuels) (a) | 10,500 | 977,837 | ||||||
INPEX Corp. (Oil, Gas & Consumable Fuels) (a) | 126 | 828,959 | ||||||
IT Holdings Corp. (IT Services) (a) | 45,600 | 472,943 | ||||||
ITOCHU Corp. (Trading Companies & Distributors) (a) | 20,000 | 197,250 | ||||||
Jaccs Co., Ltd. (Consumer Finance) | 154,000 | 513,711 | ||||||
Japan Petroleum Exploration Co., Ltd. (Oil, Gas & Consumable Fuels) (a) | 18,400 | 727,273 | ||||||
Japan Securities Finance Co., Ltd. (Diversified Financial Services) | 30,200 | 144,627 | ||||||
JFE Shoji Holdings, Inc. (Trading Companies & Distributors) | 69,000 | 279,167 | ||||||
JX Holdings, Inc. (Oil, Gas & Consumable Fuels) (a) | 26,100 | 151,868 | ||||||
K’s Holdings Corp. (Specialty Retail) (a) | 15,700 | 663,835 | ||||||
Kayaba Industry Co., Ltd. (Auto Components) (a) | 83,000 | 477,218 | ||||||
KDDI Corp. (Wireless Telecommunication Services) (a) | 154 | 1,126,618 | ||||||
Kohnan Shoji Co., Ltd. (Specialty Retail) (a) | 27,000 | 468,629 | ||||||
Konica Minolta Holdings, Inc. (Office Electronics) (a) | 13,500 | 98,338 | ||||||
Kyoei Steel, Ltd. (Metals & Mining) | 700 | 12,398 | ||||||
Maeda Road Construction Co., Ltd. (Construction & Engineering) | 19,000 | 187,788 | ||||||
Melco Holdings, Inc. (Computers & Peripherals) | 5,200 | 144,960 | ||||||
Mitsubishi Corp. (Trading Companies & Distributors) (a) | 23,900 | 491,965 | ||||||
Mitsubishi Steel Manufacturing Co., Ltd. (Metals & Mining) | 106,000 | 284,650 | ||||||
Mitsubishi UFJ Financial Group, Inc. (Commercial Banks) (a) | 370,800 | 1,606,325 | ||||||
Mitsubishi UFJ Lease & Finance Co., Ltd. (Diversified Financial Services) (a) | 5,080 | 196,758 | ||||||
MITSUI & Co., Ltd. (Trading Companies & Distributors) (a) | 72,400 | 1,056,425 | ||||||
Morinaga Milk Industry Co., Ltd. (Food Products) | 15,000 | 59,764 | ||||||
NEC Networks & System Integration Corp. (Construction & Engineering) | 1,700 | 25,536 | ||||||
NET One Systems Co., Ltd. (IT Services) (a) | 263 | 688,192 | ||||||
Nichiha Corp. (Building Products) | 5,700 | 66,731 | ||||||
Nippo Corp. (Construction & Engineering) (a) | 46,000 | 403,848 | ||||||
Nippon Coke & Engineering Co., Ltd. (Metals & Mining) | 92,500 | 126,977 | ||||||
Nippon Densetsu Kogyo Co., Ltd. (Construction & Engineering) | 11,000 | 109,087 | ||||||
Nippon Electric Glass Co., Ltd. (Electronic Equipment & Instruments) (a) | 109,000 | 971,827 | ||||||
Nippon Light Metal Co., Ltd. (Metals & Mining) | 144,000 | 209,520 | ||||||
Nippon Soda Co., Ltd. (Chemicals) | 14,000 | 64,559 | ||||||
Nippon Synthetic Chemical Industry Co., Ltd. (The) (Chemicals) | 32,000 | 179,164 | ||||||
Nippon Telegraph & Telephone Corp. (Diversified Telecommunication Services) (a) | 23,800 | 1,216,725 | ||||||
Nishi-Nippon City Bank, Ltd. (The) (Commercial Banks) (a) | 159,000 | 433,151 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 39 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Japan (continued) | ||||||||
Nishimatsu Construction Co., Ltd. (Construction & Engineering) | 55,000 | $ | 90,571 | |||||
Nissan Motor Co., Ltd. (Automobiles) (a) | 112,100 | 1,032,762 | ||||||
Nissin Electric Co., Ltd. (Electrical Equipment) | 84,000 | 515,568 | ||||||
Nitto Boseki Co., Ltd. (Building Products) | 9,000 | 26,958 | ||||||
NTT Data Corp. (IT Services) (a) | 117 | 392,887 | ||||||
NTT DoCoMo, Inc. (Wireless Telecommunication Services) (a) | 328 | 579,367 | ||||||
Okinawa Electric Power Co., Inc. (The) (Electric Utilities) | 800 | 32,623 | ||||||
Osaka Gas Co., Ltd. (Gas Utilities) (a) | 92,000 | 348,638 | ||||||
PanaHome Corp. (Household Durables) (a) | 33,000 | 226,729 | ||||||
Press Kogyo Co., Ltd. (Auto Components) (a) | 121,000 | 569,883 | ||||||
Promise Co., Ltd. (Consumer Finance) (a)(d) | 14,500 | 141,974 | ||||||
Ricoh Leasing Co., Ltd. (Diversified Financial Services) | 8,400 | 184,804 | ||||||
Riso Kagaku Corp. (Office Electronics) | 5,000 | 86,466 | ||||||
Rohm Co., Ltd. (Semiconductors & Semiconductor Equipment) (a) | 6,600 | 336,211 | ||||||
Round One Corp. (Hotels, Restaurants & Leisure) | 86,400 | 634,407 | ||||||
Ryobi, Ltd. (Machinery) | 82,000 | 332,779 | ||||||
Sakai Chemical Industry Co., Ltd. (Chemicals) | 50,000 | 197,242 | ||||||
Sanyo Special Steel Co., Ltd. (Metals & Mining) | 39,000 | 213,964 | ||||||
Sapporo Hokuyo Holdings, Inc. (Commercial Banks) (a) | 181,000 | 594,422 | ||||||
Seria Co., Ltd. (Multiline Retail) | 12 | 65,014 | ||||||
Shinsei Bank, Ltd. (Commercial Banks) | 346,000 | 381,472 | ||||||
Ship Healthcare Holdings, Inc. (Health Care Providers & Services) (a) | 29,000 | 709,531 | ||||||
Sintokogio, Ltd. (Machinery) | 4,500 | 41,075 | ||||||
SKY Perfect JSAT Holdings, Inc. (Media) (a) | 1,481 | 721,713 | ||||||
Sojitz Corp. (Trading Companies & Distributors) (a) | 401,800 | 686,364 | ||||||
Sony Corp. (Household Durables) (a) | 44,200 | 929,421 | ||||||
Sumitomo Corp. (Trading Companies & Distributors) (a) | 19,900 | 246,838 | ||||||
Sumitomo Electric Industries, Ltd. (Electrical Equipment) | 31,200 | 348,012 | ||||||
Sumitomo Forestry Co., Ltd. (Household Durables) (a) | 82,400 | 708,699 | ||||||
Sumitomo Mitsui Financial Group, Inc. (Commercial Banks) (a) | 47,776 | 1,331,948 | ||||||
Takeda Pharmaceutical Co., Ltd. (Pharmaceuticals) (a) | 16,800 | 758,015 | ||||||
Toda Corp. (Construction & Engineering) (a) | 28,000 | 98,672 | ||||||
Tokai Rubber Industries, Inc. (Auto Components) (a) | 13,200 | 166,068 | ||||||
Tokuyama Corp. (Chemicals) (a) | 111,000 | 399,623 | ||||||
Tosoh Corp. (Chemicals) | 160,000 | 520,336 | ||||||
Toyota Motor Corp. (Automobiles) (a) | 15,200 | 508,222 | ||||||
Tsuruha Holdings, Inc. (Food & Staples Retailing) (a) | 7,600 | 391,442 | ||||||
Unipres Corp. (Auto Components) (a) | 26,200 | 717,994 | ||||||
UNY Co., Ltd. (Food & Staples Retailing) (a) | 79,300 | 714,809 | ||||||
Valor Co., Ltd. (Food & Staples Retailing) | 26,300 | 393,371 | ||||||
Xebio Co., Ltd. (Specialty Retail) | 21,100 | 514,938 | ||||||
Yamada Denki Co., Ltd. (Specialty Retail) | 8,280 | 596,748 | ||||||
46,075,427 | ||||||||
Malaysia 0.2% | ||||||||
AirAsia BHD (Airlines) | 183,800 | 231,762 | ||||||
Netherlands 2.7% | ||||||||
European Aeronautic Defence and Space Co. N.V. (Aerospace & Defense) (a) | 33,909 | 994,626 | ||||||
Heineken Holding N.V. (Beverages) (a) | 15,848 | 678,621 | ||||||
ING Groep N.V. (Diversified Financial Services) (a)(d) | 47,148 | 407,119 | ||||||
Koninklijke KPN N.V. (Diversified Telecommunication Services) | 74,157 | 968,932 | ||||||
STMicroelectronics N.V. (Semiconductors & Semiconductor Equipment) (a) | 113,087 | 779,374 | ||||||
Ten Cate N.V. (Textiles, Apparel & Luxury Goods) (a) | 284 | 9,718 | ||||||
Unilever N.V., CVA (Food Products) (a) | 387 | 13,308 | ||||||
3,851,698 | ||||||||
New Zealand 0.5% | ||||||||
Telecom Corp. of New Zealand, Ltd. (Diversified Telecommunication Services) (a) | 320,863 | 658,554 | ||||||
Norway 2.5% | ||||||||
Atea ASA (IT Services) (a) | 59,776 | 527,193 | ||||||
Austevoll Seafood A.S.A. (Food Products) (a) | 31,612 | 124,808 | ||||||
Cermaq ASA (Food Products) (a)(d) | 42,819 | 474,818 | ||||||
StatoilHydro ASA (Oil, Gas & Consumable Fuels) (a) | 51,883 | 1,319,651 | ||||||
TGS Nopec Geophysical Co. ASA (Energy Equipment & Services) (a) | 34,934 | 792,751 | ||||||
Yara International ASA (Chemicals) (a) | 7,938 | 374,857 | ||||||
3,614,078 | ||||||||
Poland 0.1% | ||||||||
KGHM Polska Miedz S.A. (Metals & Mining) (a) | 2,770 | 133,615 | ||||||
The notes to the financial statements are an integral part of,
40 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Republic of Korea 1.5% | ||||||||
Daelim Industrial Co., Ltd. (Construction & Engineering) (a) | 1,518 | $ | 131,674 | |||||
Dongbu Insurance Co., Ltd. (Insurance) (a) | 830 | 34,601 | ||||||
Dongkuk Steel Mill Co., Ltd. (Metals & Mining) (a) | 3,660 | 84,757 | ||||||
Doosan Corp. (Industrial Conglomerates) (a) | 914 | 115,737 | ||||||
Doosan Infracore Co., Ltd. (Machinery) (a)(d) | 2,510 | 43,197 | ||||||
GS Holdings (Oil, Gas & Consumable Fuels) (a) | 2,142 | 120,386 | ||||||
Hankook Tire Co., Ltd. (Auto Components) (a) | 1,030 | 41,284 | ||||||
Hanwha Chem Corp. (Chemicals) (a) | 1,260 | 32,678 | ||||||
Hanwha Corp. (Chemicals) (a) | 2,130 | 74,762 | ||||||
Honam Petrochemical Corp. (Chemicals) (a) | 482 | 130,776 | ||||||
Hyosung Corp. (Chemicals) (a) | 465 | 26,884 | ||||||
Hyundai Heavy Industries Co., Ltd. (Machinery) (a) | 303 | 81,477 | ||||||
Hyundai Mipo Dockyard (Machinery) (a) | 1,086 | 118,299 | ||||||
Hyundai Motor Co. (Automobiles) (a) | 376 | 76,269 | ||||||
Industrial Bank of Korea (Commercial Banks) (a) | 3,240 | 42,264 | ||||||
Kia Motors Corp. (Automobiles) (a) | 1,766 | 114,131 | ||||||
Korea Gas Corp. (Gas Utilities) (a) | 4,030 | 135,977 | ||||||
Korea Kumho Petrochemical (Chemicals) | 376 | 63,718 | ||||||
KP Chemical Corp. (Chemicals) | 3,770 | 53,170 | ||||||
Lotte Confectionery Co., Ltd. (Food Products) (a) | 38 | 59,504 | ||||||
OCI Co., Ltd. (Chemicals) (a) | 396 | 81,396 | ||||||
S-Oil Corp. (Oil, Gas & Consumable Fuels) (a) | 975 | 100,063 | ||||||
Samsung Heavy Industries Co., Ltd. (Machinery) (a) | 870 | 26,760 | ||||||
SK Holdings Co., Ltd. (Industrial Conglomerates) (a) | 975 | 129,712 | ||||||
SK Innovation Co., Ltd. (Oil, Gas & Consumable Fuels) (a) | 173 | 25,842 | ||||||
SK Networks Co., Ltd. (Trading Companies & Distributors) (a) | 7,880 | 79,328 | ||||||
Woori Finance Holdings Co., Ltd. (Commercial Banks) (a) | 6,620 | 62,770 | ||||||
2,087,416 | ||||||||
Russia 0.1% | ||||||||
Lukoil OAO, Sponsored ADR (Oil, Gas & Consumable Fuels) (f) | 2,074 | 120,046 | ||||||
Sistema JSFC, Sponsored GDR (Wireless Telecommunication Services) (g) | 1,551 | 26,386 | ||||||
Tatneft, Sponsored ADR (Oil, Gas & Consumable Fuels) (f) | 1,895 | 55,908 | ||||||
202,340 | ||||||||
Singapore 1.0% | ||||||||
CWT, Ltd. (Transportation Infrastructure) | 58,000 | 48,022 | ||||||
DBS Group Holdings, Ltd. (Commercial Banks) (a) | 22,000 | 214,618 | ||||||
First Resources, Ltd. (Food Products) | 22,000 | 24,649 | ||||||
Hi-P International, Ltd. (Electronic Equipment & Instruments) | 47,000 | 21,185 | ||||||
Hong Leong Asia, Ltd. (Industrial Conglomerates) | 64,000 | 99,403 | ||||||
Jardine Cycle & Carriage, Ltd. (Distributors) (a) | 13,000 | 468,316 | ||||||
XP Power, Ltd. (Electrical Equipment) | 2,456 | 39,610 | ||||||
Yangzijiang Shipbuilding Holdings, Ltd. (Machinery) | 612,000 | 452,003 | ||||||
1,367,806 | ||||||||
Spain 2.7% | ||||||||
Banco Bilbao Vizcaya Argentaria S.A. (Commercial Banks) (a) | 53,226 | 478,829 | ||||||
Banco Santander S.A. (Commercial Banks) (a) | 103,895 | 888,490 | ||||||
Distribuidora Internacional de Alimentacion S.A. (Food & Staples Retailing) (d) | 17,045 | 77,514 | ||||||
Endesa S.A. (Electric Utilities) (a) | 9,790 | 233,046 | ||||||
Gamesa Corp. Tecnologica S.A. (Electrical Equipment) | 119,861 | 577,615 | ||||||
Gas Natural SDG S.A. (Gas Utilities) (a) | 48,270 | 898,092 | ||||||
Iberdrola S.A. (Electric Utilities) (a) | 61,183 | 443,844 | ||||||
Telefonica S.A. (Diversified Telecommunication Services) (a) | 15,194 | 324,163 | ||||||
3,921,593 | ||||||||
Sweden 2.2% | ||||||||
Betsson AB (Hotels, Restaurants & Leisure) (a)(d) | 18,456 | 433,614 | ||||||
Billerud AB (Paper & Forest Products) | 18,523 | 143,267 | ||||||
Boliden AB (Metals & Mining) (a) | 80,359 | 1,131,602 | ||||||
Hexpol AB (Machinery) | 2,116 | 54,300 | ||||||
Hoganas AB (Metals & Mining) | 3,284 | 104,493 | ||||||
Meda AB Class A (Pharmaceuticals) (a) | 79,461 | 807,214 | ||||||
SAAB AB (Aerospace & Defense) | 11,629 | 223,504 | ||||||
Swedish Match AB (Tobacco) (a) | 3,569 | 123,162 | ||||||
Telefonaktiebolaget LM Ericsson Class B (Communications Equipment) (a) | 6,056 | 63,042 | ||||||
3,084,198 | ||||||||
Switzerland 7.3% | ||||||||
Aryzta A.G. (Food Products) | 6,367 | 307,099 | ||||||
X Nestle S.A. Registered (Food Products) (a) | 52,248 | 3,023,577 | ||||||
X Novartis A.G. (Pharmaceuticals) (a) | 43,145 | 2,437,374 | ||||||
Pargesa Holding S.A. (Diversified Financial Services) (a) | 365 | 28,456 | ||||||
X Roche Holding A.G., Genusscheine (Pharmaceuticals) (a) | 13,093 | 2,152,539 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 41 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Switzerland (continued) | ||||||||
Swiss Life Holding (Insurance) (a)(d) | 8,303 | $ | 1,017,841 | |||||
Swiss Re, Ltd. (Insurance) (a)(d) | 23,704 | 1,296,518 | ||||||
Zurich Financial Services A.G. (Insurance) (a)(d) | 1,114 | 256,019 | ||||||
10,519,423 | ||||||||
Taiwan 0.8% | ||||||||
Catcher Technology Co., Ltd. (Computers & Peripherals) (a) | 13,000 | 72,678 | ||||||
China Motor Corp. (Automobiles) | 80,000 | 77,147 | ||||||
China Petrochemical Development Corp. (Chemicals) | 160,600 | 186,069 | ||||||
Coretronic Corp. (Electronic Equipment & Instruments) | 26,000 | 19,561 | ||||||
E Ink Holdings, Inc. (Electronic Equipment & Instruments) | 21,000 | 43,035 | ||||||
Formosa Chemicals & Fibre Corp. (Chemicals) (a) | 46,000 | 132,113 | ||||||
Formosa Plastics Corp. (Chemicals) (a) | 38,000 | 110,188 | ||||||
Formosa Taffeta Co., Ltd. (Textiles, Apparel & Luxury Goods) | 76,000 | 70,357 | ||||||
HTC Corp. (Communications Equipment) (a) | 2,100 | 46,697 | ||||||
LCY Chemical Corp. (Chemicals) | 40,000 | 67,497 | ||||||
Nan Ya Plastics Corp. (Chemicals) (a) | 21,000 | 47,340 | ||||||
Tainan Spinning Co., Ltd. (Textiles, Apparel & Luxury Goods) | 133,900 | 59,608 | ||||||
Teco Electric and Machinery Co., Ltd. (Electrical Equipment) | 114,000 | 66,540 | ||||||
TSRC Corp. (Chemicals) | 63,800 | 166,030 | ||||||
1,164,860 | ||||||||
Thailand 0.1% | ||||||||
PTT Global Chemical PCL (Chemicals) (d) | 33,068 | 70,438 | ||||||
Thai Oil PCL (Oil, Gas & Consumable Fuels) | 74,300 | 138,700 | ||||||
209,138 | ||||||||
Turkey 0.1% | ||||||||
Arcelik AS (Household Durables) (a) | 19,039 | 72,917 | ||||||
United Kingdom 25.4% | ||||||||
African Barrick Gold PLC (Metals & Mining) (a) | 17,175 | 148,780 | ||||||
Anglo American PLC (Metals & Mining) (a) | 32,960 | 1,207,833 | ||||||
Ashtead Group PLC (Trading Companies & Distributors) (a) | 344,395 | 853,383 | ||||||
X AstraZeneca PLC (Pharmaceuticals) (a) | 38,005 | 1,814,764 | ||||||
Aviva PLC (Insurance) (a) | 157,598 | 855,447 | ||||||
Avocet Mining PLC (Metals & Mining) | 32,242 | 118,968 | ||||||
Barclays PLC (Commercial Banks) (a) | 502,975 | 1,555,065 | ||||||
Berendsen PLC (Commercial Services & Supplies) | 6,899 | 51,275 | ||||||
BG Group PLC (Oil, Gas & Consumable Fuels) (a) | 3,495 | 75,740 | ||||||
BHP Billiton PLC (Metals & Mining) (a) | 28,265 | 889,744 | ||||||
Bodycote PLC (Machinery) (a) | 150,823 | 679,658 | ||||||
X BP PLC (Oil, Gas & Consumable Fuels) (a) | 247,406 | 1,823,637 | ||||||
X British American Tobacco PLC (Tobacco) (a) | 44,229 | 2,024,020 | ||||||
BT Group PLC (Diversified Telecommunication Services) (a) | 360,147 | 1,087,645 | ||||||
Cape PLC (Commercial Services & Supplies) (a) | 52,207 | 403,299 | ||||||
Dairy Crest Group PLC (Food Products) (a) | 48,014 | 266,130 | ||||||
Diageo PLC (Beverages) (a) | 2,295 | 47,537 | ||||||
Diploma PLC (Electronic Equipment & Instruments) | 13,865 | 71,410 | ||||||
Drax Group PLC (Independent Power Producers & Energy Traders) (a) | 93,585 | 813,188 | ||||||
Elementis PLC (Chemicals) (a) | 96,403 | 222,167 | ||||||
Fenner PLC (Machinery) | 13,129 | 71,587 | ||||||
Ferrexpo PLC (Metals & Mining) (a) | 74,844 | 385,816 | ||||||
Filtrona PLC (Chemicals) | 22,226 | 141,245 | ||||||
GlaxoSmithKline PLC (Pharmaceuticals) (a) | 36,521 | 818,601 | ||||||
Go-Ahead Group PLC (Road & Rail) | 4,064 | 89,923 | ||||||
Home Retail Group PLC (Internet & Catalog Retail) (a) | 403,370 | 647,097 | ||||||
X HSBC Holdings PLC (Commercial Banks) (a) | 245,103 | 2,138,879 | ||||||
Interserve PLC (Construction & Engineering) (a) | 54,726 | 290,055 | ||||||
Kentz Corp., Ltd. (Construction & Engineering) | 21,046 | 164,033 | ||||||
Kier Group PLC (Construction & Engineering) | 2,749 | 62,041 | ||||||
Legal & General Group PLC (Insurance) (a) | 403,115 | 710,088 | ||||||
London Stock Exchange Group PLC (Diversified Financial Services) (a) | 59,126 | 849,382 | ||||||
Micro Focus International PLC (Software) | 35,667 | 192,706 | ||||||
Mondi PLC (Paper & Forest Products) (a) | 26,931 | 204,570 | ||||||
Moneysupermarket.com Group PLC (Internet Software & Services) | 23,579 | 40,385 | ||||||
Morgan Crucible Co. PLC (Machinery) (a) | 109,110 | 494,573 | ||||||
Next PLC (Multiline Retail) (a) | 730 | 29,817 | ||||||
Paragon Group of Cos. PLC (Thrifts & Mortgage Finance) (a) | 110,757 | 287,681 | ||||||
Persimmon PLC (Household Durables) (a) | 42,270 | 337,138 | ||||||
Prudential PLC (Insurance) (a) | 110,999 | 1,148,241 | ||||||
Rio Tinto PLC (Metals & Mining) (a) | 29,569 | 1,598,897 | ||||||
X Royal Dutch Shell PLC Class A (Oil, Gas & Consumable Fuels) (a) | 54,923 | 1,939,851 | ||||||
Royal Dutch Shell PLC Class B (Oil, Gas & Consumable Fuels) (a) | 41,785 | 1,499,552 | ||||||
RPC Group PLC (Containers & Packaging) (a) | 76,566 | 433,506 | ||||||
Senior PLC (Machinery) (a) | 142,396 | 379,005 | ||||||
Shire PLC (Pharmaceuticals) (a) | 32,164 | 1,009,952 |
The notes to the financial statements are an integral part of,
42 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 43 |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
United Kingdom (continued) | ||||||||
Spectris PLC (Electronic Equipment & Instruments) (a) | 24,766 | $ | 504,979 | |||||
Tesco PLC (Food & Staples Retailing) (a) | 28,742 | 185,240 | ||||||
Tetragon Financial Group, Ltd. (Capital Markets) | 12,222 | 79,947 | ||||||
Unilever PLC (Food Products) (a) | 16,007 | 534,328 | ||||||
Vedanta Resources PLC (Metals & Mining) (a) | 9,694 | 197,975 | ||||||
X Vodafone Group PLC (Wireless Telecommunication Services) (a) | 750,749 | 2,082,039 | ||||||
Weir Group PLC (The) (Machinery) (a) | 28,923 | 884,172 | ||||||
WH Smith PLC (Specialty Retail) (a) | 39,635 | 348,657 | ||||||
William Hill PLC (Hotels, Restaurants & Leisure) (a) | 180,602 | 625,816 | ||||||
36,417,464 | ||||||||
Total Common Stocks (Cost $181,399,640) | 182,092,554 | |||||||
Convertible Preferred Stocks 0.8% | ||||||||
Brazil 0.0%‡ | ||||||||
Brasil Telecom S.A. (a) 7.92% (Diversified Telecommunication Services) | 1,600 | 11,015 | ||||||
Germany 0.7% | ||||||||
Porsche Automobil Holding SE (a) 2.37% (Automobiles) | 17,547 | 1,023,917 | ||||||
Republic of Korea 0.1% | ||||||||
Hyundai Motor Co. 2.31% (Automobiles) | 546 | 36,380 | ||||||
2.47% (Automobiles) | 593 | 37,437 | ||||||
LG Chem, Ltd. 3.08% (Chemicals) | 481 | 54,472 | ||||||
128,289 | ||||||||
Total Convertible Preferred Stocks (Cost $937,123) | 1,163,221 | |||||||
Exchange Traded Funds 3.3% (h) | ||||||||
United States 3.3% | ||||||||
iShares MSCI EAFE Index Fund (Capital Markets) (a) | 32,741 | 1,714,646 | ||||||
X iShares MSCI Emerging Markets Index Fund (Capital Markets) (a) | 73,825 | 3,012,060 | ||||||
Total Exchange Traded Funds (Cost $4,588,452) | 4,726,706 | |||||||
Preferred Stocks 0.5% | ||||||||
Germany 0.5% | ||||||||
Jungheinrich A.G. 0.40% (Machinery) | 7,811 | 244,293 | ||||||
RWE A.G. 0.00% (Multi-Utilities) | 2,048 | 76,555 | ||||||
Volkswagen A.G. 1.54% (Automobiles) (a) | 2,326 | 406,906 | ||||||
Total Preferred Stocks (Cost $720,695) | 727,754 | |||||||
Number of | ||||||||
Warrants | ||||||||
Warrants 0.0%‡ | ||||||||
Cayman Islands 0.0%‡ | ||||||||
Kingboard Chemical Holdings, Ltd. Strike Price HK$40.00 Expires 10/31/12 (Electronic Equipment & Instruments) (d) | 11,400 | 1,519 | ||||||
Spain 0.0%‡ | ||||||||
Promotora de Informaciones S.A. Strike Price €2.00 Expires 6/28/14 (Media) (d) | 85,100 | 9,420 | ||||||
Total Warrants (Cost $0) | 10,939 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 0.1% | ||||||||
Repurchase Agreement 0.1% | ||||||||
United States 0.1% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $145,675 (Collateralized by a Federal Home Loan Mortgage Corp. security with a rate of 0.90% and a maturity date of 9/12/14, with a Principal Amount of $150,000 and a Market Value of $150,302) (Capital Markets) | $ | 145,675 | 145,675 | |||||
Total Short-Term Investment (Cost $145,675) | 145,675 | |||||||
Total Investments, Before Investments Sold Short (Cost $187,791,585) (i) | 131.9 | % | 188,866,849 | |||||
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Investments Sold Short (32.3%) Common Stocks Sold Short (32.3%) | ||||||||
Australia (6.1%) | ||||||||
Arafura Resources, Ltd. (Metals & Mining) (d) | (54,677 | ) | $ | (34,394 | ) | |||
Aristocrat Leisure, Ltd. (Hotels, Restaurants & Leisure) | (350,364 | ) | (827,966 | ) | ||||
Aurora Oil and Gas, Ltd. (Oil, Gas & Consumable Fuels) (d) | (184,610 | ) | (546,339 | ) | ||||
Austar United Communications, Ltd. (Media) (d) | (413,781 | ) | (499,444 | ) | ||||
Bandanna Energy, Ltd. (Oil, Gas & Consumable Fuels) (d) | (171,594 | ) | (143,848 | ) | ||||
Bathurst Resources, Ltd. (Metals & Mining) (d) | (347,343 | ) | (271,645 | ) | ||||
Billabong International, Ltd. (Textiles, Apparel & Luxury Goods) | (22,053 | ) | (98,131 | ) | ||||
Coalspur Mines, Ltd. (Oil, Gas & Consumable Fuels) (d) | (267,162 | ) | (515,990 | ) | ||||
Cockatoo Coal, Ltd. (Oil, Gas & Consumable Fuels) (d) | (780,898 | ) | (311,449 | ) | ||||
CSR, Ltd. (Industrial Conglomerates) | (141,688 | ) | (357,196 | ) | ||||
Cudeco, Ltd. (Metals & Mining) (d) | (112,288 | ) | (370,405 | ) | ||||
Dart Energy, Ltd. (Oil, Gas & Consumable Fuels) (d) | (271,188 | ) | (174,497 | ) | ||||
Discovery Metals, Ltd. (Metals & Mining) (d) | (161,418 | ) | (230,238 | ) | ||||
Eastern Star Gas, Ltd. (Oil, Gas & Consumable Fuels) (d) | (454,433 | ) | (419,596 | ) | ||||
Energy World Corp, Ltd. (Independent Power Producers & Energy Traders) (d) | (554,414 | ) | (333,201 | ) | ||||
Extract Resources, Ltd. (Oil, Gas & Consumable Fuels) (d) | (91,348 | ) | (734,628 | ) | ||||
Gloucester Coal, Ltd. (Oil, Gas & Consumable Fuels) (d) | (9,160 | ) | (65,116 | ) | ||||
Gryphon Minerals, Ltd. (Metals & Mining) (d) | (29,735 | ) | (42,464 | ) | ||||
Independence Group NL (Metals & Mining) | (19,905 | ) | (108,207 | ) | ||||
Integra Mining, Ltd. (Metals & Mining) (d) | (8,436 | ) | (4,604 | ) | ||||
Karoon Gas Australia, Ltd. (Oil, Gas & Consumable Fuels) (d) | (201,624 | ) | (927,548 | ) | ||||
Macquarie Atlas Roads Group (Transportation Infrastructure) (d) | (67,008 | ) | (98,647 | ) | ||||
Mirabela Nickel, Ltd. (Metals & Mining) (d) | (60,522 | ) | (102,680 | ) | ||||
Murchison Metals, Ltd. (Metals & Mining) (d) | (489,369 | ) | (150,876 | ) | ||||
Pharmaxis, Ltd. (Pharmaceuticals) (d) | (18,189 | ) | (24,231 | ) | ||||
Sandfire Resources NL (Metals & Mining) (d) | (43,409 | ) | (307,565 | ) | ||||
Seven West Media, Ltd. (Media) | (38,209 | ) | (142,910 | ) | ||||
Sundance Resources, Ltd. (Metals & Mining) (d) | (447,048 | ) | (200,540 | ) | ||||
Virgin Blue Holdings, Ltd. (Airlines) (d) | (1,079,333 | ) | (419,984 | ) | ||||
White Energy Co., Ltd. (Metals & Mining) (d) | (77,418 | ) | (132,441 | ) | ||||
Wotif.com Holdings, Ltd. (Internet & Catalog Retail) | (37,047 | ) | (141,524 | ) | ||||
(8,738,304 | ) | |||||||
Austria (0.2%) | ||||||||
Intercell A.G. (Biotechnology) (d) | (36,320 | ) | (96,042 | ) | ||||
RHI A.G. (Construction Materials) | (6,933 | ) | (150,459 | ) | ||||
(246,501 | ) | |||||||
Belgium (0.2%) | ||||||||
Tessenderlo Chemie N.V. (Chemicals) | (3,293 | ) | (101,891 | ) | ||||
ThromboGenics N.V. (Biotechnology) (d) | (4,147 | ) | (108,335 | ) | ||||
(210,226 | ) | |||||||
Bermuda (0.8%) | ||||||||
Beijing Enterprises Water Group, Ltd. (Water Utilities) (d) | (552,000 | ) | (132,141 | ) | ||||
China Oil and Gas Group, Ltd. (Gas Utilities) (d) | (20,000 | ) | (1,318 | ) | ||||
Golar LNG, Ltd. (Oil, Gas & Consumable Fuels) | (15,789 | ) | (629,674 | ) | ||||
Huabao International Holdings, Ltd. (Chemicals) | (276,000 | ) | (175,250 | ) | ||||
Man Wah Holdings, Ltd. (Household Durables) | (162,000 | ) | (90,184 | ) | ||||
Ports Design, Ltd. (Textiles, Apparel & Luxury Goods) | (77,000 | ) | (136,486 | ) | ||||
(1,165,053 | ) | |||||||
Cayman Islands (1.0%) | ||||||||
Ajisen China Holdings, Ltd. (Hotels, Restaurants & Leisure) | (198,000 | ) | (282,301 | ) | ||||
BaWang International Group Holding, Ltd. (Personal Products) (d) | (8,000 | ) | (914 | ) | ||||
China Shineway Pharmaceutical Group, Ltd. (Pharmaceuticals) | (187,000 | ) | (257,075 | ) | ||||
China State Construction International Holdings, Ltd. (Construction & Engineering) | (34,000 | ) | (25,600 | ) | ||||
Geely Automobile Holdings, Ltd. (Automobiles) | (610,000 | ) | (151,888 | ) | ||||
International Mining Machinery Holdings, Ltd. (Machinery) | (202,000 | ) | (203,703 | ) | ||||
Jinchuan Group International Resources Co., Ltd. (Chemicals) (d) | (89,000 | ) | (20,266 | ) | ||||
Li Ning Co., Ltd. (Textiles, Apparel & Luxury Goods) | (128,500 | ) | (121,863 | ) | ||||
Lijun International Pharmaceutical Holding, Ltd. (Pharmaceuticals) | (380,000 | ) | (43,260 | ) | ||||
Minth Group, Ltd. (Auto Components) | (160,000 | ) | (163,593 | ) | ||||
Wasion Group Holdings, Ltd. (Electronic Equipment & Instruments) | (222,000 | ) | (81,924 | ) | ||||
Xingda International Holdings, Ltd. (Metals & Mining) | (174,000 | ) | (99,032 | ) | ||||
(1,451,419 | ) | |||||||
China (0.4%) | ||||||||
Byd Co., Ltd. (Automobiles) (d) | (118,000 | ) | (285,083 | ) | ||||
Guangzhou Pharmaceutical Co., Ltd. (Pharmaceuticals) | (210,000 | ) | (147,332 | ) |
The notes to the financial statements are an integral part of,
44 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks Sold Short (continued) | ||||||||
China (continued) | ||||||||
Shandong Weigao Group Medical Polymer Co., Ltd. (Health Care Equipment & Supplies) | (88,000 | ) | $ | (90,837 | ) | |||
(523,252 | ) | |||||||
Denmark (0.5%) | ||||||||
Bang & Olufsen A/S (Household Durables) (d) | (4,821 | ) | (55,703 | ) | ||||
Genmab A/S (Biotechnology) (d) | (22,931 | ) | (133,534 | ) | ||||
NKT Holding A/S (Machinery) | (11,676 | ) | (443,581 | ) | ||||
Torm A/S (Oil, Gas & Consumable Fuels) (d) | (5,993 | ) | (6,946 | ) | ||||
(639,764 | ) | |||||||
Finland (0.8%) | ||||||||
Konecranes Oyj (Machinery) | (32,136 | ) | (732,499 | ) | ||||
M-real Oyj Class B (Paper & Forest Products) (d) | (130,185 | ) | (280,384 | ) | ||||
Poyry Oyj (Professional Services) | (1,423 | ) | (12,830 | ) | ||||
Stockmann Oyj Abp (Multiline Retail) | (4,257 | ) | (75,550 | ) | ||||
Talvivaara Mining Co. PLC (Metals & Mining) (d) | (11,999 | ) | (44,414 | ) | ||||
Uponor Oyj (Building Products) | (3,904 | ) | (40,301 | ) | ||||
(1,185,978 | ) | |||||||
France (0.2%) | ||||||||
Bull S.A. (Computers & Peripherals) (d) | (19,134 | ) | (90,506 | ) | ||||
Technicolor S.A. (Media) (d) | (81,142 | ) | (218,548 | ) | ||||
(309,054 | ) | |||||||
Germany (1.6%) | ||||||||
Aixtron A.G. (Semiconductors & Semiconductor Equipment) | (45,071 | ) | (634,857 | ) | ||||
ElringKlinger A.G. (Auto Components) | (16,963 | ) | (465,207 | ) | ||||
Heidelberger Druckmaschinen A.G. (Machinery) (d) | (338,024 | ) | (663,970 | ) | ||||
KUKA A.G. (Machinery) (d) | (4,246 | ) | (80,433 | ) | ||||
MLP A.G. (Capital Markets) | (6,089 | ) | (40,760 | ) | ||||
Morphosys A.G. (Life Sciences Tools & Services) (d) | (8,349 | ) | (202,593 | ) | ||||
Nordex A.G. (Electrical Equipment) (d) | (1,809 | ) | (11,143 | ) | ||||
Solar Millennium A.G. (Construction & Engineering) (d) | (4,376 | ) | (13,915 | ) | ||||
Vossloh A.G. (Machinery) | (2,249 | ) | (234,540 | ) | ||||
(2,347,418 | ) | |||||||
Greece (0.1%) | ||||||||
Marfin Investment Group S.A. (Diversified Financial Services) (d) | (116,168 | ) | (63,924 | ) | ||||
Piraeus Bank S.A. (Commercial Banks) (d) | (280,173 | ) | (81,952 | ) | ||||
TT Hellenic Postbank S.A. (Commercial Banks) (d) | (28,905 | ) | (14,245 | ) | ||||
(160,121 | ) | |||||||
Hong Kong (0.2%) | ||||||||
China Taiping Insurance Holdings Co., Ltd. (Insurance) (d) | (84,800 | ) | (182,523 | ) | ||||
Citic 1616 Holdings, Ltd. (Diversified Telecommunication Services) | (273,000 | ) | (60,452 | ) | ||||
Dah Sing Banking Group, Ltd. (Commercial Banks) | (111,600 | ) | (108,230 | ) | ||||
(351,205 | ) | |||||||
Italy (1.2%) | ||||||||
Ansaldo STS S.p.A (Transportation Infrastructure) | (59,729 | ) | (622,187 | ) | ||||
Falck Renewables S.p.A. (Independent Power Producers & Energy Traders) | (41,272 | ) | (46,734 | ) | ||||
Milano Assicurazioni S.p.A. (Insurance) (d) | (324,638 | ) | (138,044 | ) | ||||
Piaggio & C S.p.A. (Automobiles) | (53,137 | ) | (175,181 | ) | ||||
Saras S.p.A. (Oil, Gas & Consumable Fuels) (d) | (102,805 | ) | (168,479 | ) | ||||
Telecom Italia Media S.p.A (Media) (d) | (365,022 | ) | (84,357 | ) | ||||
Trevi Finanziaria S.p.A. (Construction & Engineering) | (45,922 | ) | (511,855 | ) | ||||
(1,746,837 | ) | |||||||
Japan (12.0%) | ||||||||
77 Bank, Ltd. (The) (Commercial Banks) | (33,000 | ) | (130,735 | ) | ||||
Akebono Brake Industry Co., Ltd. (Auto Components) | (54,500 | ) | (256,624 | ) | ||||
Asahi Co., Ltd. (Specialty Retail) | (17,300 | ) | (384,245 | ) | ||||
Asahi Diamond Industrial Co., Ltd. (Machinery) | (48,800 | ) | (716,640 | ) | ||||
CKD Corp. (Machinery) | (19,700 | ) | (132,508 | ) | ||||
Cosel Co., Ltd. (Electrical Equipment) | (17,300 | ) | (240,896 | ) | ||||
CyberAgent, Inc. (Media) | (206 | ) | (692,005 | ) | ||||
Daiichi Chuo KK (Marine) (d) | (119,000 | ) | (160,016 | ) | ||||
Daiseki Co., Ltd. (Commercial Services & Supplies) | (3,200 | ) | (58,440 | ) | ||||
Fujiya Co., Ltd. (Food Products) (d) | (24,000 | ) | (47,326 | ) | ||||
Funai Electric Co., Ltd. (Household Durables) | (5,000 | ) | (98,535 | ) | ||||
GCA Savvian Group Corp. (Capital Markets) | (68 | ) | (79,980 | ) | ||||
Harmonic Drive Systems, Inc. (Machinery) | (3,400 | ) | (69,635 | ) | ||||
Iseki & Co., Ltd. (Machinery) (d) | (36,000 | ) | (79,357 | ) | ||||
Kakaku.com, Inc. (Internet Software & Services) | (19,300 | ) | (763,415 | ) | ||||
Kandenko Co., Ltd. (Construction & Engineering) | (20,000 | ) | (87,216 | ) | ||||
Kureha Corp. (Chemicals) | (18,000 | ) | (80,757 | ) | ||||
MISUMI Group, Inc. (Trading Companies & Distributors) | (21,900 | ) | (456,991 | ) | ||||
Moshi Moshi Hotline, Inc. (Commercial Services & Supplies) | (6,300 | ) | (60,533 | ) | ||||
Nichi-iko Pharmaceutical Co., Ltd. (Pharmaceuticals) | (13,100 | ) | (310,925 | ) | ||||
Nifco, Inc./Japan (Auto Components) | (16,500 | ) | (432,033 | ) |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 45 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks Sold Short (continued) | ||||||||
Japan (continued) | ||||||||
Nippon Chemi-Con Corp. (Electronic Equipment & Instruments) | (196,000 | ) | $ | (748,177 | ) | |||
Oki Electric Industry Co., Ltd. (Electronic Equipment & Instruments) (d) | (384,000 | ) | (326,971 | ) | ||||
Orient Corp. (Consumer Finance) (d) | (513,500 | ) | (488,143 | ) | ||||
Osaka Securities Exchange Co., Ltd. (Diversified Financial Services) | (159 | ) | (749,799 | ) | ||||
OSAKA Titanium Technologies Co. (Metals & Mining) | (18,900 | ) | (1,045,449 | ) | ||||
Pigeon Corp. (Household Products) | (18,600 | ) | (690,374 | ) | ||||
Sanken Electric Co., Ltd. (Semiconductors & Semiconductor Equipment) | (98,000 | ) | (368,376 | ) | ||||
Sanrio Co., Ltd. (Specialty Retail) | (16,100 | ) | (798,694 | ) | ||||
SCSK Corp. (Software) | (13,376 | ) | (209,273 | ) | ||||
Seiko Holdings Corp. (Textiles, Apparel & Luxury Goods) | (135,000 | ) | (336,661 | ) | ||||
Senshu Ikeda Holdings, Inc. (Commercial Banks) | (214,900 | ) | (313,676 | ) | ||||
Shin-Kobe Electric Machinery Co., Ltd. (Electrical Equipment) | (16,000 | ) | (273,322 | ) | ||||
SHO-BOND Holdings Co., Ltd. (Construction & Engineering) | (20,000 | ) | (445,631 | ) | ||||
Shochiku Co., Ltd. (Media) | (8,000 | ) | (72,918 | ) | ||||
Skymark Airlines, Inc. (Airlines) | (45,400 | ) | (664,474 | ) | ||||
Start Today Co., Ltd. (Internet & Catalog Retail) | (35,600 | ) | (751,908 | ) | ||||
Stella Chemifa Corp. (Chemicals) | (6,200 | ) | (179,960 | ) | ||||
Taiyo Holdings Co., Ltd. (Chemicals) | (2,600 | ) | (68,327 | ) | ||||
Takuma Co., Ltd. (Machinery) (d) | (167,000 | ) | (789,104 | ) | ||||
The Daiei, Inc. (Multiline Retail) (d) | (11,950 | ) | (45,284 | ) | ||||
Toda Kogyo Corp. (Chemicals) | (20,000 | ) | (148,943 | ) | ||||
Toho Titanium Co., Ltd. (Metals & Mining) | (40,800 | ) | (878,168 | ) | ||||
Topcon Corp. (Electronic Equipment & Instruments) | (100 | ) | (519 | ) | ||||
Towa Pharmaceutical Co., Ltd. (Pharmaceuticals) | (2,900 | ) | (128,011 | ) | ||||
Toyo Tanso Co., Ltd. (Electrical Equipment) | (9,200 | ) | (428,975 | ) | ||||
Universal Entertainment Corp. (Leisure Equipment & Products) | (2,900 | ) | (76,779 | ) | ||||
Wacom Co., Ltd/Japan (Computers & Peripherals) | (589 | ) | (817,479 | ) | ||||
(17,184,207 | ) | |||||||
Luxembourg (0.1%) | ||||||||
L’Occitane International S.A. (Specialty Retail) | (71,500 | ) | (156,892 | ) | ||||
SAF-Holland S.A. (Auto Components) (d) | (7,059 | ) | (43,445 | ) | ||||
(200,337 | ) | |||||||
Netherlands (0.2%) | ||||||||
TomTom N.V. (Household Durables) (d) | (47,102 | ) | (234,376 | ) | ||||
Wavin N.V. (Construction & Engineering) (d) | (7,634 | ) | (56,397 | ) | ||||
(290,773 | ) | |||||||
Norway (0.1%) | ||||||||
Norwegian Energy Co. ASA (Oil, Gas & Consumable Fuels) (d) | (103,809 | ) | (110,968 | ) | ||||
Portugal (0.0%)‡ | ||||||||
Brisa Auto-Estradas de Portugal S.A. (Transportation Infrastructure) | (17,749 | ) | (60,571 | ) | ||||
Singapore (0.1%) | ||||||||
Midas Holdings, Ltd. (Metals & Mining) | (268,000 | ) | (86,865 | ) | ||||
Oceanus Group, Ltd. (Distributors) (d) | (9,000 | ) | (790 | ) | ||||
(87,655 | ) | |||||||
Spain (0.7%) | ||||||||
NH Hoteles S.A. (Hotels, Restaurants & Leisure) (d) | (38,827 | ) | (188,778 | ) | ||||
Promotora de Informaciones S.A. (Media) (d) | (289,214 | ) | (297,356 | ) | ||||
SOS Corp. Alimentaria S.A. (Food Products) (d) | (417,301 | ) | (210,270 | ) | ||||
Tecnicas Reunidas S.A. (Energy Equipment & Services) | (1,552 | ) | (62,451 | ) | ||||
Zeltia S.A. (Biotechnology) (d) | (93,789 | ) | (214,826 | ) | ||||
(973,681 | ) | |||||||
Sweden (0.5%) | ||||||||
Axis Communications AB (Communications Equipment) | (1,088 | ) | (24,102 | ) | ||||
Husqvarna AB (Household Durables) | (498 | ) | (2,525 | ) | ||||
Nobia AB (Household Durables) (d) | (74,453 | ) | (320,793 | ) | ||||
Rezidor Hotel Group AB (Hotels, Restaurants & Leisure) (d) | (1 | ) | (4 | ) | ||||
SAS AB (Airlines) (d) | (122,349 | ) | (202,080 | ) | ||||
Swedish Orphan Biovitrum AB (Biotechnology) (d) | (60,397 | ) | (146,667 | ) | ||||
(696,171 | ) | |||||||
Switzerland (1.7%) | ||||||||
Bank Sarasin & Cie A.G. Class B (Capital Markets) | (3,254 | ) | (123,822 | ) | ||||
Basilea Pharmaceutica Registered (Biotechnology) (d) | (1,710 | ) | (76,673 | ) | ||||
Burckhardt Compression Holding A.G. (Machinery) | (716 | ) | (157,221 | ) | ||||
Clariant A.G. (Chemicals) (d) | (47,798 | ) | (516,903 | ) | ||||
Kudelski S.A. (Electronic Equipment & Instruments) | (19,907 | ) | (206,287 | ) | ||||
Logitech International S.A. (Computers & Peripherals) (d) | (84,562 | ) | (811,571 | ) |
The notes to the financial statements are an integral part of,
46 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks Sold Short (continued) | ||||||||
Switzerland (continued) | ||||||||
Panalpina Welttransport Holding A.G. (Air Freight & Logistics) (d) | (1,983 | ) | $ | (195,873 | ) | |||
Temenos Group A.G. Registered (Software) (d) | (18,879 | ) | (357,461 | ) | ||||
(2,445,811 | ) | |||||||
United Kingdom (3.6%) | ||||||||
Britvic PLC (Beverages) | (153,897 | ) | (814,750 | ) | ||||
Carpetright PLC (Specialty Retail) | (8,332 | ) | (61,444 | ) | ||||
Carphone Warehouse Group PLC (Specialty Retail) | (11,506 | ) | (64,470 | ) | ||||
Dialog Semiconductor PLC (Semiconductors & Semiconductor Equipment) (d) | (15,361 | ) | (293,371 | ) | ||||
Domino’s Pizza UK & IRL PLC (Hotels, Restaurants & Leisure) | (88,244 | ) | (646,318 | ) | ||||
DSG International PLC (Specialty Retail) (d) | (3,403,310 | ) | (641,871 | ) | ||||
Hargreaves Lansdown PLC (Capital Markets) | (44,400 | ) | (355,772 | ) | ||||
Heritage Oil PLC (Oil, Gas & Consumable Fuels) (d) | (194,633 | ) | (679,120 | ) | ||||
Imagination Technologies Group PLC (Computers & Peripherals) (d) | (94,371 | ) | (693,864 | ) | ||||
Jazztel PLC (Diversified Telecommunication Services) (d) | (40,493 | ) | (232,601 | ) | ||||
Jupiter Fund Management PLC (Capital Markets) | (22,823 | ) | (85,462 | ) | ||||
Mothercare PLC (Multiline Retail) | (2,574 | ) | (6,924 | ) | ||||
Ocado Group PLC (Internet & Catalog Retail) (d) | (27,008 | ) | (40,445 | ) | ||||
Redrow PLC (Household Durables) (d) | (118,434 | ) | (220,669 | ) | ||||
Spirit Pub Co. PLC (Hotels, Restaurants & Leisure) (d) | (11,900 | ) | (9,132 | ) | ||||
SuperGroup PLC (Specialty Retail) (d) | (30,196 | ) | (301,856 | ) | ||||
(5,148,069 | ) | |||||||
Total Investments Sold Short (Proceeds $52,255,324) | (32.3 | )% | (46,273,375 | ) | ||||
Total Investments, Net of Investments Sold Short (Cost $135,536,261) | 99.6 | 142,593,474 | ||||||
Other Assets, Less Liabilities | 0.4 | 580,575 | ||||||
Net Assets | 100.0 | % | $ | 143,174,049 | ||||
††† | On a daily basis New York Life Investments confirms that the value of the Fund’s liquid assets (liquid portfolio securities and cash) is sufficient to cover its potential senior securities (e.g., futures, swaps, options). | |
‡ | Less than one-tenth of a percent. | |
(a) | Security, or a portion thereof, is maintained in a segregated account at the Fund’s custodian as collateral for securities sold short (See Note 2(I)). | |
(b) | Illiquid security—The total market value of this security at October 31, 2011 is $11, which represents less than one-tenth of a percent of the Fund’s net assets. | |
(c) | Fair valued security. The total market value of these securities at October 31, 2011 is $51,125, which represents less than one-tenth of a percent of the Fund’s net assets. | |
(d) | Non-income producing security. | |
(e) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(2) of the Securities Act of 1933, as amended. | |
(f) | ADR—American Depositary Receipt. | |
(g) | GDR—Global Depositary Receipt. | |
(h) | Exchange Traded Fund—An investment vehicle that represents a basket of securities that is traded on an exchange. | |
(i) | At October 31, 2011, cost is $190,228,623 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 9,160,482 | ||
Gross unrealized depreciation | (10,522,256 | ) | ||
Net unrealized depreciation | $ | (1,361,774 | ) | |
The following abbreviation is used in the above portfolio:
€—Euro
HK$—Hong Kong Dollar
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 47 |
Portfolio of Investments††† October 31, 2011 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks (b)(c) | $ | 680,674 | $ | 181,360,755 | $ | 51,125 | $ | 182,092,554 | ||||||||
Convertible Preferred Stocks (d) | 11,015 | 1,152,206 | — | 1,163,221 | ||||||||||||
Exchange Traded Funds | 4,726,706 | — | — | 4,726,706 | ||||||||||||
Preferred Stocks | — | 727,754 | — | 727,754 | ||||||||||||
Warrants | 10,939 | — | — | 10,939 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 145,675 | — | 145,675 | ||||||||||||
Total Investments in Securities | $ | 5,429,334 | $ | 183,386,390 | $ | 51,125 | $ | 188,866,849 | ||||||||
Liability Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities Sold Short (a) | ||||||||||||||||
Common Stocks Sold Short (e) | $ | (370,405 | ) | $ | (45,902,970 | ) | $ | — | $ | (46,273,375 | ) | |||||
Total Investments in Securities Sold Short | $ | (370,405 | ) | $ | (45,902,970 | ) | $ | — | $ | (46,273,375 | ) | |||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 securities valued at $43,935 and $7,190 are held in Australia and Cayman Islands, respectively, within the Common Stock section of the Portfolio of Investments. |
(c) | Level 1 assets represent ADRs and the following common stock whose primary exchange is the New York Stock Exchange: PTT Global Chemical PCL under Thailand. |
(d) | Level 1 assets represent securities listed under Brazil. |
(e) | Level 1 assets represent the following common stocks whose primary exchange is the New York Stock Exchange: Cudeco, Ltd. under Australia. |
The Fund recognizes transfers between the levels as of the beginning of the period.
During the year ended October 31, 2011, certain foreign equity securities with a market value of $88,962,779 held by the Fund at October 31, 2010, transferred from Level 1 to Level 2 due to these securities being fair valued at period end by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures. (See Note 2)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Change in | ||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||||||||||||||||||
(Depreciation) | ||||||||||||||||||||||||||||||||||||||||
from | ||||||||||||||||||||||||||||||||||||||||
Balance | Change in | Balance | Investments | |||||||||||||||||||||||||||||||||||||
as of | Accrued | Realized | Unrealized | Transfers | Transfers | as of | Still Held at | |||||||||||||||||||||||||||||||||
October 31, | Discounts | Gain | Appreciation | in to | out of | October 31, | October 31, | |||||||||||||||||||||||||||||||||
Investments in Securities | 2010 | (Premiums) | (Loss) | (Depreciation) | Purchases | Sales | Level 3 | Level 3 | 2011 | 2011 (a) | ||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||||
Australia | $ | 10 | $ | — | $ | — | $ | 12,383 | $ | 31,542 | $ | — | $ | — | $ | — | $ | 43,935 | $ | 12,383 | ||||||||||||||||||||
Cayman Islands | — | — | (174,660 | ) | 37,336 | 246,809 | (558,170 | ) | 455,875 | — | 7,190 | (241,109 | ) | |||||||||||||||||||||||||||
Rights Sold Short | ||||||||||||||||||||||||||||||||||||||||
Hong Kong | (583 | ) | — | 23 | 583 | — | (23 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Total | $ | (573 | ) | $ | — | $ | (174,637 | ) | $ | 50,302 | $ | 278,351 | $ | (558,193 | ) | $ | 455,875 | $ | — | $ | 51,125 | $ | (228,726 | ) | ||||||||||||||||
(a) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
The notes to the financial statements are an integral part of,
48 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
The table below sets forth the diversification of MainStay 130/30 International Fund investments by industry.
Industry Diversification (Unaudited)
Value | Percent † | |||||||
Aerospace & Defense | $ | 2,028,848 | 1.4 | % | ||||
Airlines | 231,762 | 0.2 | ||||||
Auto Components | 3,550,842 | 2.5 | ||||||
Automobiles | 6,641,162 | 4.6 | ||||||
Beverages | 2,225,111 | 1.6 | ||||||
Biotechnology | 670,165 | 0.5 | ||||||
Building Products | 627,396 | 0.4 | ||||||
Capital Markets | 5,427,953 | 3.8 | ||||||
Chemicals | 6,875,328 | 4.8 | ||||||
Commercial Banks | 15,929,884 | 11.1 | ||||||
Commercial Services & Supplies | 750,309 | 0.5 | ||||||
Communications Equipment | 187,066 | 0.1 | ||||||
Computers & Peripherals | 453,597 | 0.3 | ||||||
Construction & Engineering | 4,493,779 | 3.1 | ||||||
Construction Materials | 659,900 | 0.5 | ||||||
Consumer Finance | 1,799,885 | 1.3 | ||||||
Containers & Packaging | 507,147 | 0.4 | ||||||
Distributors | 1,225,914 | 0.9 | ||||||
Diversified Financial Services | 3,682,850 | 2.6 | ||||||
Diversified Telecommunication Services | 7,323,082 | 5.1 | ||||||
Electric Utilities | 3,091,590 | 2.2 | ||||||
Electrical Equipment | 1,627,912 | 1.1 | ||||||
Electronic Equipment & Instruments | 3,862,797 | 2.7 | ||||||
Energy Equipment & Services | 792,751 | 0.6 | ||||||
Food & Staples Retailing | 3,367,459 | 2.4 | ||||||
Food Products | 6,315,498 | 4.4 | ||||||
Gas Utilities | 1,382,707 | 1.0 | ||||||
Health Care Equipment & Supplies | 462,557 | 0.3 | ||||||
Health Care Providers & Services | 2,251,562 | 1.6 | ||||||
Hotels, Restaurants & Leisure | 2,913,294 | 2.0 | ||||||
Household Durables | 3,340,777 | 2.3 | ||||||
Independent Power Producers & Energy Traders | 1,174,991 | 0.8 | ||||||
Industrial Conglomerates | 3,019,275 | 2.1 | ||||||
Insurance | 7,157,575 | 5.0 | ||||||
Internet & Catalog Retail | 647,097 | 0.5 | ||||||
Internet Software & Services | 794,453 | 0.6 | ||||||
IT Services | 2,569,171 | 1.8 | ||||||
Leisure Equipment & Products | 61,383 | 0.0 | ‡ | |||||
Machinery | 5,684,079 | 4.0 | ||||||
Marine | 180,771 | 0.1 | ||||||
Media | 891,988 | 0.6 | ||||||
Metals & Mining | 13,840,906 | 9.7 | ||||||
Multi-Utilities | 1,272,132 | 0.9 | ||||||
Multiline Retail | 204,551 | 0.1 | ||||||
Office Electronics | 262,437 | 0.2 | ||||||
Oil, Gas & Consumable Fuels | 15,984,254 | 11.2 | ||||||
Paper & Forest Products | 1,038,681 | 0.7 | ||||||
Personal Products | 55,410 | 0.0 | ‡ | |||||
Pharmaceuticals | 13,359,880 | 9.3 | ||||||
Professional Services | 85,325 | 0.1 | ||||||
Real Estate Investment Trusts | 1,365,981 | 1.0 | ||||||
Real Estate Management & Development | 489,430 | 0.3 | ||||||
Road & Rail | 2,064,753 | 1.4 | ||||||
Semiconductors & Semiconductor Equipment | 2,121,610 | 1.5 | ||||||
Software | 192,706 | 0.1 | ||||||
Specialty Retail | 5,652,972 | 3.9 | ||||||
Textiles, Apparel & Luxury Goods | 2,027,692 | 1.4 | ||||||
Thrifts & Mortgage Finance | 287,681 | 0.2 | ||||||
Tobacco | 2,147,182 | 1.5 | ||||||
Trading Companies & Distributors | 4,509,287 | 3.1 | ||||||
Transportation Infrastructure | 484,488 | 0.3 | ||||||
Water Utilities | 75,964 | 0.1 | ||||||
Wireless Telecommunication Services | 4,461,860 | 3.1 | ||||||
188,866,849 | 131.9 | |||||||
Other Assets, Less Liabilities | (45,692,800 | ) | (31.9 | ) | ||||
Net Assets | $ | 143,174,049 | 100.0 | % | ||||
† | Percentages indicated are based on Fund net assets. | |
‡ | Less than one-tenth of a percent. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 49 |
Portfolio of Investments††† October 31, 2011 (continued)
The table below sets forth the diversification of MainStay 130/30 International Fund investments sold short by industry.
Value | Percent † | |||||||
Air Freight & Logistics | $ | (195,873 | ) | (0.1 | )% | |||
Airlines | (1,286,538 | ) | (0.9 | ) | ||||
Auto Components | (1,360,902 | ) | (0.9 | ) | ||||
Automobiles | (612,152 | ) | (0.4 | ) | ||||
Beverages | (814,750 | ) | (0.6 | ) | ||||
Biotechnology | (776,077 | ) | (0.5 | ) | ||||
Building Products | (40,301 | ) | (0.0 | )‡ | ||||
Capital Markets | (685,796 | ) | (0.5 | ) | ||||
Chemicals | (1,292,297 | ) | (0.9 | ) | ||||
Commercial Banks | (648,838 | ) | (0.5 | ) | ||||
Commercial Services & Supplies | (118,973 | ) | (0.1 | ) | ||||
Communications Equipment | (24,102 | ) | (0.0 | )‡ | ||||
Computers & Peripherals | (2,413,420 | ) | (1.7 | ) | ||||
Construction & Engineering | (1,140,614 | ) | (0.8 | ) | ||||
Construction Materials | (150,459 | ) | (0.1 | ) | ||||
Consumer Finance | (488,143 | ) | (0.3 | ) | ||||
Distributors | (790 | ) | (0.0 | )‡ | ||||
Diversified Financial Services | (813,723 | ) | (0.6 | ) | ||||
Diversified Telecommunication Services | (293,053 | ) | (0.2 | ) | ||||
Electrical Equipment | (954,336 | ) | (0.7 | ) | ||||
Electronic Equipment & Instruments | (1,363,878 | ) | (1.0 | ) | ||||
Energy Equipment & Services | (62,451 | ) | (0.0 | )‡ | ||||
Food Products | (257,596 | ) | (0.2 | ) | ||||
Gas Utilities | (1,318 | ) | (0.0 | )‡ | ||||
Health Care Equipment & Supplies | (90,837 | ) | (0.1 | ) | ||||
Hotels, Restaurants & Leisure | (1,954,499 | ) | (1.4 | ) | ||||
Household Durables | (1,022,785 | ) | (0.7 | ) | ||||
Household Products | (690,374 | ) | (0.5 | ) | ||||
Independent Power Producers & Energy Traders | (379,935 | ) | (0.3 | ) | ||||
Industrial Conglomerates | (357,196 | ) | (0.2 | ) | ||||
Insurance | (320,567 | ) | (0.2 | ) | ||||
Internet & Catalog Retail | (933,877 | ) | (0.7 | ) | ||||
Internet Software & Services | (763,415 | ) | (0.5 | ) | ||||
Leisure Equipment & Products | (76,779 | ) | (0.1 | ) | ||||
Life Sciences Tools & Services | (202,593 | ) | (0.1 | ) | ||||
Machinery | (4,303,191 | ) | (3.0 | ) | ||||
Marine | (160,016 | ) | (0.1 | ) | ||||
Media | (2,007,538 | ) | (1.4 | ) | ||||
Metals & Mining | (4,109,987 | ) | (2.9 | ) | ||||
Multiline Retail | (127,758 | ) | (0.1 | ) | ||||
Oil, Gas & Consumable Fuels | (5,434,198 | ) | (3.8 | ) | ||||
Paper & Forest Products | (280,384 | ) | (0.2 | ) | ||||
Personal Products | (914 | ) | (0.0 | )‡ | ||||
Pharmaceuticals | (910,834 | ) | (0.6 | ) | ||||
Professional Services | (12,830 | ) | (0.0 | )‡ | ||||
Semiconductors & Semiconductor Equipment | (1,296,604 | ) | (0.9 | ) | ||||
Software | (566,734 | ) | (0.4 | ) | ||||
Specialty Retail | (2,409,472 | ) | (1.7 | ) | ||||
Textiles, Apparel & Luxury Goods | (693,141 | ) | (0.5 | ) | ||||
Trading Companies & Distributors | (456,991 | ) | (0.3 | ) | ||||
Transportation Infrastructure | (781,405 | ) | (0.5 | ) | ||||
Water Utilities | (132,141 | ) | (0.1 | ) | ||||
$ | (46,273,375 | ) | (32.3 | )% | ||||
† | Percentages indicated are based on Fund net assets. | |
‡ | Less than one-tenth of a percent. |
The notes to the financial statements are an integral part of,
50 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities before investments sold short, at value (identified cost $187,791,585) | $ | 188,866,849 | ||
Cash denominated in foreign currencies (identified cost $144,079) | 144,667 | |||
Receivables: | ||||
Dividends | 627,835 | |||
Investment securities sold | 8,992 | |||
Fund shares sold | 6,326 | |||
Other assets | 135,864 | |||
Total assets | 189,790,533 | |||
Liabilities | ||||
Investments sold short (proceeds $52,255,324) | 46,273,375 | |||
Payables: | ||||
Broker fees and charges on short sales | 104,470 | |||
Manager (See Note 3) | 88,835 | |||
Dividends on investments sold short | 66,716 | |||
Investment securities purchased | 31,542 | |||
Professional fees | 20,217 | |||
Custodian | 15,730 | |||
Shareholder communication | 11,836 | |||
Transfer agent (See Note 3) | 1,980 | |||
Trustees | 508 | |||
NYLIFE Distributors (See Note 3) | 170 | |||
Accrued expenses | 1,105 | |||
Total liabilities | 46,616,484 | |||
Net assets | $ | 143,174,049 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 22,424 | ||
Additional paid-in capital | 166,102,821 | |||
166,125,245 | ||||
Undistributed net investment income | 3,376,424 | |||
Accumulated net realized gain (loss) on investments, futures transactions, investments sold short and foreign currency transactions | (33,381,209 | ) | ||
Net unrealized appreciation (depreciation) on investments | 1,075,264 | |||
Net unrealized appreciation (depreciation) on investments sold short | 5,981,949 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | (3,624 | ) | ||
Net assets | $ | 143,174,049 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 225,963 | ||
Shares of beneficial interest outstanding | 35,580 | |||
Net asset value per share outstanding | $ | 6.35 | ||
Maximum sales charge (5.50% of offering price) | 0.37 | |||
Maximum offering price per share outstanding | $ | 6.72 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 109,603 | ||
Shares of beneficial interest outstanding | 17,230 | |||
Net asset value per share outstanding | $ | 6.36 | ||
Maximum sales charge (5.50% of offering price) | 0.37 | |||
Maximum offering price per share outstanding | $ | 6.73 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 121,417 | ||
Shares of beneficial interest outstanding | 19,523 | |||
Net asset value and offering price per share outstanding | $ | 6.22 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 142,717,066 | ||
Shares of beneficial interest outstanding | 22,351,983 | |||
Net asset value and offering price per share outstanding | $ | 6.38 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 51 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 6,061,491 | ||
Expenses | ||||
Manager (See Note 3) | 1,468,811 | |||
Broker fees and charges on short sales | 1,293,374 | |||
Dividends on investments sold short | 405,766 | |||
Custodian | 178,049 | |||
Professional fees | 80,680 | |||
Registration | 61,378 | |||
Shareholder communication | 20,081 | |||
Transfer agent (See Note 3) | 11,723 | |||
Trustees | 3,671 | |||
Distribution/Service—Investor Class (See Note 3) | 558 | |||
Distribution/Service—Class A (See Note 3) | 271 | |||
Distribution/Service—Class C (See Note 3) | 1,231 | |||
Miscellaneous | 19,494 | |||
Total expenses before waiver/reimbursement | 3,545,087 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (40,421 | ) | ||
Net expenses | 3,504,666 | |||
Net investment income (loss) | 2,556,825 | |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Security transactions | 7,154,862 | |||
Futures transactions | (333,455 | ) | ||
Investments sold short | (2,436,741 | ) | ||
Foreign currency transactions | (67,323 | ) | ||
Net realized gain (loss) on investments, investments sold short, futures transactions and foreign currency transactions | 4,317,343 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (15,576,726 | ) | ||
Investments sold short | 6,776,753 | |||
Translation of other assets and liabilities in foreign currencies | (24,526 | ) | ||
Net change in unrealized appreciation (depreciation) on investments, investments sold short and foreign currency transactions | (8,824,499 | ) | ||
Net realized and unrealized gain (loss) on investments, futures transactions, investments sold short and foreign currency transactions | (4,507,156 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (1,950,331 | ) | |
(a) | Dividends recorded net of foreign withholding taxes in the amount of $565,085. |
The notes to the financial statements are an integral part of,
52 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 2,556,825 | $ | 1,589,405 | ||||
Net realized gain (loss) on investments, futures transactions, investments sold short and foreign currency transactions | 4,317,343 | 4,784,954 | ||||||
Net change in unrealized appreciation (depreciation) on investments, investments sold short and foreign currency transactions | (8,824,499 | ) | 5,047,602 | |||||
Net increase (decrease) in net assets resulting from operations | (1,950,331 | ) | 11,421,961 | |||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (3,935 | ) | (2,435 | ) | ||||
Class A | (1,691 | ) | (2,160 | ) | ||||
Class C | (1,378 | ) | (1,314 | ) | ||||
Class I | (2,890,412 | ) | (2,760,270 | ) | ||||
Total dividends to shareholders | (2,897,416 | ) | (2,766,179 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 69,900,339 | 26,499,972 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 2,896,719 | 2,765,720 | ||||||
Cost of shares redeemed | (51,537,934 | ) | (23,259,559 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 21,259,124 | 6,006,133 | ||||||
Net increase (decrease) in net assets | 16,411,377 | 14,661,915 | ||||||
Net Assets | ||||||||
Beginning of year | 126,762,672 | 112,100,757 | ||||||
End of year | $ | 143,174,049 | $ | 126,762,672 | ||||
Undistributed net investment income at end of year | $ | 3,376,424 | $ | 2,897,414 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 53 |
Statement of Cash Flows
for the year ended October 31, 2011
Cash flows used in operating activities: | ||||
Net decrease in net assets resulting from operations | $ | (1,950,331 | ) | |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash used in operating activities: | ||||
Investments purchased | (308,264,438 | ) | ||
Investments sold | 277,445,826 | |||
Purchases to cover securities sold short | (91,726,829 | ) | ||
Securities sold short | 101,603,762 | |||
Sell of short term investments, net | 412,659 | |||
Increase in investment securities sold receivable | (8,992 | ) | ||
Increase in dividends receivable | (124,381 | ) | ||
Increase in other assets | (100,957 | ) | ||
Increase in investment securities purchased payable | 31,471 | |||
Increase in broker fees and charges payable on short sales | 104,470 | |||
Increase in dividends payable for securities sold short | 33,552 | |||
Decrease in cash collateral due to broker | (501 | ) | ||
Decrease in professional fees payable | (440 | ) | ||
Increase in custodian payable | 578 | |||
Decrease in shareholder communication payable | (1,686 | ) | ||
Increase in due to Trustees | 249 | |||
Increase in due to manager | 3,734 | |||
Increase in due to transfer agent | 40 | |||
Increase in due to NYLIFE Distributors | 28 | |||
Increase in accrued expenses | 22 | |||
Net change in unrealized (appreciation) depreciation on investments | 15,576,726 | |||
Net realized (gain) loss from investments | (7,154,862 | ) | ||
Net change in unrealized (appreciation) depreciation on securities sold short | (6,776,753 | ) | ||
Net realized loss from securities sold short | 2,436,741 | |||
Net cash used in operating activities | (18,460,312 | ) | ||
Cash flows from financing activities: | ||||
Proceeds from shares sold | 69,922,367 | |||
Payment on shares redeemed | (51,537,934 | ) | ||
Cash distributions paid | (697 | ) | ||
Net cash from financing activities | 18,383,736 | |||
Net decrease in cash: | (76,576 | ) | ||
Cash at beginning of year | 221,243 | |||
Cash at end of year | $ | 144,667 | ||
Non cash financing activities not included herein consist of all reinvestment of dividends and distributions of $2,896,719.
The notes to the financial statements are an integral part of,
54 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 6.77 | $ | 6.31 | $ | 5.20 | $ | 8.74 | ||||||||||
Net investment income (loss) (a) | 0.10 | 0.07 | 0.07 | 0.04 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.37 | ) | 0.52 | 1.04 | (3.58 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | — | — | — | |||||||||||||
Total from investment operations | (0.28 | ) | 0.59 | 1.11 | (3.54 | ) | ||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.14 | ) | (0.13 | ) | — | — | ||||||||||||
Net asset value at end of period | $ | 6.35 | $ | 6.77 | $ | 6.31 | $ | 5.20 | ||||||||||
Total investment return (b) | (4.32 | %) | 9.57 | % | 21.35 | % | (40.50 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.52 | % | 1.06 | % | 1.37 | % | 0.82 | % †† | ||||||||||
Net expenses (excluding short sale expenses) | 1.70 | % | 1.70 | % | 1.70 | % | 1.70 | % †† | ||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 3.09 | % | 3.06 | % | 3.28 | % | 3.40 | % †† | ||||||||||
Short sale expenses | 1.27 | % | 1.18 | % | 1.37 | % | 1.19 | % †† | ||||||||||
Portfolio turnover rate | 157 | % | 160 | % | 143 | % | 204 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 226 | $ | 186 | $ | 111 | $ | 90 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 55 |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
September 28, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 6.77 | $ | 6.31 | $ | 5.19 | $ | 10.32 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.12 | 0.05 | 0.07 | 0.08 | 0.05 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.38 | ) | 0.55 | 1.05 | (5.17 | ) | 0.27 | |||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | — | — | — | — | ||||||||||||||||
Total from investment operations | (0.27 | ) | 0.60 | 1.12 | (5.09 | ) | 0.32 | |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.14 | ) | — | (0.02 | ) | — | ||||||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | — | ||||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.14 | ) | — | (0.04 | ) | — | ||||||||||||||
Net asset value at end of period | $ | 6.36 | $ | 6.77 | $ | 6.31 | $ | 5.19 | $ | 10.32 | ||||||||||||
Total investment return (b) | (4.08 | %) | 9.49 | % | 21.58 | %(d) | (49.50 | %) | 3.20 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.77 | % | 0.88 | % | 1.27 | % | 0.96 | % | 6.17 | %†† | ||||||||||||
Net expenses (excluding short sales expenses) | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | %†† | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 2.91 | % | 2.87 | % | 3.13 | % | 3.11 | % | 7.37 | %†† | ||||||||||||
Short sale expenses | 1.28 | % | 1.15 | % | 1.32 | % | 1.05 | % | 0.98 | %†† | ||||||||||||
Portfolio turnover rate | 157 | % | 160 | % | 143 | % | 204 | % | 26 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 110 | $ | 75 | $ | 97 | $ | 61 | $ | 32 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. |
The notes to the financial statements are an integral part of,
56 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||
September 28, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 6.64 | $ | 6.20 | $ | 5.15 | $ | 10.32 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.06 | 0.02 | 0.02 | (0.01 | ) | 0.05 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.38 | ) | 0.52 | 1.03 | (5.13 | ) | 0.27 | |||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | — | — | — | — | ||||||||||||||||
Total from investment operations | (0.33 | ) | 0.54 | 1.05 | (5.14 | ) | 0.32 | |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.09 | ) | (0.10 | ) | — | (0.01 | ) | — | ||||||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | — | ||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.10 | ) | — | (0.03 | ) | — | ||||||||||||||
Net asset value at end of period | $ | 6.22 | $ | 6.64 | $ | 6.20 | $ | 5.15 | $ | 10.32 | ||||||||||||
Total investment return (b) | (5.06 | %) | 8.84 | % | 20.39 | % | (49.90 | %) | 3.10 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.88 | % | 0.33 | % | 0.36 | % | (0.08 | %) | 5.75 | %†† | ||||||||||||
Net expenses (excluding short sale expenses) | 2.45 | % | 2.45 | % | 2.45 | % | 2.41 | % | 2.35 | %†† | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 3.85 | % | 3.81 | % | 3.98 | % | 3.94 | % | 8.12 | %†† | ||||||||||||
Short sale expenses | 1.28 | % | 1.19 | % | 1.32 | % | 1.01 | % | 0.98 | %†† | ||||||||||||
Portfolio turnover rate | 157 | % | 160 | % | 143 | % | 204 | % | 26 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 121 | $ | 100 | $ | 69 | $ | 44 | $ | 27 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 57 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
September 28, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 6.80 | $ | 6.34 | $ | 5.21 | $ | 10.32 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.13 | 0.09 | 0.09 | 0.22 | 0.06 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.38 | ) | 0.52 | 1.04 | (5.29 | ) | 0.26 | |||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | — | — | — | — | ||||||||||||||||
Total from investment operations | (0.26 | ) | 0.61 | 1.13 | (5.07 | ) | 0.32 | |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.15 | ) | — | (0.02 | ) | — | ||||||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | — | ||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.15 | ) | — | (0.04 | ) | — | ||||||||||||||
Net asset value at end of period | $ | 6.38 | $ | 6.80 | $ | 6.34 | $ | 5.21 | $ | 10.32 | ||||||||||||
Total investment return (b) | (3.87 | %) | 9.83 | % | 21.69 | % | (49.29 | %) | 3.20 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.92 | % | 1.37 | % | 1.74 | % | 2.80 | % | 6.78 | %†† | ||||||||||||
Net expenses (excluding short sale expenses) | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | %†† | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 2.65 | % | 2.65 | % | 2.92 | % | 2.73 | % | 7.12 | %†† | ||||||||||||
Short sale expenses | 1.27 | % | 1.18 | % | 1.36 | % | 0.98 | % | 0.98 | %†† | ||||||||||||
Portfolio turnover rate | 157 | % | 160 | % | 143 | % | 204 | % | 26 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 142,717 | $ | 126,402 | $ | 111,823 | $ | 75,912 | $ | 11,905 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
58 MainStay 130/30 International Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds” and each individually, referred to as a “Fund”). These financial statements and notes relate to the MainStay 130/30 Core Fund and MainStay 130/30 International Fund (collectively, referred to as the “130/30 Funds” and each individually referred to as a “130/30 Fund”). Each is a diversified fund. Each 130/30 Fund is the successor of a series of Eclipse Funds Inc. with the same name (each a “Predecessor Fund”). The reorganizations of the Predecessor Funds with and into the respective 130/30 Funds occurred on February 26, 2010. All information and references to periods prior to February 26, 2010 relate to the respective Predecessor Fund.
A 130/30 fund is a fund that invests up to approximately 130 percent of its assets in long positions (either directly or indirectly through derivatives), while up to approximately 30 percent of its assets are sold short (either directly or indirectly through derivatives). The proceeds from the short strategies may be used to purchase all or a portion of the additional 30% of the long positions.
Class A, Class C and Class I shares of the 130/30 Funds commenced operations on the dates indicated below:
Commencement | ||
of Operations | Funds | |
June 29, 2007 | MainStay 130/30 Core Fund | |
September 28, 2007 | MainStay 130/30 International Fund | |
Investor Class shares for the 130/30 Funds commenced operations on February 28, 2008.
The 130/30 Funds each currently offer four classes of shares. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions within one year of the date of purchase. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase. Class I shares are offered at NAV without imposition of a front-end sales charge or a CDSC. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The four classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The investment objective for each of the 130/30 Funds is as follows:
The MainStay 130/30 Core Fund seeks long-term growth of capital, with income as a secondary consideration.
The MainStay 130/30 International Fund seeks to provide long-term growth of capital with income as a secondary objective.
Note 2–Significant Accounting Policies
The 130/30 Funds prepare their financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follow the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the 130/30 Funds are open for business (“valuation date”).
“Fair value” is defined as the price that a 130/30 Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk Inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the 130/30 Funds. Unobservable inputs reflect each 130/30 Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the 130/30 Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the 130/30 Funds to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The 130/30 Funds may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The 130/30 Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the 130/30 Funds primarily employ a market-based
mainstayinvestments.com 59
Notes to Financial Statements (continued)
approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The 130/30 Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for each 130/30 Fund’s investments is included at the end of each 130/30 Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Options contracts are valued at the last posted settlement price on the market where such options are principally traded. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values determined on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the 130/30 Funds’ Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 130/30 Funds’ Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the MainStay 130/30 International Fund held securities with a value of $51,125 that were fair valued in such a manner. Additionally at October 31, 2011, the MainStay 130/30 Core Fund did not hold any securities that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the 130/30 Funds principally trade, and the time at which the 130/30 Funds’ NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or Subadvisor conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the 130/30 Funds’ Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. At October 31, 2011, certain foreign equity securities held by the 130/30 Funds were fair valued in such a manner.
Generally, a security is considered illiquid if it cannot be sold or disposed of in the ordinary course of business at approximately the price at which it is valued. Its illiquidity might prevent the sale of such security at a time when the Manager or Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of a 130/30 Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the 130/30 Funds to rely on judgments that may be somewhat subjective in determining value, which could vary from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to a 130/30 Fund. Under the supervision of the Board, the Manager or Subadvisor determines the liquidity of the 130/30 Fund’s investments; in doing so, the Manager or Subadvisor may consider various factors, including (i) the frequency of trades and quotations, (ii) the number of dealers and prospective purchasers, (iii) dealer undertakings to make a market, and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities generally will be valued in such manner as the Board in good faith deems appropriate to reflect their fair market value.
(B) Income Taxes. Each of the 130/30 Funds is treated as a separate entity for federal income tax purposes. The 130/30 Funds’ policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of each 130/30 Fund within the allowable
60 MainStay 130/30 Funds
time limits. Therefore, no federal, state and local income tax provision is required.
Investment income received by the 130/30 Funds from foreign sources may be subject to foreign income taxes. These foreign income taxes are generally withheld at the source.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the 130/30 Funds’ tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the 130/30 Funds’ financial statements. The 130/30 Funds’ federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The 130/30 Funds intend to declare and pay dividends of net investment income and distributions of net realized capital gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the respective 130/30 Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The 130/30 Funds record security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the 130/30 Funds are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual 130/30 Funds in proportion to the net assets of the respective 130/30 Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by each 130/30 Fund, including those of related parties to the 130/30 Funds, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The 130/30 Funds may enter into repurchase agreements to earn income. The 130/30 Funds may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the 130/30 Funds’ Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the 130/30 Funds invest in repurchase agreements, the 130/30 Funds’ custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the 130/30 Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the respective 130/30 Fund.
(H) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security, or securities index). The MainStay 130/30 International Fund is subject to equity price risk in the normal course of investment in these transactions. The MainStay 130/30 International Fund enters into futures contracts for market exposure. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking to market” such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The MainStay 130/30 International Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the MainStay 130/30 International Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the MainStay 130/30 International Fund’s involvement in open futures positions. Risks arise from the possible imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the terms of their contracts. However, the MainStay 130/30 International Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a broker that holds margin on behalf of the MainStay 130/30
mainstayinvestments.com 61
Notes to Financial Statements (continued)
International Fund, the MainStay 130/30 International Fund may not be entitled to the return of all of the margin owed to the MainStay 130/30 International Fund, potentially resulting in a loss. The MainStay 130/30 International Fund’s investment in futures contracts and other derivatives may increase the volatility of the MainStay 130/30 International Fund’s NAV and may result in a loss to the MainStay 130/30 International Fund. The MainStay 130/30 International Fund had no open futures contracts at October 31, 2011.
(I) Securities Sold Short. The 130/30 Funds typically engage in short sales as part of their investment strategies. When a 130/30 Fund enters into a short sale, it must segregate the cash proceeds from the security sold short or other securities, as collateral for its obligation to deliver the security upon conclusion of the sale. A gain, limited to the price at which the 130/30 Funds sold the security short, or a loss, unlimited as to dollar amount, will be recognized upon termination of a short sale if the market price on the date the short position is closed out is less or greater, respectively, than the proceeds originally received. Any such gain or loss may be offset, completely or in part, by the change in the value of the hedged investments. Dividends declared on short positions existing on the record date are recorded on the ex-dividend date as a dividend expense on the Statement of Operations.
(J) Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows of each 130/30 Fund is the amount included in the 130/30 Fund’s Statement of Assets and Liabilities and represents the cash on hand at its custodian and does not include any Short-Term Investments or deposit at brokers for securities sold short or restricted cash. Cash may include domestic and foreign currency.
(K) Foreign Currency Forward Contracts. The 130/30 Funds may enter into foreign currency forward contracts, which are agreements to buy or sell currencies of different countries on a specified future date at a specified rate. The 130/30 Funds are subject to foreign currency exchange rate risk in the normal course of investing in these transactions. During the period the forward contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking-to-market” such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. Cash movement occurs on settlement date. When the forward contract is closed, the 130/30 Funds record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the 130/30 Funds’ basis in the contract. The 130/30 Funds enter into foreign currency forward contracts primarily to hedge their foreign currency denominated investments and receivables and payables against adverse movements in future foreign exchange rates or to try to enhance the 130/30 Funds’ returns.
The use of foreign currency forward contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract amount reflects the extent of a 130/30 Fund’s involvement in these financial instruments. Risks arise from the possible movements in the foreign exchange rates underlying these instruments. While the 130/30 Funds may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the 130/30 Funds than if they had not engaged in such transactions. Exchange rate movements can be large, depending on the currency, and can last for extended periods of time, affecting the value of the 130/30 Funds’ assets. Moreover, there may be an imperfect correlation between the 130/30 Funds’ holdings of securities denominated in a particular currency and the forward contracts entered into by the 130/30 Funds. Such imperfect correlation may prevent the 130/30 Funds from achieving the intended hedge or expose the 130/30 Funds to the risk of currency exchange loss. The unrealized appreciation (depreciation) on forward contracts reflects a 130/30 Fund’s exposure at valuation date to credit loss in the event of a counterparty’s failure to perform its obligations. As of October 31, 2011, the 130/30 Funds did not hold any foreign currency forward contracts.
(L) Foreign Currency Transactions. The books and records of the 130/30 Funds are kept in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling exchange rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date, and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the 130/30 Funds’ books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(M) Rights and Warrants. A right is a certificate that permits the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. A warrant is an instrument that entitles the holder to buy an equity security at a specific price for a specific period of time. The 130/30 Funds generally enter into rights and warrants when securities are acquired through a corporate action. With respect to warrants in international markets, the securities are only purchased when the underlying security cannot be purchased due to the many restrictions an industry and/or country might place on foreign investors. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The 130/30 Funds could also lose the entire value of its investment in warrants if the warrant is not exercised by the date of its expiration. The securities
62 MainStay 130/30 Funds
are sold as soon as the opportunity becomes available. The 130/30 Funds are exposed to risk until each sale is completed.
(N) Concentration of Risk. The MainStay 130/30 International Fund invests in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the MainStay 130/30 International Fund to meet its obligations may be affected by economic or political developments in a specific country, industry or region.
(O) Securities Lending. In order to realize additional income, the 130/30 Funds may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the 130/30 Funds do engage in securities lending, the 130/30 Funds will lend through their custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the 130/30 Funds’ cash collateral in accordance with the Lending Agreement between the 130/30 Funds and State Street, and indemnify the 130/30 Funds’ portfolios against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The 130/30 Funds may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The 130/30 Funds may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The 130/30 Funds will receive compensation for lending their securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The 130/30 Funds also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the 130/30 Funds.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the 130/30 Funds and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The 130/30 Funds had no portfolio securities on loan as of October 31, 2011.
(P) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the 130/30 Funds enter into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The 130/30 Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the 130/30 Funds that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the 130/30 Funds.
(Q) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures about the 130/30 Funds’ derivative and hedging activities, including how such activities are accounted for and their effect on the 130/30 Funds’ financial positions, performance and cash flows. These derivatives are not accounted for as hedging instruments.
MainStay 130/30 Core Fund
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2011:
Realized Gain (Loss)
Statement of | Equity | |||||||||
Operations | Contracts | |||||||||
Location | Risk | Total | ||||||||
Rights Sold Short | Net realized gain (loss) on investments sold short | $ | 7,059 | $ | 7,059 | |||||
Total Realized Loss | $ | 7,059 | $ | 7,059 | ||||||
Change in Unrealized Appreciation (Depreciation)
Statement of | Equity | |||||||||
Operations | Contracts | |||||||||
Location | Risk | Total | ||||||||
Rights Sold Short | Net change in unrealized appreciation (depreciation) on investments sold short | $ | (4,290 | ) | $ | (4,290 | ) | |||
Total Change in Unrealized Appreciation (Depreciation) | $ | (4,290 | ) | $ | (4,290 | ) | ||||
Number of Contracts, Notional Amounts or Shares/Units (1)
Equity | ||||||||
Contracts | ||||||||
Risk | Total | |||||||
Rights Sold Short (2) | (9,533)-0 | (9,533)-0 | ||||||
(1) | Amount disclosed represents the minimum and maximum held during the year ended October 31, 2011. |
(2) | Amount(s) represent(s) number of contracts or number of shares/units. |
mainstayinvestments.com 63
Notes to Financial Statements (continued)
MainStay 130/30 International Fund
Fair value of derivatives as of October 31, 2011:
Asset Derivatives
Statement of | ||||||||||||
Assets and | Equity | |||||||||||
Liabilities | Contracts | |||||||||||
Location | Risk | Total | ||||||||||
Warrants | Investment in securities, at value | $ | 10,939 | $ | 10,939 | |||||||
Total Fair Value | $ | 10,939 | $ | 10,939 | ||||||||
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2011:
Realized Gain (Loss)
Statement of | Equity | |||||||||||
Operations | Contracts | |||||||||||
Location | Risk | Total | ||||||||||
Rights | Net realized gain (loss) on security transactions | $ | 89,221 | $ | 89,221 | |||||||
Futures Contacts | Net realized gain (loss) on futures contracts | (333,455 | ) | (333,455 | ) | |||||||
Total Realized Gain (Loss) | $ | (244,234 | ) | $ | (244,234 | ) | ||||||
Change in Unrealized Appreciation (Depreciation)
Statement of | Equity | |||||||||||
Operations | Contracts | |||||||||||
Location | Risk | Total | ||||||||||
Rights | Net change in unrealized appreciation (depreciation) on investments | $ | 119 | $ | 119 | |||||||
Warrants | Net change in unrealized appreciation (depreciation) on investments | 4,409 | 4,409 | |||||||||
Rights Sold Short | Net change in unrealized appreciation (depreciation) on investments sold short | 583 | 583 | |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 5,111 | $ | 5,111 | ||||||||
Number of Contracts, Notional Amounts or Shares/Units
Equity | ||||||||
Contracts | ||||||||
Risk | Total | |||||||
Rights (1)(2) | 29,695 | 29,695 | ||||||
Warrants (1)(2) | 89,408 | 89,408 | ||||||
Rights Sold Short (1)(2) | (165,854 | ) | (165,854 | ) | ||||
Futures Contracts Long (2)(3) | 6-98 | 6-98 | ||||||
(1) | Amount disclosed represents the weighted average held during the year ended October 31, 2011. |
(2) | Amount(s) represent(s) number of contracts or number of shares/units. |
(3) | Amount disclosed represents the minimum and maximum held during the year ended October 31, 2011. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the 130/30 Funds’ Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the 130/30 Funds. Except for the portion of salaries and expenses that are the responsibility of the 130/30 Funds, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the 130/30 Funds which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the 130/30 Funds and certain operational expenses of the 130/30 Funds. Madison Square Investors LLC (“MSI” or “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to and is responsible for the day-to-day portfolio management of the 130/30 Funds. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MSI, New York Life Investments pays for the Subadvisor’s services.
Each 130/30 Fund is contractually obligated to pay the Manager a monthly fee for services performed and facilities furnished at an annual rate of average daily net assets of each 130/30 Fund as follows:
Mainstay 130/30 Core Fund | 1.00 | % | ||
MainStay 130/30 International Fund | 1.10 | |||
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses do not exceed the percentages of average daily net assets for Class A shares as shown in the table below. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
Class A | ||||
MainStay 130/30 Core Fund | 1.50 | % | ||
MainStay 130/30 International Fund | 1.60 | |||
New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of each 130/30 Fund. These agreements expire on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board.
Additionally, the Manager has agreed to voluntarily waive fees and/or reimburse expenses of the appropriate class of each 130/30 Fund so
64 MainStay 130/30 Funds
that Total Annual Fund Operating Expenses do not exceed the following percentages:
Investor Class | Class C | |||||||
Mainstay 130/30 Core Fund | 1.60 | % | 2.35 | % | ||||
MainStay 130/30 International Fund | 1.70 | 2.45 | ||||||
These voluntary waivers or reimbursements may be discontinued at any time without notice.
For the year ended October 31, 2011, New York Life investments earned fees from the 130/30 Funds and waived its fees and/or reimbursed expenses as follows:
Waived | ||||||||
Fees | Fees | |||||||
MainStay 130/30 Core Fund | $ | 3,123,445 | $ | — | ||||
MainStay 130/30 International Fund | 1,468,811 | 40,421 | ||||||
State Street Bank & Trust (“State Street”), 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the 130/30 Funds pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the 130/30 Funds, maintaining the general ledger and sub-ledger accounts for the calculation of the 130/30 Funds’ respective NAVs, and assisting New York Life Investments in conducting various aspects of the 130/30 Funds’ administrative operations. For providing these services to the 130/30 Funds, State Street is compensated by New York Life Investments.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the 130/30 Funds, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The 130/30 Funds have adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class C Plan, Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the 130/30 Funds’ shares and service activities.
(C) Sales Charges. The 130/30 Funds were advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares for the year ended October 31, 2011 were as follows:
MainStay 130/30 Core Fund | ||||
Investor Class | $ | 425 | ||
Class A | 701 | |||
MainStay 130/30 International Fund | ||||
Investor Class | $ | 451 | ||
Class A | 131 | |||
The MainStay 130/30 Core and MainStay 130/30 International Fund were also advised that the Distributor retained CDSCs on redemptions of Class C shares of $259 and $14, respectively for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the 130/30 Funds’ transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the 130/30 Funds for the year ended October 31, 2011, were as follows:
MainStay 130/30 Core Fund | Total | |||
Investor Class | $ | 291 | ||
Class A | 10 | |||
Class C | 942 | |||
Class I | 11,002 | |||
MainStay 130/30 International Fund | Total | |||
Investor Class | $ | 457 | ||
Class A | 9 | |||
Class C | 254 | |||
Class I | 11,003 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the 130/30 Funds have implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the 130/30 Funds with the following values and percentages of net assets as follows:
MainStay 130/30 Core Fund | ||||||||
Investor Class | $ | 22,641 | 18.7 | % | ||||
Class A | 19,747 | 4.7 | ||||||
Class C | 19,055 | 5.0 | ||||||
Class I | 19,827,947 | 5.2 | ||||||
mainstayinvestments.com 65
Notes to Financial Statements (continued)
MainStay 130/30 International Fund | ||||||||
Investor Class | $ | 18,923 | 8.4 | % | ||||
Class A | 16,661 | 15.2 | ||||||
Class C | 16,065 | 13.2 | ||||||
Class I | 22,887 | 0.0 | ‡ | |||||
‡ | Less than one-tenth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the 130/30 Funds by the Office of the General Counsel of New York Life Investments was payable directly by the 130/30 Funds through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were as follows:
MainStay 130/30 Core Fund | $ | 3,935 | ||
MainStay 130/30 International Fund | 1,830 | |||
Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the 130/30 Funds are no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||||
MainStay 130/30 Core Fund | $ | 1,502,360 | $ | 30,771,483 | $ | — | $ | 14,796,597 | $ | 47,070,440 | ||||||||||
MainStay 130/30 International Fund | 3,861,463 | (31,362,820 | ) | — | 4,550,161 | (22,951,196 | ) | |||||||||||||
The difference between book-basis and tax basis unrealized appreciation (depreciation) is primarily due to wash sale deferrals, real estate investment trust (“REIT”) basis adjustment, passive foreign investment company (“PFIC”) adjustments and return of capital distributions from non-REIT securities.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated Net | ||||||||||||
Undistributed | Realized | Additional | ||||||||||
Net Investment | Gain (Loss) on | Paid-in | ||||||||||
Income (Loss) | Investments | Capital | ||||||||||
MainStay 130/30 Core Fund | $ | (102,557 | ) | $ | 102,557 | $ | — | |||||
MainStay 130/30 International Fund | 819,601 | (819,601 | ) | — | ||||||||
The reclassifications for the 130/30 Funds are primarily due to dividends in lieu, taxable non-REIT dividends, foreign currency gain (loss), PFIC gain (loss), capital gain distributions and return of capital distributions from REITs.
Under the Regulated Investment Company Modernization Act of 2010, the 130/30 Funds will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
MainStay 130/30 Core Fund
The MainStay 130/30 Core Fund utilized $14,137,906 of capital loss carryforwards during the year ended October 31, 2011.
MainStay 130/30 International Fund
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $31,362,820 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the MainStay 130/30 International Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2016 | $ | 2,491 | ||||
2017 | 28,872 | |||||
Total | $ | 31,363 | ||||
The MainStay 130/30 International Fund utilized $3,387,507 of capital loss carryforwards during the year ended October 31, 2011.
66 MainStay 130/30 Funds
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||||||||||||||||||
Tax Based | Tax Based | Tax Based | Tax Based | |||||||||||||||||||||
Distributions | Distributions | Distributions | Distributions | |||||||||||||||||||||
from Ordinary | from Long-Term | from Ordinary | from Long-Term | |||||||||||||||||||||
Income | Capital Gains | Total | Income | Capital Gains | Total | |||||||||||||||||||
MainStay 130/30 Core Fund | $ | 1,166,723 | $ | — | $ | 1,166,723 | $ | 1,164,737 | $ | — | $ | 1,164,737 | ||||||||||||
MainStay 130/30 International Fund | 2,897,416 | — | 2,897,416 | 2,766,179 | — | 2,766,179 | ||||||||||||||||||
Note 5–Foreign CurrencyTransactions
MainStay 130/30 International Fund
As of October 31, 2011, the Fund held the following foreign currencies:
Currency | Cost | Value | ||||||||||||||||||||||
Australian Dollar | AUD | 35,959 | USD | 37,469 | USD | 37,897 | ||||||||||||||||||
Euro | EUR | 2,167 | 2,987 | 2,999 | ||||||||||||||||||||
Hong Kong Dollar | HKD | 68,367 | 8,805 | 8,800 | ||||||||||||||||||||
Japanese Yen | JPY | 823,233 | 10,713 | 10,530 | ||||||||||||||||||||
New Taiwan Dollar | TWD | 2,296,078 | 76,450 | 76,746 | ||||||||||||||||||||
Pound Sterling | GBP | 4,783 | 7,650 | 7,690 | ||||||||||||||||||||
Singapore Dollar | SGD | 5 | 4 | 4 | ||||||||||||||||||||
Swiss Franc | CHF | 1 | 1 | 1 | ||||||||||||||||||||
Total | USD | 144,079 | USD | 144,667 | ||||||||||||||||||||
Note 6–Custodian
State Street is the custodian of the cash and the securities of the 130/30 Funds. Custodial fees are charged to the 130/30 Funds based on the market value of securities in the 130/30 Funds and the number of certain cash transactions incurred by the 130/30 Funds.
Note 7–Line of Credit
The 130/30 Funds and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the 130/30 Funds on the amended credit agreement during the year ended October 31, 2011.
Note 8–Purchases and Sales of Securities (in 000’s)
For the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were as follows:
MainStay 130/30 | MainStay 130/30 | |||||||||||||||
Core Fund | International Fund | |||||||||||||||
Purchases | Sales | Purchases | Sales | |||||||||||||
U.S. Government Securities | $ | — | $ | — | $ | — | $ | — | ||||||||
All Others | 658,432 | 620,012 | 308,264 | 277,446 | ||||||||||||
Total | $ | 658,432 | $ | 620,012 | $ | 308,264 | $ | 277,446 | ||||||||
mainstayinvestments.com 67
Notes to Financial Statements (continued)
Note 9–Capital Share Transactions
MainStay 130/30 Core Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 10,887 | $ | 84,990 | |||||
Shares issued to shareholders in reinvestment of dividends | 3 | 24 | ||||||
Shares redeemed | (5,910 | ) | (44,645 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 4,980 | 40,369 | ||||||
Shares converted from Investor Class (See Note 1) | (679 | ) | (4,916 | ) | ||||
Net increase (decrease) | 4,301 | $ | 35,453 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 3,416 | $ | 23,443 | |||||
Shares issued to shareholders in reinvestment of dividends | 9 | 65 | ||||||
Shares redeemed | (147 | ) | (924 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 3,278 | 22,584 | ||||||
Shares converted from Investor Class (See Note 1) | (442 | ) | (3,035 | ) | ||||
Net increase (decrease) | 2,836 | $ | 19,549 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31,2011: | ||||||||
Shares sold | 31,040 | $ | 248,859 | |||||
Shares issued to shareholders in reinvestment of dividends | 21 | 162 | ||||||
Shares redeemed | (10,231 | ) | (80,184 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 20,830 | 168,837 | ||||||
Shares converted into Class A (See Note 1) | 676 | 4,916 | ||||||
Net increase (decrease) | 21,506 | $ | 173,753 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 38,796 | $ | 280,300 | |||||
Shares issued to shareholders in reinvestment of dividends | 30 | 205 | ||||||
Shares redeemed | (29,511 | ) | (196,775 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 9,315 | 83,730 | ||||||
Shares converted into Class A (See Note 1) | 442 | 3,035 | ||||||
Shares converted from Class A (a) | (1 | ) | (8 | ) | ||||
Net increase (decrease) | 9,756 | $ | 86,757 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31,2011: | ||||||||
Shares sold | 18,110 | $ | 132,920 | |||||
Shares issued to shareholders in reinvestment of dividends | 4 | 32 | ||||||
Shares redeemed | (9,067 | ) | (68,672 | ) | ||||
Net increase (decrease) | 9,047 | $ | 64,280 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 6,170 | $ | 42,929 | |||||
Shares redeemed | (24,324 | ) | (159,236 | ) | ||||
Net increase (decrease) | (18,154 | ) | $ | (116,307 | ) | |||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | 25,423,328 | $ | 197,718,153 | |||||
Shares sold | ||||||||
Shares issued to shareholders in reinvestment of dividends | 151,742 | 1,166,377 | ||||||
Shares redeemed | (23,171,311 | ) | (185,406,139 | ) | ||||
Net increase (decrease) | 2,403,759 | $ | 13,478,391 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 21,018,600 | $ | 144,417,239 | |||||
Shares issued to shareholders in reinvestment of dividends | 158,510 | 1,084,207 | ||||||
Shares redeemed | (4,981,718 | ) | (34,703,839 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 16,195,392 | 110,797,607 | ||||||
Shares converted into Class I (a) | 1 | 8 | ||||||
Net increase (decrease) | 16,195,393 | $ | 110,797,615 | |||||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class and Class A shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class and Class A shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, you may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
68 MainStay 130/30 Funds
MainStay 130/30 International Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 12,784 | $ | 87,532 | |||||
Shares issued to shareholders in reinvestment of dividends | 569 | 3,906 | ||||||
Shares redeemed | (4,817 | ) | (33,077 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 8,536 | 58,361 | ||||||
Shares converted from Investor Class (See Note 1) | (358 | ) | (2,110 | ) | ||||
Net increase (decrease) | 8,178 | $ | 56,251 | |||||
Year ended October 31,2010: | ||||||||
Shares sold | 10,716 | $ | 66,638 | |||||
Shares issued to shareholders in reinvestment of dividends | 384 | 2,435 | ||||||
Shares redeemed | (1,358 | ) | (8,605 | ) | ||||
Net increase (decrease) | 9,742 | $ | 60,468 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 21,113 | $ | 149,079 | |||||
Shares issued to shareholders in reinvestment of dividends | 240 | 1,647 | ||||||
Shares redeemed | (15,519 | ) | (105,453 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 5,834 | 45,273 | ||||||
Shares converted into Class A (See Note 1) | 358 | 2,110 | ||||||
Net increase (decrease) | 6,192 | $ | 47,383 | |||||
Year ended October 31,2010: | ||||||||
Shares sold | 6,096 | $ | 38,868 | |||||
Shares issued to shareholders in reinvestment of dividends | 275 | 1,741 | ||||||
Shares redeemed | (7,610 | ) | (47,119 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (1,239 | ) | (6,510 | ) | ||||
Shares converted from Class A (a) | (3,061 | ) | (18,452 | ) | ||||
Net increase (decrease) | (4,300 | ) | $ | (24,962 | ) | |||
Class C | Shares | Amount | ||||||
Year ended October 31,2011: | ||||||||
Shares sold | 4,676 | $ | 32,926 | |||||
Shares issued to shareholders in reinvestment of dividends | 183 | 1,237 | ||||||
Shares redeemed | (438 | ) | (2,920 | ) | ||||
Net increase (decrease) | 4,421 | $ | 31,243 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 5,989 | $ | 37,783 | |||||
Shares issued to shareholders in reinvestment of dividends | 203 | 1,274 | ||||||
Shares redeemed | (2,286 | ) | (14,305 | ) | ||||
Net increase (decrease) | 3,906 | $ | 24,752 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 10,568,436 | $ | 69,630,802 | |||||
Shares issued to shareholders in reinvestment of dividends | 420,048 | 2,889,929 | ||||||
Shares redeemed | (7,215,858 | ) | (51,396,484 | ) | ||||
Net increase (decrease) | 3,772,626 | $ | 21,124,247 | |||||
Year ended October 31,2010: | ||||||||
Shares sold | 4,276,409 | $ | 26,356,683 | |||||
Shares issued to shareholders in reinvestment of dividends | 434,005 | 2,760,270 | ||||||
Shares redeemed | (3,784,390 | ) | (23,189,530 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 926,024 | 5,927,423 | ||||||
Shares converted into Class I (a) | 3,051 | 18,452 | ||||||
Net increase (decrease) | 929,075 | $ | 5,945,875 | |||||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class and Class A shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class and Class A shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, you may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the 130/30 Funds as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the 130/30 Funds’ management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 69
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the MainStay 130/30 Core Fund and MainStay 130/30 International Fund (“the Funds”), two of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay 130/30 Core Fund and MainStay 130/30 International Fund of MainStay Funds Trust as of October 31, 2011, and the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
70 MainStay 130/30 Funds
Federal Income Tax Information (Unaudited)
The 130/30 Funds are required under the Internal Revenue Code to advise shareholders within 60 days of the 130/30 Funds’ fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the 130/30 Funds during such fiscal years.
For the fiscal year ended October 31, 2011, the 130/30 Funds designated approximately the following amounts under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
130/30 Core Fund | $ | 6,408,164 | ||
130/30 International Fund | 5,930,212 | |||
The dividends paid by the following 130/30 Funds during the fiscal year ended October 31, 2011 should be multiplied by the following percentages to arrive at the amount eligible for the corporate dividend-received deduction.
DRD% | ||||
130/30 Core Fund | 100.0 | % | ||
130/30 International Fund | — | % | ||
In accordance with federal tax law, the MainStay 130/30 International Fund elected to provide each shareholder with their portion of the Fund’s foreign taxes paid and the income sourced from foreign countries. Accordingly, the Fund made the following designations regarding its fiscal year ended October 31, 2011:
• | the total amount of taxes credited to foreign countries was $564,324. |
• | the total amount of income sourced from foreign countries was $6,597,427. |
As required by federal tax law rules, shareholders will receive notification of their proportionate share of foreign taxes paid and foreign sourced income for the 2011 calendar year with form 1099-DIV, which will be mailed during February 2012.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Funds’ fiscal year end October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the 130/30 Funds’ securities is available without charge, upon request, (i) by visiting the MainStay Funds’ website at mainstayinvestments.com; and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The 130/30 Funds are required to file with the SEC its proxy voting records for each of its funds for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
Each 130/30 Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. Each 130/30 Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 71
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
72 MainStay 130/30 Funds
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 73
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
74 MainStay 130/30 Funds
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 75
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
76 MainStay 130/30 Funds
This page intentionally left blank
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24841 MS284-11 | MS30ALL11-12/11 |
NC2
MainStay Cash Reserves Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 16 | |
Notes to Financial Statements | 20 | |
Report of Independent Registered Public Accounting Firm | 24 | |
Federal Income Tax Information | 25 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 25 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 25 | |
Board Members and Officers | 26 | |
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||
Expenses | ||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||
Class I Shares3 | No Sales Charge | 0 | .01% | 1 | .58% | 1 | .79% | 0 | .59% | |||||||||
Sweep Shares3 | No Sales Charge | 0 | .01 | 1 | .33 | 1 | .42 | 1 | .09 | |||||||||
7-Day Current Yield: 0.01%
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | As of October 31, 2011, MainStay Cash Reserves Fund had an effective 7-day yield of 0.01% and a 7-day current yield of 0.01% for Class I shares and an effective 7-day yield of 0.01% and a 7-day current yield of 0.01% for Sweep Shares. These yields reflect certain expense limitations. Had these expense limitations not been in effect, the effective 7-day yield and the 7-day current yield would have been –0.41% and –0.41% for Class I shares, respectively, and –0.85% and –0.85% for Sweep Shares, respectively. The current yield reflects the Fund’s earnings better than does the Fund’s total return. |
The footnote on the next page is an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
Average Lipper Institutional Money Market Fund4 | 0 | .05% | 1 | .74% | 1 | .92% | ||||||
4. | The average Lipper institutional money market fund is an equally weighted performance average adjusted for capital gains distributions and income dividends of all of the institutional money market funds in the Lipper Universe. Lipper Inc., a wholly-owned subsidiary of Thomson Reuters, is an independent monitor of mutual fund performance. Results do not reflect any deduction of sales charges, expenses or taxes. Lipper averages are not class specific. Lipper returns are unaudited. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Cash Reserves Fund
Cost in Dollars of a $1,000 Investment in MainStay Cash Reserves Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,000.10 | $ | 0.71 | $ | 1,024.50 | $ | 0.71 | ||||||||||||
Sweep Shares | $ | 1,000.00 | $ | 1,000.10 | $ | 0.71 | $ | 1,024.50 | $ | 0.71 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.14% for Class I Shares and 0.14% for Sweep Shares) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Portfolio Composition as of October 31, 2011 (Unaudited)
Other Commercial Paper | 42.60 | |||
Treasury Debt | 18.30 | |||
Treasury Repurchase Agreements | 11.50 | |||
Other Notes | 7.90 | |||
Government Agency Debt | 6.40 | |||
Financial Company Commercial Paper | 6.20 | |||
Certificates of Deposit | 6.00 | |||
Asset - Backed Commercial Paper | 0.70 | |||
Other Assets, Less Liabilities | 0.40 |
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
8 MainStay Cash Reserves Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers David E. Clement, CFA, and Thomas J. Girard of New York Life Investments,1 the Fund’s Manager.
How did MainStay Cash Reserves Fund perform relative to its peers during the 12 months ended October 31, 2011?
As of October 31, 2011, MainStay Cash Reserves Fund Class I shares and Sweep Shares each provided a 7-day current yield of 0.01% and a 7-day effective yield of 0.01%. For the 12 months ended October 31, 2011, MainStay Cash Reserves Fund Class I shares and Sweep Shares both returned 0.01%. Both share classes underperformed the 0.05% return of the average Lipper2 institutional money market fund for the 12 months ended October 31, 2011.
Were there any significant developments with respect to the Fund during the reporting period?
On September 28, 2011, the Board of Trustees (“Board”) of MainStay Funds Trust (“Trust”), upon the recommendation of the Fund’s Manager, approved a proposal to liquidate the Fund. The Fund will be liquidated pursuant to a Board-approved Plan of Liquidation on or about March 30, 2012 (“Liquidation Date”).
Effective October 14, 2011, the Fund was closed to all new investors of Class I shares. As of that date, new account requests and exchanges into the Fund were no longer accepted for Class I shares. Existing Class I shareholders as of October 14, 2011, may continue to purchase shares, including through dividend reinvestments. Effective March 20, 2012, the Fund will be closed to purchases by existing Class I shareholders. Effective January 31, 2012, the Fund will be closed to all investments in the Sweep Shares class. These dates, including the Liquidation Date, may be changed without notice.
Additional information about the liquidation process and shareholder options is available in the Prospectus Supplement dated September 30, 2011.
What factors affected the Fund’s relative performance during the reporting period?
A variety of factors affected the Fund’s relative performance during the reporting period. Repurchase rates declined dramatically, which detracted from the Fund’s relative performance because we had been using repurchase agreements to help satisfy the requirement instituted by regulators last year that a money market fund must invest at least 30% of total assets in instruments that are readily convertible to cash within five business days. During the reporting period, some of the longer-dated higher-yielding floating-rate securities backed by the Federal Deposit Insurance Corporation (FDIC) that we purchased in 2009 began to mature. The maturities of the higher-yielding
FDIC-backed securities detracted from performance because replacements with comparable backing and yield were difficult to find. An underweight position in European bank securities—a higher-yielding sector—detracted from relative performance. On the positive side, asset-backed securities and floating-rate agency securities added to the Fund’s relative performance.
FDIC-backed securities detracted from performance because replacements with comparable backing and yield were difficult to find. An underweight position in European bank securities—a higher-yielding sector—detracted from relative performance. On the positive side, asset-backed securities and floating-rate agency securities added to the Fund’s relative performance.
What was the Fund’s duration3 strategy during the reporting period?
During the reporting period, we kept the Fund’s average weighted duration between 50 and 55 days. We view this as a longer duration because regulations prevent money market funds from maintaining an average weighted duration longer than 60 days. This strategy was particularly effective among LIBOR-based4 investments because of the steepness of the LIBOR yield curve5 relative to the Treasury curve.
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
The Federal Open Market Committee (FOMC) kept the federal funds target rate in a very low range, which gave us the confidence to go out further on an upward-sloping yield curve during the first half of the reporting period. This was accomplished by using longer-dated Treasury coupon securities and asset-backed securities. (Asset-backed securities must be recorded as though they will mature on their legal maturity date even though their average lives are typically much shorter.)
We hedged this positioning by participating in the floating-rate securities market. In our opinion, the use of floating-rate securities offered two potential advantages. First, if interest rates rose, we would participate in the upward movement. Second, floating-rate securities offered what we felt were compelling yields compared to other available investments.
Later in the reporting period, negative sentiment regarding the Eurozone sovereign debt crisis was at the forefront of the market. This resulted in significant downward pressure on Treasury rates as money funds began to pare back their holdings of European bank paper in favor of Treasury securities. When the FOMC expressed its anticipation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013,” the flow of higher-yielding floating-rate assets sharply declined. This forced the Fund into the already crowded government and domestic commercial paper markets.
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 6 for more information on Lipper Inc.
3. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of days and is considered a more accurate sensitivity gauge than average maturity.
4. London InterBank Offered Rate (LIBOR) is an interest rate that is widely used as a reference rate in bank, corporate and government lending agreements.
5. The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting.
mainstayinvestments.com 9
During the reporting period, which market segments were the strongest contributors to the Fund’s perfor-mance and which market segments were partic-ularly weak?
The strongest contributors to the Fund’s performance included floating-rate securities (corporate and agency floaters) and asset-backed securities. The weakest contributors to the Fund’s performance were repurchase agreements and the Fund’s nonparticipation in longer-maturity Yankee bank issues.
Did the Fund make any significant purchases or sales during the reporting period?
Significant purchases that added to the Fund’s return during the reporting period included the asset-backed securities of Great America Leasing Receivables and Macquarie Equipment Funding Trust. The Fund’s yield was also strengthened by investments in the floating-rate securities of Federal Farm Credit Bank, Federal Home Loan Bank, Toronto-Dominion Bank and Sanofi-Aventis S.A. There were no significant sales during the reporting period.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, we increased the Fund’s weightings in repurchase agreements, Treasury securities and asset-backed securities. The Fund decreased its weightings in FDIC-backed securities and agency securities.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Cash Reserves Fund
Portfolio of Investments October 31, 2011
Principal | Amortized | |||||||
Amount | Cost | |||||||
Short-Term Investments 99.6%† | ||||||||
Asset-Backed Commercial Paper 0.7% | ||||||||
Straight-A Funding LLC 0.16%, due 11/16/11 (a)(b) | $ | 5,529,000 | $ | 5,528,631 | ||||
Certificates of Deposit 6.0% | ||||||||
Bank of Nova Scotia 0.38%, due 3/22/12 (c) | 8,505,000 | 8,505,000 | ||||||
National Australia Bank, Ltd. 0.28%, due 12/8/11 | 8,290,000 | 8,290,000 | ||||||
0.31%, due 1/9/12 | 8,505,000 | 8,505,000 | ||||||
Toronto-Dominion Bank (The) 0.315%, due 9/20/12 (c) | 8,370,000 | 8,370,000 | ||||||
Westpac Banking Corp. 0.32%, due 2/1/12 | 8,525,000 | 8,525,000 | ||||||
0.46%, due 3/23/12 | 8,505,000 | 8,505,000 | ||||||
50,700,000 | ||||||||
Financial Company Commercial Paper 6.2% | ||||||||
Bank of Nova Scotia | ||||||||
0.10%, due 11/28/11 (a) | 1,670,000 | 1,669,875 | ||||||
Caterpillar Financial Services Corp. 0.10%, due 12/6/11 (a) | 10,150,000 | 10,149,013 | ||||||
National Rural Utilities Cooperative Finance Corp. 0.12%, due 11/30/11 (a) | 10,150,000 | 10,149,019 | ||||||
0.12%, due 12/1/11 (a) | 8,635,000 | 8,634,137 | ||||||
PACCAR Financial Corp. 0.06%, due 11/3/11 (a) | 6,755,000 | 6,754,977 | ||||||
0.20%, due 11/15/11 (a) | 6,635,000 | 6,634,484 | ||||||
Private Export Funding Corp. 0.05%, due 11/22/11 (a)(b) | 8,440,000 | 8,439,754 | ||||||
52,431,259 | ||||||||
Government Agency Debt 6.4% | ||||||||
Federal Farm Credit Bank | ||||||||
0.10%, due 7/5/12 (c) | 8,765,000 | 8,759,724 | ||||||
0.12%, due 11/4/11 (c) | 6,920,000 | 6,920,000 | ||||||
0.25%, due 1/12/12 (c) | 8,840,000 | 8,840,000 | ||||||
Federal Home Loan Bank 0.17%, due 1/24/12 (c) | 7,135,000 | 7,135,000 | ||||||
Federal National Mortgage Association 0.273%, due 9/17/12 (c) | 8,000,000 | 8,005,174 | ||||||
0.30%, due 9/13/12 (c) | 2,315,000 | 2,317,016 | ||||||
Federal National Mortgage Association (Discount Note) | ||||||||
0.005%, due 11/7/11 (a) | 12,000,000 | 11,999,990 | ||||||
53,976,904 | ||||||||
Other Commercial Paper 42.6% | ||||||||
BHP Billiton Finance (USA), Ltd. 0.14%, due 11/15/11 (a)(b) | 9,750,000 | 9,749,469 | ||||||
Campbell Soup Co. 0.301%, due 12/14/11 (a)(b) | 9,210,000 | 9,206,700 | ||||||
0.401%, due 11/29/11 (a)(b) | 7,230,000 | 7,227,751 | ||||||
Canadian Wheat Board 0.05%, due 11/28/11 (a) | 5,265,000 | 5,264,803 | ||||||
Caterpillar, Inc. 0.09%, due 12/22/11 (a)(b) | 3,385,000 | 3,384,568 | ||||||
Cisco Systems, Inc. 0.081%, due 11/8/11 (a)(b) | 8,220,000 | 8,219,872 | ||||||
Coca-Cola Co. (The) 0.08%, due 11/18/11 (a)(b) | 8,525,000 | 8,524,678 | ||||||
0.11%, due 11/10/11 (a)(b) | 8,285,000 | 8,284,772 | ||||||
0.12%, due 11/17/11 (a)(b) | 3,985,000 | 3,984,787 | ||||||
Devon Energy Corp. 0.23%, due 11/1/11 (a)(b) | 3,090,000 | 3,090,000 | ||||||
Duke Energy Corp. 0.34%, due 11/21/11 (a)(b) | 3,168,000 | 3,167,402 | ||||||
E.I. du Pont de Nemours & Co. 0.17%, due 12/12/11 (a)(b) | 3,400,000 | 3,399,342 | ||||||
Eli Lilly & Co. 0.04%, due 11/2/11 (a)(b) | 3,615,000 | 3,614,996 | ||||||
Emerson Electric Co. 0.05%, due 11/3/11 (a)(b) | 4,960,000 | 4,959,986 | ||||||
0.05%, due 11/9/11 (a)(b) | 5,295,000 | 5,294,941 | ||||||
0.07%, due 11/14/11 (a)(b) | 8,440,000 | 8,439,787 | ||||||
Exxon Mobil Corp. 0.05%, due 11/18/11 (a) | 8,250,000 | 8,249,805 | ||||||
General Electric Co. 0.07%, due 11/17/11 (a) | 8,665,000 | 8,664,730 | ||||||
Google, Inc. 0.05%, due 11/21/11 (a)(b) | 8,355,000 | 8,354,768 | ||||||
0.06%, due 11/21/11 (a)(b) | 10,150,000 | 10,149,662 | ||||||
Henkel of America, Inc. 0.14%, due 12/5/11 (a)(b) | 2,680,000 | 2,679,646 | ||||||
Hewlett-Packard Co. 0.22%, due 1/17/12 (a)(b) | 7,250,000 | 7,246,588 | ||||||
Illinois Tool Works, Inc. 0.06%, due 11/10/11 (a)(b) | 7,035,000 | 7,034,894 | ||||||
0.07%, due 11/15/11 (a)(b) | 10,395,000 | 10,394,717 | ||||||
International Business Machines Corp. 0.05%, due 11/7/11 (a)(b) | 5,720,000 | 5,719,952 | ||||||
0.06%, due 11/16/11 (a)(b) | 8,360,000 | 8,359,791 | ||||||
0.06%, due 12/13/11 (a)(b) | 550,000 | 549,962 | ||||||
Johnson & Johnson 0.05%, due 11/28/11 (a)(b) | 6,695,000 | 6,694,749 | ||||||
0.05%, due 12/27/11 (a)(b) | 8,950,000 | 8,949,304 |
† | Percentages indicated are based on Fund net assets. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
Principal | Amortized | |||||||
Amount | Cost | |||||||
Short-Term Investments (continued) | ||||||||
Other Commercial Paper (continued) | ||||||||
Kellogg Co. 0.22%, due 11/10/11 (a)(b) | $ | 3,210,000 | $ | 3,209,823 | ||||
McDonald’s Corp. 0.07%, due 12/16/11 (a)(b) | 3,345,000 | 3,344,707 | ||||||
0.08%, due 11/1/11 (a)(b) | 4,000,000 | 4,000,000 | ||||||
Merck & Co., Inc. 0.06%, due 11/9/11 (a)(b) | 6,550,000 | 6,549,913 | ||||||
Nestle Finance International, Ltd. 0.05%, due 12/1/11 (a) | 10,150,000 | 10,149,577 | ||||||
Novartis Finance Corp. 0.07%, due 11/1/11 (a)(b) | 8,445,000 | 8,445,000 | ||||||
0.09%, due 11/21/11 (a)(b) | 9,030,000 | 9,029,548 | ||||||
Parker Hannifin Corp. 0.06%, due 11/9/11 (a)(b) | 5,065,000 | 5,064,932 | ||||||
0.07%, due 11/30/11 (a)(b) | 7,780,000 | 7,779,561 | ||||||
0.08%, due 11/22/11 (a)(b) | 7,510,000 | 7,509,650 | ||||||
PepsiCo, Inc. 0.05%, due 12/16/11 (a)(b) | 3,000,000 | 2,999,813 | ||||||
0.07%, due 12/5/11 (a)(b) | 3,410,000 | 3,409,775 | ||||||
0.08%, due 11/22/11 (a)(b) | 8,480,000 | 8,479,604 | ||||||
Procter & Gamble Co. (The) 0.10%, due 2/14/12 (a)(b) | 8,440,000 | 8,437,538 | ||||||
Roche Holding, Inc. 0.06%, due 11/23/11 (a)(b) | 8,270,000 | 8,269,697 | ||||||
Schlumberger Technology Corp. 0.12%, due 11/8/11 (a)(b) | 8,370,000 | 8,369,805 | ||||||
Siemens Capital Co., LLC 0.12%, due 11/21/11 (a)(b) | 8,355,000 | 8,354,443 | ||||||
0.14%, due 12/8/11 (a)(b) | 8,445,000 | 8,443,785 | ||||||
0.14%, due 12/14/11 (a)(b) | 2,370,000 | 2,369,604 | ||||||
South Carolina Electric & Gas Co. 0.385%, due 11/4/11 (a) | 3,340,000 | 3,339,894 | ||||||
Target Corp. 0.06%, due 11/7/11 (a) | 8,360,000 | 8,359,916 | ||||||
0.07%, due 11/7/11 (a) | 3,975,000 | 3,974,954 | ||||||
Wal-Mart Stores, Inc. 0.05%, due 12/7/11 (a)(b) | 8,360,000 | 8,359,582 | ||||||
0.09%, due 11/17/11 (a)(b) | 8,480,000 | 8,479,661 | ||||||
Walt Disney Co. (The) 0.05%, due 11/29/11 (a)(b) | 4,705,000 | 4,704,817 | ||||||
0.07%, due 12/6/11 (a)(b) | 8,525,000 | 8,524,420 | ||||||
358,822,441 | ||||||||
Other Notes 7.9% | ||||||||
Bank of Nova Scotia 0.24%, due 11/16/11 | 8,275,000 | 8,275,000 | ||||||
BMW Vehicle Lease Trust Series 2011-1, Class A1 0.289%, due 4/20/12 | 697,307 | 697,307 | ||||||
BMW Vehicle Owner Trust Series 2011-A, Class A1 0.306%, due 9/25/12 | 1,149,642 | 1,149,642 | ||||||
CNH Equipment Trust | ||||||||
Series 2011-A, Class A1 0.336%, due 5/15/12 | 1,755,272 | 1,755,272 | ||||||
Series 2011-B, Class A1 0.384%, due 10/12/12 | 3,278,530 | 3,278,530 | ||||||
Enterprise Fleet Financing LLC Series 2011-2, Class A1 0.384%, due 7/20/12 (b) | 1,989,171 | 1,989,171 | ||||||
Ford Credit Auto Lease Trust Series 2011-A, Class A1 0.261%, due 7/15/12 (b) | 1,919,025 | 1,919,025 | ||||||
Ford Credit Auto Owner Trust Series 2011-B, Class A1 0.219%, due 8/15/12 (b) | 740,381 | 740,381 | ||||||
GE Equipment Midticket LLC Series 2011-1, Class A1 0.429%, due 10/22/12 | 1,700,000 | 1,700,000 | ||||||
GE Equipment Small Ticket LLC Series 2011-1A, Class A1 0.383%, due 2/21/12 (b) | 201,305 | 201,305 | ||||||
GE Equipment Transportation LLC Series 2011-1, Class A1 0.294%, due 7/20/12 | 926,852 | 926,852 | ||||||
Great America Leasing Receivables Series 2011-1, Class A1 0.405%, due 3/15/12 (b) | 341,535 | 341,535 | ||||||
Holmes Master Issuer PLC Series 2011-3A, Class A1 0.373%, due 7/15/12 (b)(c) | 10,040,000 | 10,040,000 | ||||||
Huntington Auto Trust Series 2011-1A, Class A1 0.364%, due 9/17/12 (b) | 1,330,420 | 1,330,420 | ||||||
International Bank for Reconstruction & Development 0.22%, due 7/25/12 (c) | 7,515,000 | 7,515,000 | ||||||
John Deere Owner Trust Series 2011-A, Class A1 0.306%, due 5/11/12 | 984,464 | 984,464 | ||||||
Macquarie Equipment Funding Trust Series 2011-A, Class A1 0.432%, due 3/20/12 (b) | 716,584 | 716,584 | ||||||
MMAF Equipment Finance LLC Series 2011-AA, Class A1 0.323%, due 8/15/12 (b) | 1,603,191 | 1,603,191 | ||||||
Nissan Auto Lease Trust Series 2011-B, Class A1 0.35%, due 10/15/12 | 2,090,427 | 2,090,427 |
The notes to the financial statements are an integral part of,
12 MainStay Cash Reserves Fund | and should be read in conjunction with, the financial statements. |
Principal | Amortized | |||||||
Amount | Cost | |||||||
Short-Term Investments (continued) | ||||||||
Other Notes (continued) | ||||||||
Nissan Auto Receivables Owner Trust Series 2011-A, Class A1 0.261%, due 4/16/12 | $ | 740,779 | $ | 740,779 | ||||
Sanofi 0.413%, due 3/28/12 (c) | 8,995,000 | 8,995,000 | ||||||
SMART Trust Series 2011-2USA, Class A1 0.365%, due 7/14/12 (b) | 1,870,691 | 1,870,691 | ||||||
Toronto-Dominion Bank (The) 0.323%, due 1/12/12 (c) | 7,135,000 | 7,135,000 | ||||||
World Omni Auto Receivables Trust Series 2011-A, Class A1 0.294%, due 3/15/12 | 129,136 | 129,136 | ||||||
World Omni Automobile Lease Securitization Trust Series 2011-A, Class A1 0.301%, due 4/16/12 | 337,446 | 337,446 | ||||||
66,462,158 | ||||||||
Treasury Debt 18.3% | ||||||||
United States Treasury Bill 0.01%, due 11/10/11 (a) | 15,525,000 | 15,524,961 | ||||||
United States Treasury Notes 0.375%, due 8/31/12 | 4,000,000 | 4,004,202 | ||||||
0.375%, due 9/30/12 | 3,900,000 | 3,907,698 | ||||||
0.625%, due 6/30/12 | 11,710,000 | 11,740,475 | ||||||
0.625%, due 7/31/12 | 3,860,000 | 3,871,810 | ||||||
0.75%, due 5/31/12 | 8,910,000 | 8,936,915 | ||||||
0.875%, due 1/31/12 | 20,025,000 | 20,064,653 | ||||||
0.875%, due 2/29/12 | 14,080,000 | 14,114,412 | ||||||
1.00%, due 12/31/11 | 53,845,000 | 53,928,015 | ||||||
1.00%, due 3/31/12 | 9,605,000 | 9,635,484 | ||||||
1.00%, due 4/30/12 | 8,450,000 | 8,481,609 | ||||||
154,210,234 | ||||||||
Treasury Repurchase Agreements 11.5% | ||||||||
Bank of America N.A. 0.08%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $48,350,107 (Collateralized by a United States Treasury Note with a rate of 3.625% and a maturity date of 2/15/20, with a Principal Amount of $43,510,800 and a Market Value of $49,317,095) | 48,350,000 | 48,350,000 | ||||||
Deutsche Bank Securities, Inc. 0.09%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $48,349,121 (Collateralized by a United States Treasury Note with a rate of 1.375% and maturity date of 9/30/18, with a Principal Amount of $50,383,100 and a Market Value of $49,316,017) | 48,349,000 | 48,349,000 | ||||||
96,699,000 | ||||||||
Total Short-Term Investments (Amortized Cost $838,830,627) (d) | 99.6 | % | 838,830,627 | |||||
Other Assets, Less Liabilities | 0.4 | 3,780,654 | ||||||
Net Assets | 100.0 | % | $ | 842,611,281 | ||||
(a) | Interest rate presented is yield to maturity. | |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(2) of the Securities Act of 1933, as amended. | |
(c) | Floating rate—Rate shown is the rate in effect at October 31, 2011. | |
(d) | The amortized cost also represents the aggregate cost for federal income tax purposes. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments October 31, 2011 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Short-Term Investments | ||||||||||||||||
Asset-Backed Commercial Paper | $ | — | $ | 5,528,631 | $ | — | $ | 5,528,631 | ||||||||
Certificates of Deposit | — | 50,700,000 | — | 50,700,000 | ||||||||||||
Financial Company Commercial Paper | — | 52,431,259 | — | 52,431,259 | ||||||||||||
Government Agency Debt | — | 53,976,904 | — | 53,976,904 | ||||||||||||
Other Commercial Paper | — | 358,822,441 | — | 358,822,441 | ||||||||||||
Other Notes | — | 66,462,158 | — | 66,462,158 | ||||||||||||
Treasury Debt | — | 154,210,234 | — | 154,210,234 | ||||||||||||
Treasury Repurchase Agreements | — | 96,699,000 | — | 96,699,000 | ||||||||||||
Total Investments in Securities | $ | — | $ | 838,830,627 | $ | — | $ | 838,830,627 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
14 MainStay Cash Reserves Fund | and should be read in conjunction with, the financial statements. |
The table below sets forth the diversification of MainStay Cash Reserves Fund investments by industry.
Industry Diversification (Unaudited)
Amortized | ||||||||
Cost | Percent † | |||||||
Automobile ABS | $ | 12,994,425 | 1.6 | % | ||||
Banks | 17,079,875 | 2.1 | ||||||
Beverages | 35,683,429 | 4.2 | ||||||
Certificate of Deposit | 50,700,000 | 6.0 | ||||||
Chemicals | 6,078,988 | 0.7 | ||||||
Computers | 21,876,293 | 2.6 | ||||||
Cosmetics & Personal Care | 8,437,538 | 1.0 | ||||||
Electric | 6,507,296 | 0.8 | ||||||
Electrical Components & Equipment | 18,694,714 | 2.2 | ||||||
Finance—Auto Loans | 16,774,029 | 2.0 | ||||||
Finance—Other Services | 37,371,923 | 4.4 | ||||||
Food | 29,793,851 | 3.5 | ||||||
Health Care—Products | 15,644,053 | 1.9 | ||||||
Health Care—Services | 8,269,697 | 1.0 | ||||||
Internet | 18,504,430 | 2.2 | ||||||
Media | 13,229,237 | 1.6 | ||||||
Mining | 9,749,469 | �� | 1.2 | |||||
Miscellaneous—Manufacturing | 65,616,316 | 7.8 | ||||||
Multi-National | 7,515,000 | 0.9 | ||||||
Oil & Gas | 19,709,610 | 2.3 | ||||||
Other ABS | 11,507,733 | 1.4 | ||||||
Pharmaceuticals | 36,634,457 | 4.3 | ||||||
Repurchase Agreements | 96,699,000 | 11.5 | ||||||
Retail | 36,518,820 | 4.3 | ||||||
Sovereign | 5,264,803 | 0.6 | ||||||
Special Purpose Entity | 13,748,503 | 1.6 | ||||||
U.S. Government & Agency | 208,187,138 | 24.7 | ||||||
Whole Loan Collateral Collateralized Mortgage Obligation | 10,040,000 | 1.2 | ||||||
838,830,627 | 99.6 | |||||||
Other Assets, Less Liabilities | 3,780,654 | 0.4 | ||||||
Net Assets | $ | 842,611,281 | 100.0 | % | ||||
† | Percentages indicated are based on Fund net assets. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (amortized cost $742,131,627) | $ | 742,131,627 | ||
Repurchase agreements, at value (identified cost $96,699,000) | 96,699,000 | |||
Cash | 874 | |||
Receivables: | ||||
Fund shares sold | 6,581,594 | |||
Interest | 358,279 | |||
Manager (See Note 3) | 109,358 | |||
Other assets | 24,764 | |||
Total assets | 845,905,496 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 2,909,445 | |||
NYLIFE Distributors (See Note 3) | 172,086 | |||
Transfer agent (See Note 3) | 94,445 | |||
Shareholder communication | 66,991 | |||
Professional fees | 41,670 | |||
Trustees | 3,451 | |||
Custodian | 1,514 | |||
Accrued expenses | 4,613 | |||
Total liabilities | 3,294,215 | |||
Net assets | $ | 842,611,281 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 842,610 | ||
Additional paid-in capital | 841,768,233 | |||
842,610,843 | ||||
Accumulated net realized gain (loss) on investments | 438 | |||
Net assets | $ | 842,611,281 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 436,936,597 | ||
Shares of beneficial interest outstanding | 436,950,243 | |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
Sweep Shares | ||||
Net assets applicable to outstanding shares | $ | 405,674,684 | ||
Shares of beneficial interest outstanding | 405,659,841 | |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
The notes to the financial statements are an integral part of,
16 MainStay Cash Reserves Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 1,398,602 | ||
Expenses | ||||
Manager (See Note 3) | 3,317,131 | |||
Distribution—Sweep Shares (See Note 3) | 982,664 | |||
Service—Sweep Shares (See Note 3) | 982,661 | |||
Transfer agent (See Note 3) | 598,028 | |||
Shareholder communication | 162,832 | |||
Professional fees | 109,879 | |||
Registration | 56,297 | |||
Custodian | 25,012 | |||
Trustees | 21,304 | |||
Miscellaneous | 25,446 | |||
Total expenses before waiver/reimbursement | 6,281,254 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (4,958,211 | ) | ||
Net expenses | 1,323,043 | |||
Net investment income (loss) | 75,559 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 438 | |||
Net increase (decrease) in net assets resulting from operations | $ | 75,997 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 75,559 | $ | 74,566 | ||||
Net realized gain (loss) on investments | 438 | 1,819 | ||||||
Net increase (decrease) in net assets resulting from operations | 75,997 | 76,385 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class I | (47,307 | ) | (35,670 | ) | ||||
Sweep Shares | (50,941 | ) | (38,748 | ) | ||||
Total dividends to shareholders | (98,248 | ) | (74,418 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 1,150,048,766 | 956,296,790 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 97,845 | 74,261 | ||||||
Cost of shares redeemed | (1,017,769,477 | ) | (1,033,178,831 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 132,377,134 | (76,807,780 | ) | |||||
Net increase (decrease) in net assets | 132,354,883 | (76,805,813 | ) | |||||
Net Assets | ||||||||
Beginning of year | 710,256,398 | 787,062,211 | ||||||
End of year | $ | 842,611,281 | $ | 710,256,398 | ||||
Undistributed net investment income at end of year | $ | — | $ | 22,689 | ||||
The notes to the financial statements are an integral part of,
18 MainStay Cash Reserves Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Net asset value at beginning of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
Net investment income (loss) | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.03 | 0.05 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | ||||||||||
Total from investment operations | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.03 | 0.05 | ||||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.03 | ) | (0.05 | ) | ||||||||||
Net asset value at end of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
Total investment return | 0.01 | % | 0.01 | % | 0.36 | % | 2.66 | % | 4.93 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.01 | % | 0.01 | % | 0.36 | % | 2.66 | % | 4.82 | % | ||||||||||
Net expenses | 0.17 | % | 0.24 | % | 0.50 | % | 0.50 | % | 0.50 | % | ||||||||||
Expenses (before reimbursement/waiver) | 0.56 | % | 0.59 | % | 0.65 | % | 0.57 | % | 0.57 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 436,937 | $ | 332,539 | $ | 382,535 | $ | 347,264 | $ | 350,717 |
‡ | Less than one cent per share. |
Sweep Shares | ||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Net asset value at beginning of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
Net investment income (loss) | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.02 | 0.04 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | ||||||||||
Total from investment operations | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.02 | 0.04 | ||||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.02 | ) | (0.04 | ) | ||||||||||
Net asset value at end of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
Total investment return | 0.01 | % | 0.01 | % | 0.15 | % | 2.15 | % | 4.41 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.01 | % | 0.01 | % | 0.16 | % | 2.10 | % | 4.32 | % | ||||||||||
Net expenses | 0.17 | % | 0.24 | % | 0.71 | % | 1.00 | % | 1.00 | % | ||||||||||
Expenses (before waiver/reimbursement) | 1.06 | % | 1.09 | % | 1.15 | % | 1.07 | % | 1.07 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 405,675 | $ | 377,717 | $ | 404,528 | $ | 436,211 | $ | 373,383 |
‡ | Less than one cent per share. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Notes to Financial Statements
Note 1��Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Cash Reserves Fund (the “Fund”), a diversified fund. The Fund is the successor of MainStay Cash Reserves Fund, a series of Eclipse Funds Inc. (the “Predecessor Fund”). The reorganization of the Predecessor Fund with and into the Fund occurred on February 26, 2010. All information and references to periods prior to February 26, 2010, relate to the Predecessor Fund.
The Fund offers two classes of shares. Class I shares commenced operations (under a former designation known as “No-Load Class” shares) on January 2, 1991. The Fund’s No-Load Class shares were redesignated as Class I shares on January 1, 2004. The Sweep Shares commenced operations on December 8, 1998. Class I shares and the Sweep Shares are offered at net asset value (“NAV”) without imposition of a front-end sales charge or a contingent deferred sales charge (“CDSC”). Each class of shares has the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights and the same terms and conditions, except that the classes are subject to different distribution fee rates. Sweep Shares are subject to distribution and service fees under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. In addition, Sweep Shares are subject to a shareholder service fee under a shareholder service plan. Class I shares are not subject to a distribution and/or service fee.
On September 28, 2011, the Board, upon the recommendation of the Manager, approved a proposal to liquidate the Fund. The Fund will be liquidated pursuant to a Board-approved Plan of Liquidation on or about March 30, 2012 (“Liquidation Date”).
Effective October 14, 2011, the Fund was closed to all new investors of Class I shares. As of that date, new account requests and exchanges into the Fund were no longer accepted for Class I shares. Existing Class I shareholders as of October 14, 2011, may continue to purchase shares, including through dividend reinvestments. Effective January 31, 2012, the Fund will be closed to all investments in the Sweep Shares Class. Effective March 20, 2012, the Fund will be closed to purchases by existing Class I shareholders. These dates, including the Liquidation Date, may be changed without notice.
The Fund’s investment objective is to seek a high level of current income while preserving capital and maintaining liquidity.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Valuation of Fund Shares. The Fund seeks to maintain a NAV of $1.00 per share, although there is no assurance that it will be able to do so on a continuous basis, and it has adopted certain investment, portfolio and dividend and distribution policies designed to enable it to do as such. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
(B) Securities Valuation. Securities are valued at their amortized cost per the requirements of Rule 2a-7 under the 1940 Act. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security.
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models and option adjusted spread pricing. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
Securities valued at amortized cost are not obtained from a quoted price in an active market and are generally categorized as Level 2 in the hierarchy. The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
(C) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the
20 MainStay Cash Reserves Fund
Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund declares dividends of net investment income daily and pays them monthly and declares and pays distribution of net realized capital gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued daily and discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager (as defined in Note 3(A)) to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(I) Concentration of Risk. The Fund’s investments may include securities such as variable rate master demand notes, floating-rate notes and mortgage-related and asset-backed securities. If expectations about changes in interest rates, or assessments of an issuer’s credit worthiness or market conditions are incorrect, these types of investments could lose money.
The Fund may also invest in U.S. dollar denominated securities of foreign issuers, which carry certain risks in addition to the usual risks inherent in domestic instruments. These risks include those resulting from future adverse political or economic developments and possible imposition of foreign governmental laws or restrictions. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.
(J) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager. New York Life Investment Management LLC (“New York Life Investments” or “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief
mainstayinvestments.com 21
Notes to Financial Statements (continued)
Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. New York Life Investments is responsible for the day-to-day portfolio management of the Fund.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.45% up to $500 million; 0.40% from $500 million to $1 billion; and 0.35% in excess of $1 billion. The effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.43% for the year ended October 31, 2011.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses of a class do not exceed the following percentages of average daily net assets: Class I, 0.50%; and Sweep Shares, 1.00%. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
From time to time, the Manager may limit expenses of the Fund to the extent it deems appropriate to enhance the yield of the Fund, or a particular class of the Fund, during periods when expenses have a significant impact on the yield of the Fund, or a particular class of the Fund, as applicable, because of low interest rates. This expense limitation policy is voluntary and in addition to any contractual arrangements that may be in place with respect to the Fund and described in the Fund’s prospectus. It may be revised or terminated by the Manager at any time without notice.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $3,317,131 and waived its fees and/or reimbursed expenses in the amount of $4,958,211.
State Street Bank and Trust Company (“State Street”), 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted a distribution plan (the ”Plan”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Sweep Shares Plan, the Distributor, receives a monthly distribution fee from the Sweep Shares at an annual rate of 0.25% of the average daily net assets of the Sweep Shares for distribution or service activities as designated by the Distributor.
The Plan provides that distribution and service fees are payable thereunder to the Distributor regardless of the amounts actually expended by the Distributor for distribution and service activities for the Sweep Shares. Class I shares of the Fund are not subject to a distribution or service fee.
In accordance with a separate Shareholder Service Plan, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Sweep Shares. For its services, the Manager is entitled to a Shareholder Service Fee accrued daily and paid monthly at an annual rate of 0.25% of the average daily net assets attributable to the Sweep Shares of the Fund.
(C) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Class I | $ | 289,594 | ||
Sweep Shares | 308,434 | |||
(D) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(E) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Class I | $ | 1,241,043 | 0.3 | % | ||||
(F) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $9,585. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
22 MainStay Cash Reserves Fund
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 438 | $ | — | $ | — | $ | — | $ | 438 | |||||||||
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 98,248 | $ | 74,418 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Capital Share Transactions
Class I (at $1 per share) | Shares | |||
Year ended October 31, 2011: | ||||
Shares sold | 934,442,067 | |||
Shares issued to shareholders in reinvestment of dividends | 46,904 | |||
Shares redeemed | (830,076,938 | ) | ||
Net increase (decrease) | 104,412,033 | |||
Year ended October 31, 2010: | ||||
Shares sold | 815,711,798 | |||
Shares issued to shareholders in reinvestment of dividends | 35,512 | |||
Shares redeemed | (865,746,938 | ) | ||
Net increase (decrease) | (49,999,628 | ) | ||
Sweep Shares (at $1 per share) | Shares | |||
Year ended October 31, 2011: | ||||
Shares sold | 215,606,699 | |||
Shares issued to shareholders in reinvestment of dividends | 50,941 | |||
Shares redeemed | (187,692,539 | ) | ||
Net increase (decrease) | 27,965,101 | |||
Year ended October 31, 2010: | ||||
Shares sold | 140,584,992 | |||
Shares issued to shareholders in reinvestment of dividends | 38,749 | |||
Shares redeemed | (167,431,893 | ) | ||
Net increase (decrease) | (26,808,152 | ) | ||
Note 7–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 23
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Cash Reserves Fund (“the Fund”), one of the funds comprising MainStay Funds Trust, as of October 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Cash Reserves Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
24 MainStay Cash Reserves Fund
Federal Income Tax Information (Unaudited)
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request (i) by visiting the Fund’s website at mainstayinvestments.com; or (ii) on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request (i) by calling 800-MAINSTAY (624-6782); (ii) by visiting the Fund’s website at
mainstayinvestments.com; or (iii) on the SEC’s website at www.sec.gov.
mainstayinvestments.com; or (iii) on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q and every month on Form N-MFP. In addition, the Fund will make available its complete schedule of portfolio holdings on its website at www.mainstayinvestments.com, five days after month-end. The Fund’s Form N-Q is available without charge on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). Form N-MFP will be made available to the public by the SEC 60 days after the month to which the information pertains, and a link to each of the most recent 12 months of filings on Form N-MFP will be provided on the Fund’s website. You can also obtain and review copies of Forms N-Q and N-MFP by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 25
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
26 MainStay Cash Reserves Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 27
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
28 MainStay Cash Reserves Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 29
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
30 MainStay Cash Reserves Fund
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24853 MS284-11 | MSCR11-12/11 |
NB2
MainStay Asset Allocation Funds
Message from the President and Annual Report
October 31, 2011
MainStay Conservative Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Growth Allocation Fund
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
MainStay Conservative Allocation Fund | 5 | |
MainStay Moderate Allocation Fund | 18 | |
MainStay Moderate Growth Allocation Fund | 33 | |
MainStay Growth Allocation Fund | 48 | |
Notes to Financial Statements | 63 | |
Report of Independent Registered Public Accounting Firm | 76 | |
Federal Income Tax Information | 77 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 77 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 77 | |
Board Members and Officers | 78 | |
Investors should refer to each Fund’s Summary Prospectus and/or Prospectus and consider each Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about each Fund. You may obtain copies of each Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read each Fund’s Summary Prospectus and/or Prospectus carefully before investing.
MainStay Conservative Allocation Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (4/4/05) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –1 | .66% | 2 | .92% | 4 | .00% | 1 | .48% | ||||||||||
Excluding sales charges | 4 | .06 | 4 | .09 | 4 | .90 | 1 | .48 | ||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –1 | .46 | 2 | .97 | 4 | .04 | 1 | .27 | ||||||||||
Excluding sales charges | 4 | .28 | 4 | .15 | 4 | .94 | 1 | .27 | ||||||||||||
Class B Shares | Maximum 5% CDSC | With sales charges | –1 | .70 | 2 | .96 | 4 | .13 | 2 | .23 | ||||||||||
if Redeemed Within the First Six Years of Purchase | Excluding sales charges | 3 | .30 | 3 | .32 | 4 | .13 | 2 | .23 | |||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | 2 | .40 | 3 | .31 | 4 | .13 | 2 | .23 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 3 | .40 | 3 | .31 | 4 | .13 | 2 | .23 | |||||||||||
Class I Shares | No Sales Charge | 4 | .42 | 4 | .39 | 5 | .25 | 1 | .02 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for Investor Class shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Since | ||||||||||
Benchmark Performance | Year | Years | Inception | |||||||||
S&P 500® Index4 | 8 | .09% | 0 | .25% | 3 | .08% | ||||||
MSCI EAFE® Index5 | –4 | .08 | –2 | .41 | 2 | .96 | ||||||
Barclays Capital U.S. Aggregate Bond Index6 | 5 | .00 | 6 | .41 | 5 | .85 | ||||||
Average Lipper Mixed-Asset Target Allocation Conservative Fund7 | 3 | .32 | 3 | .25 | 4 | .11 | ||||||
4. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
7. | The average Lipper mixed-asset target allocation conservative fund is representative of funds that, by portfolio practice, maintain a mix of between 20%-40% equity securities, with the remainder invested in bonds, cash, and cash equivalents. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Conservative Allocation Fund
Cost in Dollars of a $1,000 Investment in MainStay Conservative Allocation Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 968.00 | $ | 2.48 | $ | 1,022.70 | $ | 2.55 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 969.50 | $ | 1.89 | $ | 1,023.30 | $ | 1.94 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 964.20 | $ | 6.19 | $ | 1,018.90 | $ | 6.36 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 965.10 | $ | 6.19 | $ | 1,018.90 | $ | 6.36 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 970.00 | $ | 0.65 | $ | 1,024.60 | $ | 0.66 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.50% for Investor Class, 0.38% for Class A, 1.25% for Class B and Class C and 0.13% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
mainstayinvestments.com 7
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
Total Return | 41.5 | |||
Current Income | 24.2 | |||
Capital Appreciation | 19.9 | |||
Growth of Capital | 14.5 | |||
Other Assets, Less Liabilities | (0.1 | ) |
See Portfolio of Investments on page 11 for specific holdings within these categories.
8 MainStay Conservative Allocation Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Conservative Allocation Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Conservative Allocation Fund returned 4.06% for Investor Class shares, 4.28% for Class A shares, 3.30% for Class B shares and 3.40% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 4.42%. Class B shares underperformed—and all other share classes outperformed—the 3.32% return of the average Lipper2 mixed-asset target allocation conservative fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the –4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index,5 which is an additional benchmark for the Fund. See page 5 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a port-folio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests in other mutual funds referred to as Underlying Funds. The Underlying Funds may invest in fixed-income securities or in domestic or international stocks at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large-cap stocks.
Our efforts to manage the Fund’s risk posture through its allocation to stocks and bonds contributed positively, but only marginally, to the Fund’s relative performance. Within the allocation ranges outlined in the Prospectus, we maintained a small bias in favor of stocks over bonds through the early part of 2011, before softer economic conditions led us to retreat to a neutral posture. In late summer, with equities having sold off considerably in response to the growing debt crisis, we again began to slightly emphasize equities on the belief that conditions were better than many investors perceived them to be. Although our timing was by no means perfect, the repositioning added to returns.
We were less successful within the fixed-income portion of the Fund. Being wary of the very low yields available on U.S. Treasury securities and mindful of the improving health of corporate bal- ance sheets (which should translate into low default rates), we preferred shorter-duration6 lower-credit-quality bonds over longer-dated government-backed bonds. We have maintained this preference, but the positioning detracted from performance during the summer. During the summer months, investors flocked to U.S. Treasury securities for their perceived safety, which drove interest rates down and caused spreads7 to widen.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced significant challenges relative to their benchmarks and peers. Included among these were MainStay Flexible Bond Opportunities Fund, MainStay MAP Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases, sector exposure, credit quality and duration. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
As previously noted, the Fund’s allocation to stocks and bonds varied slightly over the course of the reporting period in response to the changing environment. Within equities, we gave mild emphasis to three themes. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively valued, to have superior access to capital and to be better positioned to benefit from growth in the developing world. Second, the Fund reflected a preference for growth stocks over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging issues.
The fixed-income portion of the Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index, the Fund’s fixed-income benchmark. The Fund was also heavily
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the S&P 500® Index.
4. See footnote on page 6 for more information on the MSCI EAFE® Index.
5. See footnote on page 6 for more information on the Barclays Capital U.S. Aggregate Bond Index.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
mainstayinvestments.com 9
tilted toward corporate bonds instead of government-backed issues. This positioning reflected our view that corporations have improved the quality of their balance sheets significantly in recent years by reducing leverage, accumulating cash and controlling operating costs. We anticipated that corporate default rates would remain low for the next few years. If this happens, we believe that the higher yields available on corporate bonds may prove attractive.
How did the Fund’s allocations change over the course of the reporting period?
The largest change during the reporting period was a partial shift out of MainStay Indexed Bond Fund, MainStay Intermediate Term Bond Fund and MainStay High Yield Opportunities Fund into MainStay Flexible Bond Opportunities Fund.
We also reduced exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund into MainStay Large Cap Growth Fund, MainStay MAP Fund and MainStay Epoch U.S. All Cap Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Two new holdings are also noteworthy. We established a position in MainStay Cash Reserves Fund to shorten the duration of the fixed-income portion of the Fund as protection against a potential rise in interest rates. The new position also served as a liquidity facility to adjust the Fund’s overall mix of exposure to stocks and bonds. We also added MainStay Epoch International Small Cap Fund during the reporting period to access an additional market segment.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds were redirected to MainStay ICAP International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion of the Fund and to implement the intended bias toward U.S. equities.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Underlying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and substantial allocations. (Contributions take weightings and total returns into account.) One of the most substantial detractors from performance was MainStay MAP Fund, but only because the allocation was largest near the end of the reporting period when the equity markets were declining and smallest early in the period when equities generated their largest gains. MainStay Epoch International Small Cap Fund also detracted from performance, in part because of similar positioning.
What factors and risks affected the Fund’s Underlying Fixed Income Fund investments during the reporting period?
The Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index. We favored credit instruments over government bonds throughout the reporting period. While this was an advantageous posture at times, the flight to quality by investors to U.S. Treasury securities and higher-quality corporate bonds over the summer in response to the escalating European sovereign debt crisis caused this positioning to be generally unproductive. We found this especially true during the final few months of the reporting period. We continued to maintain a positive outlook on corporate bonds over U.S. Treasurys at the end of the reporting period.
During the reporting period, which fixed-income market segments were strong performers and which segments were particularly weak?
Interest rates finished the reporting period markedly lower than they were when the fiscal year began. Accordingly, Underlying Funds that invested in long-maturity bonds generally did better than those that focused on securities with shorter durations. The return on cash investments was little more than zero and most Underlying Funds that invest primarily in short-term bonds failed to deliver returns much greater than that. Credit instruments and investment-grade bonds diverged sharply at points during the reporting period, but the differences ended up being relatively small over the entire period.
Which Underlying Fixed Income Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Fixed Income Funds were the greatest detractors?
The strongest fixed-income contributions to overall performance came from large positions in MainStay Indexed Bond Fund and MainStay Intermediate Term Bond Fund. At the other end of the spectrum, a very small position in MainStay Global High Income Fund was the greatest fixed-income dectractor from overall performance, although it detracted only slightly. All other Underlying Fixed Income Funds contributed positively to performance.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Conservative Allocation Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 100.1%† | ||||||||
Equity Funds 41.1% | ||||||||
MainStay 130/30 Core Fund Class I | 1,916,760 | $ | 15,180,739 | |||||
MainStay 130/30 International Fund Class I | 382,196 | 2,438,407 | ||||||
MainStay Common Stock Fund Class I | 150,681 | 1,714,754 | ||||||
MainStay Epoch Global Choice Fund Class I | 85,539 | 1,248,875 | ||||||
MainStay Epoch International Small Cap Fund Class I | 213,472 | 3,592,726 | ||||||
MainStay Epoch U.S. All Cap Fund Class I | 685,552 | 15,966,514 | ||||||
MainStay Growth Equity Fund Class I (a) | 2,366 | 26,663 | ||||||
MainStay ICAP Equity Fund Class I | 281,649 | 9,891,500 | ||||||
MainStay ICAP International Fund Class I | 171,327 | 4,721,762 | ||||||
MainStay ICAP Select Equity Fund Class I | 179,599 | 6,011,176 | ||||||
MainStay Large Cap Growth Fund Class I (a) | 2,398,860 | 17,871,508 | ||||||
MainStay MAP Fund Class I | 749,858 | 23,320,587 | ||||||
MainStay U.S. Small Cap Fund Class I | 224,438 | 3,709,961 | ||||||
Total Equity Funds (Cost $102,627,318) | 105,695,172 | |||||||
Fixed Income Funds 59.0% | ||||||||
MainStay Cash Reserves Fund Class I | 6,118,305 | 6,118,305 | ||||||
MainStay Convertible Fund Class I | 214,757 | 3,249,277 | ||||||
MainStay Flexible Bond Opportunities Fund Class I (b) | 2,611,900 | 22,801,886 | ||||||
MainStay Floating Rate Fund Class I (b) | 2,378,079 | 22,139,916 | ||||||
MainStay Global High Income Fund Class I | 13,595 | 160,967 | ||||||
MainStay High Yield Corporate Bond Fund Class I | 1,023,353 | 5,976,383 | ||||||
MainStay High Yield Opportunities Fund Class I | 442,266 | 5,006,454 | ||||||
MainStay Indexed Bond Fund Class I (b) | 3,475,507 | 40,559,163 | ||||||
MainStay Intermediate Term Bond Fund Class I (b) | 4,234,486 | 45,944,177 | ||||||
Total Fixed Income Funds (Cost $149,371,018) | 151,956,528 | |||||||
Total Investments (Cost $251,998,336) (c) | 100.1 | % | 257,651,700 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (210,041 | ) | ||||
Net Assets | 100.0 | % | $ | 257,441,659 | ||||
† | Percentages indicated are based on Fund net assets. | |
(a) | Non-income producing Underlying Fund. | |
(b) | The Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. (See Note 3) | |
(c) | At October 31, 2011, cost is $253,376,646 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 5,557,073 | ||
Gross unrealized depreciation | (1,282,019 | ) | ||
Net unrealized appreciation | $ | 4,275,054 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies | ||||||||||||||||
Equity Funds | $ | 105,695,172 | $ | — | $ | — | $ | 105,695,172 | ||||||||
Fixed Income Funds | 151,956,528 | — | — | 151,956,528 | ||||||||||||
Total Investments in Securities | $ | 257,651,700 | $ | — | $ | — | $ | 257,651,700 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $251,998,336) | $ | 257,651,700 | ||
Receivables: | ||||
Fund shares sold | 155,947 | |||
Manager (See Note 3) | 5,736 | |||
Other assets | 31,077 | |||
Total assets | 257,844,460 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 211,239 | |||
NYLIFE Distributors (See Note 3) | 91,051 | |||
Transfer agent (See Note 3) | 54,721 | |||
Shareholder communication | 24,086 | |||
Professional fees | 15,849 | |||
Trustees | 1,018 | |||
Custodian | 540 | |||
Accrued expenses | 4,297 | |||
Total liabilities | 402,801 | |||
Net assets | $ | 257,441,659 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 23,517 | ||
Additional paid-in capital | 250,132,230 | |||
250,155,747 | ||||
Undistributed net investment income | 335,137 | |||
Accumulated net realized gain (loss) on investments | 1,297,411 | |||
Net unrealized appreciation (depreciation) on investments | 5,653,364 | |||
Net assets | $ | 257,441,659 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 41,525,249 | ||
Shares of beneficial interest outstanding | 3,789,944 | |||
Net asset value per share outstanding | $ | 10.96 | ||
Maximum sales charge (5.50% of offering price) | 0.64 | |||
Maximum offering price per share outstanding | $ | 11.60 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 143,519,576 | ||
Shares of beneficial interest outstanding | 13,102,029 | |||
Net asset value per share outstanding | $ | 10.95 | ||
Maximum sales charge (5.50% of offering price) | 0.64 | |||
Maximum offering price per share outstanding | $ | 11.59 | ||
Class B | ||||
Net assets applicable to outstanding shares | $ | 33,579,957 | ||
Shares of beneficial interest outstanding | 3,076,179 | |||
Net asset value and offering price per share outstanding | $ | 10.92 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 30,224,259 | ||
Shares of beneficial interest outstanding | 2,768,908 | |||
Net asset value and offering price per share outstanding | $ | 10.92 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 8,592,618 | ||
Shares of beneficial interest outstanding | 779,610 | |||
Net asset value and offering price per share outstanding | $ | 11.02 | ||
The notes to the financial statements are an integral part of,
12 MainStay Conservative Allocation Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 6,450,772 | ||
Expenses | ||||
Distribution/Service—Investor Class (See Note 3) | 95,788 | |||
Distribution/Service—Class A (See Note 3) | 337,303 | |||
Distribution/Service—Class B (See Note 3) | 325,817 | |||
Distribution/Service—Class C (See Note 3) | 292,836 | |||
Transfer agent (See Note 3) | 305,916 | |||
Registration | 88,022 | |||
Shareholder communication | 50,231 | |||
Professional fees | 41,201 | |||
Custodian | 7,526 | |||
Trustees | 6,781 | |||
Miscellaneous | 11,710 | |||
Total expenses before waiver/reimbursement | 1,563,131 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (68,782 | ) | ||
Net expenses | 1,494,349 | |||
Net investment income (loss) | 4,956,423 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Affiliated investment company transactions | 15,681,581 | |||
Realized capital gain distributions from affiliated investment companies | 1,659,951 | |||
Net realized gain (loss) on investments from affiliated investment companies | 17,341,532 | |||
Net change in unrealized appreciation (depreciation) on investments | (13,351,322 | ) | ||
Net realized and unrealized gain (loss) on investments | 3,990,210 | |||
Net increase (decrease) in net assets resulting from operations | $ | 8,946,633 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 4,956,423 | $ | 4,093,290 | ||||
Net realized gain (loss) on investments from affiliated investment company transactions | 17,341,532 | 3,029,431 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (13,351,322 | ) | 14,121,623 | |||||
Net increase (decrease) in net assets resulting from operations | 8,946,633 | 21,244,344 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (971,532 | ) | (669,755 | ) | ||||
Class A | (3,612,245 | ) | (2,496,024 | ) | ||||
Class B | (592,973 | ) | (440,162 | ) | ||||
Class C | (531,492 | ) | (369,258 | ) | ||||
Class I | (206,554 | ) | (95,852 | ) | ||||
Total dividends to shareholders | (5,914,796 | ) | (4,071,051 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 77,873,216 | 69,657,748 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 5,444,185 | 3,725,788 | ||||||
Cost of shares redeemed | (48,552,081 | ) | (40,727,750 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 34,765,320 | 32,655,786 | ||||||
Net increase (decrease) in net assets | 37,797,157 | 49,829,079 | ||||||
Net Assets | ||||||||
Beginning of year | 219,644,502 | 169,815,423 | ||||||
End of year | $ | 257,441,659 | $ | 219,644,502 | ||||
Undistributed net investment income at end of year | $ | 335,137 | $ | 395,605 | ||||
The notes to the financial statements are an integral part of,
14 MainStay Conservative Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 10.81 | $ | 9.90 | $ | 8.76 | $ | 10.69 | ||||||||||
Net investment income (loss) (a) | 0.24 | 0.23 | 0.27 | 0.19 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.20 | 0.91 | 1.25 | (1.91 | ) | |||||||||||||
Total from investment operations | 0.44 | 1.14 | 1.52 | (1.72 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.29 | ) | (0.23 | ) | (0.27 | ) | (0.21 | ) | ||||||||||
From net realized gain on investments | — | — | (0.11 | ) | — | |||||||||||||
Total dividends and distributions | (0.29 | ) | (0.23 | ) | (0.38 | ) | (0.21 | ) | ||||||||||
Net asset value at end of period | $ | 10.96 | $ | 10.81 | $ | 9.90 | $ | 8.76 | ||||||||||
Total investment return (b) | 4.06 | % | 11.70 | % | 18.01 | % | (16.36 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 2.17 | % | 2.26 | % | 2.98 | % | 2.72 | % †† | ||||||||||
Net expenses (d) | 0.50 | % | 0.50 | % | 0.50 | % | 0.50 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 0.57 | % | 0.63 | % | 0.74 | % | 0.62 | % †† | ||||||||||
Portfolio turnover rate | 55 | % | 32 | % | 36 | % | 35 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 41,525 | $ | 34,979 | $ | 25,216 | $ | 17,140 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.80 | $ | 9.90 | $ | 8.76 | $ | 11.47 | $ | 10.80 | ||||||||||||
Net investment income (loss) (a) | 0.25 | 0.24 | 0.27 | 0.30 | 0.34 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.20 | 0.90 | 1.25 | (2.39 | ) | 0.73 | ||||||||||||||||
Total from investment operations | 0.45 | 1.14 | 1.52 | (2.09 | ) | 1.07 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.30 | ) | (0.24 | ) | (0.27 | ) | (0.49 | ) | (0.23 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.13 | ) | (0.17 | ) | ||||||||||||||
Total dividends and distributions | (0.30 | ) | (0.24 | ) | (0.38 | ) | (0.62 | ) | (0.40 | ) | ||||||||||||
Net asset value at end of year | $ | 10.95 | $ | 10.80 | $ | 9.90 | $ | 8.76 | $ | 11.47 | ||||||||||||
Total investment return (b) | 4.28 | % | 11.68 | % | 18.05 | % | (19.14 | %) | 10.22 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.27 | % | 2.35 | % | 3.06 | % | 2.91 | % | 3.12 | % | ||||||||||||
Net expenses (c) | 0.39 | % | 0.42 | % | 0.47 | % | 0.49 | % | 0.48 | % | ||||||||||||
Portfolio turnover rate | 55 | % | 32 | % | 36 | % | 35 | % | 10 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 143,520 | $ | 121,439 | $ | 94,643 | $ | 84,434 | $ | 80,018 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Class B | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.76 | $ | 9.86 | $ | 8.73 | $ | 11.42 | $ | 10.78 | ||||||||||||
Net investment income (loss) (a) | 0.15 | 0.16 | 0.20 | 0.22 | 0.26 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.21 | 0.90 | 1.24 | (2.39 | ) | 0.73 | ||||||||||||||||
Total from investment operations | 0.36 | 1.06 | 1.44 | (2.17 | ) | 0.99 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.20 | ) | (0.16 | ) | (0.20 | ) | (0.39 | ) | (0.18 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.13 | ) | (0.17 | ) | ||||||||||||||
Total dividends and distributions | (0.20 | ) | (0.16 | ) | (0.31 | ) | (0.52 | ) | (0.35 | ) | ||||||||||||
Net asset value at end of year | $ | 10.92 | $ | 10.76 | $ | 9.86 | $ | 8.73 | $ | 11.42 | ||||||||||||
Total investment return (b) | 3.30 | % | 10.92 | % | 17.09 | % | (19.78 | %) | 9.37 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.41 | % | 1.51 | % | 2.25 | % | 2.11 | % | 2.38 | % | ||||||||||||
Net expenses (c) | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.23 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.32 | % | 1.38 | % | 1.48 | % | 1.33 | % | 1.23 | % | ||||||||||||
Portfolio turnover rate | 55 | % | 32 | % | 36 | % | 35 | % | 10 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 33,580 | $ | 31,241 | $ | 27,417 | $ | 23,226 | $ | 20,919 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
16 MainStay Conservative Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.76 | $ | 9.86 | $ | 8.73 | $ | 11.42 | $ | 10.78 | ||||||||||||
Net investment income (loss) (a) | 0.15 | 0.16 | 0.21 | 0.22 | 0.26 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.21 | 0.90 | 1.23 | (2.39 | ) | 0.73 | ||||||||||||||||
Total from investment operations | 0.36 | 1.06 | 1.44 | (2.17 | ) | 0.99 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.20 | ) | (0.16 | ) | (0.20 | ) | (0.39 | ) | (0.18 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.13 | ) | (0.17 | ) | ||||||||||||||
Total dividends and distributions | (0.20 | ) | (0.16 | ) | (0.31 | ) | (0.52 | ) | (0.35 | ) | ||||||||||||
Net asset value at end of year | $ | 10.92 | $ | 10.76 | $ | 9.86 | $ | 8.73 | $ | 11.42 | ||||||||||||
Total investment return (b) | 3.40 | % | 10.82 | % | 17.09 | % | (19.79 | %) | 9.37 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.41 | % | 1.51 | % | 2.29 | % | 2.12 | % | 2.38 | % | ||||||||||||
Net expenses (c) | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.23 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.32 | % | 1.38 | % | 1.48 | % | 1.33 | % | 1.23 | % | ||||||||||||
Portfolio turnover rate | 55 | % | 32 | % | 36 | % | 35 | % | 10 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 30,224 | $ | 26,375 | $ | 21,498 | $ | 18,846 | $ | 17,628 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.87 | $ | 9.95 | $ | 8.81 | $ | 11.54 | $ | 10.85 | ||||||||||||
Net investment income (loss) (a) | 0.28 | 0.27 | 0.30 | 0.33 | 0.36 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.20 | 0.92 | 1.24 | (2.41 | ) | 0.75 | ||||||||||||||||
Total from investment operations | 0.48 | 1.19 | 1.54 | (2.08 | ) | 1.11 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.33 | ) | (0.27 | ) | (0.29 | ) | (0.52 | ) | (0.25 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.13 | ) | (0.17 | ) | ||||||||||||||
Total dividends and distributions | (0.33 | ) | (0.27 | ) | (0.40 | ) | (0.65 | ) | (0.42 | ) | ||||||||||||
Net asset value at end of year | $ | 11.02 | $ | 10.87 | $ | 9.95 | $ | 8.81 | $ | 11.54 | ||||||||||||
Total investment return (b) | 4.42 | % | 12.10 | % | 18.23 | % | (18.90 | %) | 10.47 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.49 | % | 2.58 | % | 3.37 | % | 3.16 | % | 3.30 | % | ||||||||||||
Net expenses (c) | 0.14 | % | 0.17 | % | 0.22 | % | 0.23 | % | 0.25 | % | ||||||||||||
Expenses (before reimbursement/waiver) (c) | 0.14 | % | 0.17 | % | 0.22 | % | 0.28 | % | 0.35 | % | ||||||||||||
Portfolio turnover rate | 55 | % | 32 | % | 36 | % | 35 | % | 10 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 8,593 | $ | 5,611 | $ | 1,041 | $ | 1,150 | $ | 1,108 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
MainStay Moderate Allocation Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (4/4/05) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –1 | .98% | 1 | .67% | 3 | .62% | 1 | .57% | ||||||||||
Excluding sales charges | 3 | .73 | 2 | .82 | 4 | .52 | 1 | .57 | ||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –1 | .86 | 1 | .70 | 3 | .65 | 1 | .35 | ||||||||||
Excluding sales charges | 3 | .85 | 2 | .86 | 4 | .55 | 1 | .35 | ||||||||||||
Class B Shares | Maximum 5% CDSC | With sales charges | –2 | .06 | 1 | .68 | 3 | .72 | 2 | .32 | ||||||||||
if Redeemed Within the First Six Years of Purchase | Excluding sales charges | 2 | .94 | 2 | .04 | 3 | .72 | 2 | .32 | |||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | 1 | .94 | 2 | .03 | 3 | .71 | 2 | .32 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 2 | .94 | 2 | .03 | 3 | .71 | 2 | .32 | |||||||||||
Class I Shares | No Sales Charge | 4 | .16 | 3 | .13 | 4 | .83 | 1 | .10 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for the Investor Class shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
18 MainStay Moderate Allocation Fund
One | Five | Since | ||||||||||
Benchmark Performance | Year | Years | Inception | |||||||||
S&P 500® Index4 | 8 | .09% | 0 | .25% | 3 | .08% | ||||||
MSCI EAFE® Index5 | –4 | .08 | –2 | .41 | 2 | .96 | ||||||
Barclays Capital U.S. Aggregate Bond Index6 | 5 | .00 | 6 | .41 | 5 | .85 | ||||||
Average Lipper Mixed-Asset Target Allocation Moderate Fund7 | 3 | .56 | 2 | .16 | 3 | .88 | ||||||
4. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
7. | The average Lipper mixed-asset target allocation moderate fund is representative of funds that, by portfolio practice, maintain a mix of between 40%-60% equity securities, with the remainder invested in bonds, cash, and cash equivalents. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 19
Cost in Dollars of a $1,000 Investment in MainStay Moderate Allocation Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 940.50 | $ | 2.45 | $ | 1,022.70 | $ | 2.55 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 941.30 | $ | 1.76 | $ | 1,023.40 | $ | 1.84 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 937.30 | $ | 6.10 | $ | 1,018.90 | $ | 6.36 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 937.30 | $ | 6.10 | $ | 1,018.90 | $ | 6.36 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 942.40 | $ | 0.49 | $ | 1,024.70 | $ | 0.51 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.50% for Investor Class, 0.36% for Class A, 1.25% for Class B and Class C and 0.10% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
20 MainStay Moderate Allocation Fund
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
Total Return | 29.40 | |||
Capital Appreciation | 27.60 | |||
Growth of Capital | 22.80 | |||
Current Income | 20.20 | |||
Other Assets, Less Liabilities | (0.00 | ) |
See Portfolio Investments on page 24 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
mainstayinvestments.com 21
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Moderate Allocation Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Moderate Allocation Fund returned 3.73% for Investor Class shares, 3.85% for Class A shares, 2.94% for Class B shares and 2.94% for Class C shares for the 12 months ended October 31, 2011. Over the same per-iod, Class I shares returned 4.16%. Class B and Class C shares underperformed—and all other share classes outperformed—the 3.56% return of the average Lipper2 mixed-asset target allocation moderate fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the –4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index,5 which is an additional benchmark for the Fund. See page 18 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a port-folio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests in other mutual funds referred to as Underlying Funds. The Underlying Funds may invest in fixed-income securities or in domestic or international stocks at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large-cap stocks.
Our efforts to manage the Fund’s risk posture through its allocation to stocks and bonds contributed positively, but only marginally, to the Fund’s relative performance. Within the allocation ranges outlined in the Prospectus, we maintained a small bias in favor of stocks over bonds through the early part of 2011, before softer economic conditions led us to retreat to a neutral posture. In late summer, with equities having sold off considerably in response to the growing debt crisis, we again began to slightly emphasize equities on the belief that conditions were better than many investors perceived them to be. Although our timing was by no means perfect, the repositioning added to returns.
We were less successful within the fixed-income portion of the Fund. Being wary of the very low yields available on U.S. Treasury securities and mindful of the improving health of corporate bal- ance sheets (which should translate into low default rates), we preferred shorter-duration6 lower-credit-quality bonds over longer-dated government-backed bonds. We have maintained this preference, but the positioning detracted from performance during the summer. During the summer months, investors flocked to U.S. Treasury securities for their perceived safety, which drove interest rates down and caused spreads7 to widen.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced significant challenges relative to their benchmarks and peers. Included among these were MainStay Flexible Bond Opportunities Fund, MainStay MAP Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases, sector exposure, credit quality and duration. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
As previously noted, the Fund’s allocation to stocks and bonds varied slightly over the course of the reporting period in response to the changing environment. Within equities, we gave mild emphasis to three themes. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively valued, to have superior access to capital and to be better positioned to benefit from growth in the developing world. Second, the Fund reflected a preference for growth stocks over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging issues.
The fixed-income portion of the Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index, the Fund’s fixed-income benchmark. The Fund was also heavily tilted
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 19 for more information on Lipper Inc.
3. See footnote on page 19 for more information on the S&P 500® Index.
4. See footnote on page 19 for more information on the MSCI EAFE® Index.
5. See footnote on page 19 for more information on the Barclays Capital U.S. Aggregate Bond Index.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
22 MainStay Moderate Allocation Fund
toward corporate bonds instead of government-backed issues. This positioning reflected our view that corporations have improved the quality of their balance sheets significantly in recent years by reducing leverage, accumulating cash and controlling operating costs. We anticipated that corporate default rates would remain low for the next few years. If this happens, we believe that the higher yields available on corporate bonds may prove attractive.
How did the Fund’s allocations change over the course of the reporting period?
The largest change during the reporting period was a shift out of MainStay Indexed Bond Fund and MainStay High Yield Opportunities Fund into MainStay Flexible Bond Opportunities Fund.
We also reduced exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund into MainStay Large Cap Growth Fund, MainStay MAP Fund and MainStay Epoch U.S. All Cap Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Two new holdings are also noteworthy. We established a position in MainStay Cash Reserves Fund to shorten the duration of the fixed-income portion of the Fund as protection against a potential rise in interest rates. The new position also served as a liquidity facility to adjust the Fund’s overall mix of exposure to stocks and bonds. We also added MainStay Epoch International Small Cap Fund during the reporting period to access an additional market segment.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds were redirected to MainStay ICAP International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion of the Fund and to implement the intended bias toward U.S. equities.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Under-lying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and substantial allocations. (Contributions take weightings and total returns into account.) One of the most substantial detractors from performance was MainStay MAP Fund, but only because the allocation was largest near the end of the reporting period when the equity markets were declining and smallest early in the period when equities generated their largest gains. MainStay Epoch International Small Cap Fund also detracted from performance, in part because of similar positioning.
What factors and risks affected the Fund’s Underlying Fixed Income Fund investments during the reporting period?
The Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index. We favored credit instruments over government bonds throughout the reporting period. While this was an advantageous posture at times, the flight to quality by investors to U.S. Treasury securities and higher-quality corporate bonds over the summer in response to the escalating European sovereign debt crisis caused this positioning to be generally unproductive. We found this especially true during the final few months of the reporting period. We continued to maintain a positive outlook on corporate bonds over U.S. Treasurys at the end of the reporting period.
During the reporting period, which fixed-income market segments were strong performers and which segments were particularly weak?
Interest rates finished the reporting period markedly lower than they were when the fiscal year began. Accordingly, Underlying Funds that invested in long-maturity bonds generally did better than those that focused on securities with shorter durations. The return on cash investments was little more than zero and most Underlying Funds that invest primarily in short-term bonds failed to deliver returns much greater than that. Credit instruments and investment-grade bonds diverged sharply at points during the reporting period, but the differences ended up being relatively small over the entire period.
Which Underlying Fixed Income Funds made the strongest contributions to the Fund’s overall per-formance, and which Underlying Fixed Income Funds were the greatest detractors?
The strongest fixed-income contributions to overall performance came from large positions in MainStay Indexed Bond Fund and MainStay Intermediate Term Bond Fund. At the other end of the spectrum, a very small position in MainStay Global High Income Fund was the greatest fixed-income detractor from overall performance, although it detracted only slightly. All other Underlying Fixed Income Funds contributed positively to performance.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 23
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 100.0%† | ||||||||
Equity Funds 61.0% | ||||||||
MainStay 130/30 Core Fund Class I (a) | 4,458,331 | $ | 35,309,985 | |||||
MainStay 130/30 International Fund Class I (a) | 2,016,220 | 12,863,486 | ||||||
MainStay Common Stock Fund Class I (a) | 745,458 | 8,483,310 | ||||||
MainStay Epoch Global Choice Fund Class I (a) | 572,223 | 8,354,456 | ||||||
MainStay Epoch International Small Cap Fund Class I | 322,788 | 5,432,528 | ||||||
MainStay Epoch U.S. All Cap Fund Class I (a) | 1,551,418 | 36,132,519 | ||||||
MainStay Growth Equity Fund Class I (b) | 5,166 | 58,221 | ||||||
MainStay ICAP Equity Fund Class I | 646,980 | 22,721,927 | ||||||
MainStay ICAP International Fund Class I | 570,428 | 15,721,007 | ||||||
MainStay ICAP Select Equity Fund Class I | 326,165 | 10,916,730 | ||||||
MainStay International Equity Fund Class I | 68,597 | 747,017 | ||||||
MainStay Large Cap Growth Fund Class I (b) | 5,162,719 | 38,462,256 | ||||||
MainStay MAP Fund Class I | 1,684,339 | 52,382,955 | ||||||
MainStay U.S. Small Cap Fund Class I (a) | 559,562 | 9,249,552 | ||||||
Total Equity Funds (Cost $242,143,560) | 256,835,949 | |||||||
Fixed Income Funds 39.0% | ||||||||
MainStay Cash Reserves Fund Class I | 10,153,730 | 10,153,730 | ||||||
MainStay Convertible Fund Class I | 316,129 | 4,783,031 | ||||||
MainStay Flexible Bond Opportunities Fund Class I (a) | 4,309,332 | 37,620,469 | ||||||
MainStay Floating Rate Fund Class I (a) | 2,686,230 | 25,008,802 | ||||||
MainStay Global High Income Fund Class I | 14,671 | 173,701 | ||||||
MainStay High Yield Corporate Bond Fund Class I | 1,201,956 | 7,019,421 | ||||||
MainStay High Yield Opportunities Fund Class I | 426,692 | 4,830,150 | ||||||
MainStay Indexed Bond Fund Class I (a) | 1,653,951 | 19,301,612 | ||||||
MainStay Intermediate Term Bond Fund Class I (a) | 5,081,613 | 55,135,506 | ||||||
Total Fixed Income Funds (Cost $162,566,217) | 164,026,422 | |||||||
Total Investments (Cost $404,709,777) (c) | 100.0 | % | 420,862,371 | |||||
Other Assets, Less Liabilities | (0.0 | )‡ | (143,095 | ) | ||||
Net Assets | 100.0 | % | $ | 420,719,276 | ||||
† | Percentages indicated are based on Fund net assets. | |
‡ | Less than one-tenth of a percent. | |
(a) | The Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. (See Note 3) | |
(b) | Non-income producing Underlying Fund. | |
(c) | At October 31, 2011, cost is $409,413,123 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 14,216,247 | ||
Gross unrealized depreciation | (2,766,999 | ) | ||
Net unrealized appreciation | $ | 11,449,248 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies | ||||||||||||||||
Equity Funds | $ | 256,835,949 | $ | — | $ | — | $ | 256,835,949 | ||||||||
Fixed Income Funds | 164,026,422 | — | — | 164,026,422 | ||||||||||||
Total Investments in Securities | $ | 420,862,371 | $ | — | $ | — | $ | 420,862,371 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
24 MainStay Moderate Allocation Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $404,709,777) | $ | 420,862,371 | ||
Receivables: | ||||
Fund shares sold | 416,454 | |||
Manager (See Note 3) | 6,036 | |||
Other assets | 29,921 | |||
Total assets | 421,314,782 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 263,227 | |||
NYLIFE Distributors (See Note 3) | 154,171 | |||
Transfer agent (See Note 3) | 108,334 | |||
Shareholder communication | 40,840 | |||
Professional fees | 22,465 | |||
Trustees | 1,636 | |||
Custodian | 202 | |||
Accrued expenses | 4,631 | |||
Total liabilities | 595,506 | |||
Net assets | $ | 420,719,276 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 38,178 | ||
Additional paid-in capital | 417,666,509 | |||
417,704,687 | ||||
Undistributed net investment income | 3,720,709 | |||
Accumulated net realized gain (loss) on investments | (16,858,714 | ) | ||
Net unrealized appreciation (depreciation) on investments | 16,152,594 | |||
Net assets | $ | 420,719,276 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 90,247,680 | ||
Shares of beneficial interest outstanding | 8,163,309 | |||
Net asset value per share outstanding | $ | 11.06 | ||
Maximum sales charge (5.50% of offering price) | 0.64 | |||
Maximum offering price per share outstanding | $ | 11.70 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 207,282,142 | ||
Shares of beneficial interest outstanding | 18,740,605 | |||
Net asset value per share outstanding | $ | 11.06 | ||
Maximum sales charge (5.50% of offering price) | 0.64 | |||
Maximum offering price per share outstanding | $ | 11.70 | ||
Class B | ||||
Net assets applicable to outstanding shares | $ | 73,686,264 | ||
Shares of beneficial interest outstanding | 6,754,632 | |||
Net asset value and offering price per share outstanding | $ | 10.91 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 39,531,423 | ||
Shares of beneficial interest outstanding | 3,622,840 | |||
Net asset value and offering price per share outstanding | $ | 10.91 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 9,971,767 | ||
Shares of beneficial interest outstanding | 896,715 | |||
Net asset value and offering price per share outstanding | $ | 11.12 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 25 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 9,259,727 | ||
Expenses | ||||
Distribution/Service—Investor Class (See Note 3) | 214,346 | |||
Distribution/Service—Class A (See Note 3) | 549,144 | |||
Distribution/Service—Class B (See Note 3) | 756,728 | |||
Distribution/Service—Class C (See Note 3) | 398,522 | |||
Transfer agent (See Note 3) | 617,630 | |||
Registration | 94,447 | |||
Shareholder communication | 78,069 | |||
Professional fees | 56,110 | |||
Trustees | 11,866 | |||
Custodian | 6,404 | |||
Miscellaneous | 16,991 | |||
Total expenses before waiver/reimbursement | 2,800,257 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (116,494 | ) | ||
Net expenses | 2,683,763 | |||
Net investment income (loss) | 6,575,964 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Affiliated investment company transactions | 20,546,413 | |||
Realized capital gain distributions from affiliated investment companies | 2,069,280 | |||
Net realized gain (loss) on investments from affiliated investment companies | 22,615,693 | |||
Net change in unrealized appreciation (depreciation) on investments | (15,086,763 | ) | ||
Net realized and unrealized gain (loss) on investments | 7,528,930 | |||
Net increase (decrease) in net assets resulting from operations | $ | 14,104,894 | ||
The notes to the financial statements are an integral part of,
26 MainStay Moderate Allocation Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 6,575,964 | $ | 5,590,619 | ||||
Net realized gain (loss) on investments from affiliated investment company transactions | 22,615,693 | (744,142 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (15,086,763 | ) | 38,377,303 | |||||
Net increase (decrease) in net assets resulting from operations | 14,104,894 | 43,223,780 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (1,540,632 | ) | (1,212,168 | ) | ||||
Class A | (4,491,728 | ) | (3,395,080 | ) | ||||
Class B | (919,966 | ) | (828,622 | ) | ||||
Class C | (459,470 | ) | (418,401 | ) | ||||
Class I | (193,133 | ) | (93,813 | ) | ||||
Total dividends to shareholders | (7,604,929 | ) | (5,948,084 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 93,276,848 | 93,395,160 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 7,234,880 | 5,618,137 | ||||||
Cost of shares redeemed | (94,887,608 | ) | (72,503,377 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 5,624,120 | 26,509,920 | ||||||
Net increase (decrease) in net assets | 12,124,085 | 63,785,616 | ||||||
Net Assets | ||||||||
Beginning of year | 408,595,191 | 344,809,575 | ||||||
End of year | $ | 420,719,276 | $ | 408,595,191 | ||||
Undistributed net investment income at end of year | $ | 3,720,709 | $ | 3,630,179 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 27 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 10.86 | $ | 9.84 | $ | 8.77 | $ | 11.12 | ||||||||||
Net investment income (loss) (a) | 0.18 | 0.17 | 0.22 | 0.14 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.23 | 1.03 | 1.22 | (2.49 | ) | |||||||||||||
Total from investment operations | 0.41 | 1.20 | 1.44 | (2.35 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.21 | ) | (0.18 | ) | (0.26 | ) | — | |||||||||||
From net realized gain on investments | — | — | (0.11 | ) | — | |||||||||||||
Total dividends and distributions | (0.21 | ) | (0.18 | ) | (0.37 | ) | — | |||||||||||
Net asset value at end of period | $ | 11.06 | $ | 10.86 | $ | 9.84 | $ | 8.77 | ||||||||||
Total investment return (b) | 3.73 | % | 12.49 | % | 17.12 | % | (21.13 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.65 | % | 1.64 | % | 2.48 | % | 1.94 | % †† | ||||||||||
Net expenses (d) | 0.50 | % | 0.50 | % | 0.46 | % | 0.45 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 0.56 | % | 0.60 | % | 0.73 | % | 0.61 | % †† | ||||||||||
Portfolio turnover rate | 60 | % | 41 | % | 35 | % | 40 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 90,248 | $ | 78,993 | $ | 63,454 | $ | 46,290 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
28 MainStay Moderate Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.87 | $ | 9.83 | $ | 8.76 | $ | 12.32 | $ | 11.34 | ||||||||||||
Net investment income (loss) | 0.20 | (a) | 0.18 | (a) | 0.22 | (a) | 0.24 | (a) | 0.27 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | 1.05 | 1.22 | (3.29 | ) | 1.18 | ||||||||||||||||
Total from investment operations | 0.42 | 1.23 | 1.44 | (3.05 | ) | 1.45 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.19 | ) | (0.26 | ) | (0.31 | ) | (0.20 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.20 | ) | (0.27 | ) | ||||||||||||||
Total dividends and distributions | (0.23 | ) | (0.19 | ) | (0.37 | ) | (0.51 | ) | (0.47 | ) | ||||||||||||
Net asset value at end of year | $ | 11.06 | $ | 10.87 | $ | 9.83 | $ | 8.76 | $ | 12.32 | ||||||||||||
Total investment return (b) | 3.85 | % | 12.65 | % | 17.14 | % | (25.78 | %) | 13.18 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.79 | % | 1.76 | % | 2.56 | % | 2.17 | % | 2.27 | % | ||||||||||||
Net expenses (c) | 0.36 | % | 0.38 | % | 0.43 | % | 0.46 | % | 0.46 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 41 | % | 35 | % | 40 | % | 10 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 207,282 | $ | 210,071 | $ | 176,139 | $ | 146,133 | $ | 192,835 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 29 |
Financial Highlights selected per share data and ratios
Class B | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.72 | $ | 9.72 | $ | 8.65 | $ | 12.23 | $ | 11.30 | ||||||||||||
Net investment income (loss) | 0.10 | (a) | 0.09 | (a) | 0.15 | (a) | 0.15 | (a) | 0.18 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | 1.03 | 1.21 | (3.27 | ) | 1.18 | ||||||||||||||||
Total from investment operations | 0.32 | 1.12 | 1.36 | (3.12 | ) | 1.36 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.12 | ) | (0.18 | ) | (0.26 | ) | (0.16 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.20 | ) | (0.27 | ) | ||||||||||||||
Total dividends and distributions | (0.13 | ) | (0.12 | ) | (0.29 | ) | (0.46 | ) | (0.43 | ) | ||||||||||||
Net asset value at end of year | $ | 10.91 | $ | 10.72 | $ | 9.72 | $ | 8.65 | $ | 12.23 | ||||||||||||
Total investment return (b) | 2.94 | % | 11.71 | % | 16.34 | % | (26.41 | %) | 12.38 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.90 | % | 0.89 | % | 1.77 | % | 1.38 | % | 1.54 | % | ||||||||||||
Net expenses (c) | 1.25 | % | 1.25 | % | 1.21 | % | 1.22 | % | 1.21 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.31 | % | 1.35 | % | 1.49 | % | 1.32 | % | 1.21 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 41 | % | 35 | % | 40 | % | 10 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 73,686 | $ | 72,829 | $ | 67,726 | $ | 58,738 | $ | 63,929 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
30 MainStay Moderate Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.73 | $ | 9.72 | $ | 8.66 | $ | 12.23 | $ | 11.30 | ||||||||||||
Net investment income (loss) | 0.10 | (a) | 0.09 | (a) | 0.15 | (a) | 0.15 | (a) | 0.19 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | 1.04 | 1.20 | (3.26 | ) | 1.17 | ||||||||||||||||
Total from investment operations | 0.32 | 1.13 | 1.35 | (3.11 | ) | 1.36 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.12 | ) | (0.18 | ) | (0.26 | ) | (0.16 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.20 | ) | (0.27 | ) | ||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.12 | ) | (0.29 | ) | (0.46 | ) | (0.43 | ) | ||||||||||||
Net asset value at end of year | $ | 10.91 | $ | 10.73 | $ | 9.72 | $ | 8.66 | $ | 12.23 | ||||||||||||
Total investment return (b) | 2.94 | % | 11.69 | % | 16.19 | % | (26.33 | %) | 12.37 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.91 | % | 0.90 | % | 1.78 | % | 1.39 | % | 1.52 | % | ||||||||||||
Net expenses (c) | 1.25 | % | 1.25 | % | 1.21 | % | 1.22 | % | 1.21 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.31 | % | 1.35 | % | 1.49 | % | 1.32 | % | 1.21 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 41 | % | 35 | % | 40 | % | 10 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 39,531 | $ | 37,895 | $ | 33,043 | $ | 27,005 | $ | 31,191 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 31 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.92 | $ | 9.87 | $ | 8.80 | $ | 12.37 | $ | 11.36 | ||||||||||||
Net investment income (loss) | 0.23 | (a) | 0.20 | (a) | 0.25 | (a) | 0.27 | (a) | 0.29 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | 1.06 | 1.21 | (3.31 | ) | 1.20 | ||||||||||||||||
Total from investment operations | 0.45 | 1.26 | 1.46 | (3.04 | ) | 1.49 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.25 | ) | (0.21 | ) | (0.28 | ) | (0.33 | ) | (0.21 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.20 | ) | (0.27 | ) | ||||||||||||||
Total dividends and distributions | (0.25 | ) | (0.21 | ) | (0.39 | ) | (0.53 | ) | (0.48 | ) | ||||||||||||
Net asset value at end of year | $ | 11.12 | $ | 10.92 | $ | 9.87 | $ | 8.80 | $ | 12.37 | ||||||||||||
Total investment return (b) | 4.16 | % | 12.94 | % | 17.40 | % | (25.54 | %) | 13.44 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.05 | % | 1.93 | % | 2.81 | % | 2.52 | % | 2.66 | % | ||||||||||||
Net expenses (c) | 0.11 | % | 0.13 | % | 0.18 | % | 0.19 | % | 0.18 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 41 | % | 35 | % | 40 | % | 10 | % | ||||||||||||
Net assets at end of year (in 000’s) | $9,972 | $8,806 | $ | 4,447 | $ | 5,358 | $1,446 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
32 MainStay Moderate Allocation Fund | and should be read in conjunction with, the financial statements. |
MainStay Moderate Growth Allocation Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (4/4/05) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –2 | .22% | 0 | .27% | 2 | .95% | 1 | .77% | ||||||||||
Excluding sales charges | 3 | .47 | 1 | .41 | 3 | .84 | 1 | .77 | ||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –2 | .04 | 0 | .31 | 2 | .98 | 1 | .52 | ||||||||||
Excluding sales charges | 3 | .66 | 1 | .46 | 3 | .87 | 1 | .52 | ||||||||||||
Class B Shares | Maximum 5% CDSC | With sales charges | –2 | .21 | 0 | .30 | 3 | .06 | 2 | .52 | ||||||||||
if Redeemed Within the First Six Years of Purchase | Excluding sales charges | 2 | .79 | 0 | .66 | 3 | .06 | 2 | .52 | |||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | 1 | .79 | 0 | .66 | 3 | .06 | 2 | .52 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 2 | .79 | 0 | .66 | 3 | .06 | 2 | .52 | |||||||||||
Class I Shares | No Sales Charge | 3 | .96 | 1 | .74 | 4 | .20 | 1 | .27 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for the Investor Class shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 33
One | Five | Since | ||||||||||
Benchmark Performance | Year | Years | Inception | |||||||||
S&P 500® Index4 | 8 | .09% | 0 | .25% | 3 | .08% | ||||||
MSCI EAFE® Index5 | –4 | .08 | –2 | .41 | 2 | .96 | ||||||
Barclays Capital U.S. Aggregate Bond Index6 | 5 | .00 | 6 | .41 | 5 | .85 | ||||||
Average Lipper Mixed-Asset Target Allocation Growth Fund7 | 3 | .51 | 1 | .44 | 3 | .63 | ||||||
4. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
7. | The average Lipper mixed-asset target allocation growth fund is representative of funds that, by portfolio practice, maintain a mix of between 60%-80% equity securities, with the remainder invested in bonds, cash, and cash equivalents. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
34 MainStay Moderate Growth Allocation Fund
Cost in Dollars of a $1,000 Investment in MainStay Moderate Growth Allocation Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 911.50 | $ | 2.41 | $ | 1,022.70 | $ | 2.55 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 912.30 | $ | 1.78 | $ | 1,023.30 | $ | 1.89 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 908.70 | $ | 6.01 | $ | 1,018.90 | $ | 6.36 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 908.70 | $ | 6.01 | $ | 1,018.90 | $ | 6.36 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 913.80 | $ | 0.58 | $ | 1,024.60 | $ | 0.61 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.50% for Investor Class, 0.37% for Class A, 1.25% for Class B and Class C and 0.12% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
mainstayinvestments.com 35
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
Capital Appreciation | 39.2 | |||
Growth of Capital | 32.0 | |||
Current Income | 18.1 | |||
Total Return | 10.8 | |||
Other Assets, Less Liabilities | (0.1 | ) |
See Portfolio of Investments on page 39 for specific holdings within these categories.
36 MainStay Moderate Growth Allocation Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Moderate Growth Allocation Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Moderate Growth Allocation Fund returned 3.47% for Investor Class shares, 3.66% for Class A shares, 2.79% for Class B shares and 2.79% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 3.96%. Class A and Class I shares outperformed—and all other share classes underperformed—the 3.51% return of the average Lipper2 mixed-asset target allocation growth fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the –4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index,5 which is an additional benchmark for the Fund. See page 33 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a portfolio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests in other mutual funds referred to as Underlying Funds. The Underlying Funds may invest in fixed-income securities or in domestic or international stocks at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large-cap stocks.
Our efforts to manage the Fund’s risk posture through its allocation to stocks and bonds contributed positively, but only marginally, to the Fund’s relative performance. Within the allocation ranges outlined in the Prospectus, we maintained a small bias in favor of stocks over bonds through the early part of 2011, before softer economic conditions led us to retreat to a neutral posture. In late summer, with equities having sold off considerably in response to the growing debt crisis, we again began to slightly emphasize equities on the belief that conditions were better than many investors perceived them to be. Although our timing was by no means perfect, the repositioning added to returns.
We were less successful within the fixed-income portion of the Fund. Being wary of the very low yields available on U.S. Treasury securities and mindful of the improving health of corporate bal-ance sheets (which should translate into low default rates), we preferred shorter-duration6 lower-credit-quality bonds over longer-dated government-backed bonds. We have maintained this preference, but the positioning detracted from performance during the summer. During the summer months, investors flocked to U.S. Treasury securities for their perceived safety, which drove interest rates down and caused spreads7 to widen.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced significant challenges relative to their benchmarks and peers. Included among these were MainStay Flexible Bond Opportunities Fund, MainStay MAP Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases, sector exposure, credit quality and duration. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
As previously noted, the Fund’s allocation to stocks and bonds varied slightly over the course of the reporting period in response to the changing environment. Within equities, we gave mild emphasis to three themes. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively valued, to have superior access to capital and to be better positioned to benefit from growth in the developing world. Second, the Fund reflected a preference for growth stocks over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging.
The fixed-income portion of the Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index, the Fund’s fixed-income benchmark. The Fund was also heavily
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 34 for more information on Lipper Inc.
3. See footnote on page 34 for more information on the S&P 500® Index.
4. See footnote on page 34 for more information on the MSCI EAFE® Index.
5. See footnote on page 34 for more information on the Barclays Capital U.S. Aggregate Bond Index.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
mainstayinvestments.com 37
tilted toward corporate bonds instead of government-backed issues. This positioning reflected our view that corporations have improved the quality of their balance sheets significantly in recent years by reducing leverage, accumulating cash and controlling operating costs. We anticipated that corporate default rates would remain low for the next few years. If this happens, we believe that the higher yields available on corporate bonds may prove attractive.
How did the Fund’s allocations change over the course of the reporting period?
The largest change during the reporting period was a shift out of MainStay Indexed Bond Fund and MainStay High Yield Opportunities Fund into MainStay Flexible Bond Opportunities Fund.
We also reduced exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund into MainStay Large Cap Growth Fund and MainStay MAP Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Two new holdings are also noteworthy. We established a position in MainStay Cash Reserves Fund to shorten the duration of the fixed-income portion of the Fund as protection against a potential rise in interest rates. The new position also served as a liquidity facility to adjust the Fund’s overall mix of exposure to stocks and bonds. We also added MainStay Epoch International Small Cap Fund during the reporting period to access an additional market segment.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds were redirected to MainStay ICAP International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion of the Fund and to implement the intended bias toward U.S. equities.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Under-lying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and substantial allocations. (Contributions take weightings and total returns into account.) One of the most substantial detractors from performance was MainStay MAP Fund, but only because the allocation was largest near the end of the reporting period when the equity markets were declining and smallest early in the period when equities generated their largest gains. MainStay Epoch International Small Cap Fund also detracted from performance, in part because of similar positioning.
What factors and risks affected the Fund’s Underlying Fixed Income Fund investments during the reporting period?
The Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index. We favored credit instruments over government bonds throughout the reporting period. While this was an advantageous posture at times, the flight to quality by investors to U.S. Treasury securities and higher-quality corporate bonds over the summer in response to the escalating European sovereign debt crisis caused this positioning to be generally unproductive. We found this especially true during the final few months of the reporting period. We continued to maintain a positive outlook on corporate bonds over U.S. Treasurys at the end of the reporting period.
During the reporting period, which fixed-income market segments were strong performers and which segments were particularly weak?
Interest rates finished the reporting period markedly lower than they were when the fiscal year began. Accordingly, Underlying Funds that invested in long-maturity bonds generally did better than those that focused on securities with shorter durations. The return on cash investments was little more than zero and most Underlying Funds that invest primarily in short-term bonds failed to deliver returns much greater than that. Credit instruments and investment-grade bonds diverged sharply at points during the reporting period, but the differences ended up being relatively small over the entire period.
Which Underlying Fixed Income Funds made the strongest contributions to the Fund’s overall perfo-rmance, and which Underlying Fixed Income Funds were the greatest detractors?
The strongest fixed-income contributions to overall performance came from a relatively large position in MainStay Floating Rate Fund and a smaller position in MainStay High Yield Corporate Bond Fund. At the other end of the spectrum, positions in MainStay Flexible Bond Opportunities Fund and MainStay Indexed Bond Fund were the greatest fixed-income detractors from overall performance, although they detracted only marginally from returns because of timing considerations. The Fund owned more of these two Funds when they were performing poorly than it did when they were performing well.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
38 MainStay Moderate Growth Allocation Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 100.1%† | ||||||||
Equity Funds 81.2% | ||||||||
MainStay 130/30 Core Fund Class I (a) | 6,388,875 | $ | 50,599,892 | |||||
MainStay 130/30 International Fund Class I (a) | 3,453,527 | 22,033,500 | ||||||
MainStay Common Stock Fund Class I | 398,563 | 4,535,647 | ||||||
MainStay Epoch Global Choice Fund Class I (a) | 543,623 | 7,936,894 | ||||||
MainStay Epoch International Small Cap Fund Class I | 324,173 | 5,455,836 | ||||||
MainStay Epoch U.S. All Cap Fund Class I (a) | 1,696,909 | 39,521,003 | ||||||
MainStay Growth Equity Fund Class I (b) | 7,723 | 87,044 | ||||||
MainStay ICAP Equity Fund Class I | 386,151 | 13,561,615 | ||||||
MainStay ICAP International Fund Class I | 715,221 | 19,711,504 | ||||||
MainStay ICAP Select Equity Fund Class I | 298,614 | 9,994,595 | ||||||
MainStay International Equity Fund Class I | 531,856 | 5,791,909 | ||||||
MainStay Large Cap Growth Fund Class I (b) | 6,098,853 | 45,436,454 | ||||||
MainStay MAP Fund Class I (a) | 2,131,240 | 66,281,577 | ||||||
MainStay U.S. Small Cap Fund Class I (a) | 2,061,436 | 34,075,531 | ||||||
Total Equity Funds (Cost $310,538,717) | 325,023,001 | |||||||
Fixed Income Funds 18.9% | ||||||||
MainStay Cash Reserves Fund Class I | 8,841,206 | 8,841,206 | ||||||
MainStay Convertible Fund Class I | 220,902 | 3,342,244 | ||||||
MainStay Flexible Bond Opportunities Fund Class I (a) | 3,709,052 | 32,380,020 | ||||||
MainStay Floating Rate Fund Class I (a) | 2,282,710 | 21,252,026 | ||||||
MainStay High Yield Corporate Bond Fund Class I | 1,235,863 | 7,217,442 | ||||||
MainStay High Yield Opportunities Fund Class I | 232,785 | 2,635,132 | ||||||
Total Fixed Income Funds (Cost $75,293,689) | 75,668,070 | |||||||
Total Investments (Cost $385,832,406) (c) | 100.1 | % | 400,691,071 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (230,180 | ) | ||||
Net Assets | 100.0 | % | $ | 400,460,891 | ||||
† | Percentages indicated are based on Fund net assets. | |
(a) | The Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. (See Note 3) | |
(b) | Non-income producing Underlying Fund. | |
(c) | At October 31, 2011, cost is $391,416,749 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 12,207,631 | ||
Gross unrealized depreciation | (2,933,309 | ) | ||
Net unrealized appreciation | $ | 9,274,322 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies | ||||||||||||||||
Equity Funds | $ | 325,023,001 | $ | — | $ | — | $ | 325,023,001 | ||||||||
Fixed Income Funds | 75,668,070 | — | — | 75,668,070 | ||||||||||||
Total Investments in Securities | $ | 400,691,071 | $ | — | $ | — | $ | 400,691,071 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 39 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $385,832,406) | $ | 400,691,071 | ||
Receivables: | ||||
Fund shares sold | 352,440 | |||
Manager (See Note 3) | 10,012 | |||
Other assets | 29,764 | |||
Total assets | 401,083,287 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 266,393 | |||
NYLIFE Distributors (See Note 3) | 153,516 | |||
Transfer agent (See Note 3) | 135,887 | |||
Shareholder communication | 38,283 | |||
Professional fees | 21,906 | |||
Trustees | 1,531 | |||
Custodian | 288 | |||
Accrued expenses | 4,592 | |||
Total liabilities | 622,396 | |||
Net assets | $ | 400,460,891 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 37,199 | ||
Additional paid-in capital | 419,248,561 | |||
419,285,760 | ||||
Undistributed net investment income | 1,086,863 | |||
Accumulated net realized gain (loss) on investments | (34,770,397 | ) | ||
Net unrealized appreciation (depreciation) on investments | 14,858,665 | |||
Net assets | $ | 400,460,891 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 121,733,403 | ||
Shares of beneficial interest outstanding | 11,259,981 | |||
Net asset value per share outstanding | $ | 10.81 | ||
Maximum sales charge (5.50% of offering price) | 0.63 | |||
Maximum offering price per share outstanding | $ | 11.44 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 160,678,920 | ||
Shares of beneficial interest outstanding | 14,851,398 | |||
Net asset value per share outstanding | $ | 10.82 | ||
Maximum sales charge (5.50% of offering price) | 0.63 | |||
Maximum offering price per share outstanding | $ | 11.45 | ||
Class B | �� | |||
Net assets applicable to outstanding shares | $ | 90,887,067 | ||
Shares of beneficial interest outstanding | 8,538,519 | |||
Net asset value and offering price per share outstanding | $ | 10.64 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 26,065,229 | ||
Shares of beneficial interest outstanding | 2,448,805 | |||
Net asset value and offering price per share outstanding | $ | 10.64 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 1,096,272 | ||
Shares of beneficial interest outstanding | 100,438 | |||
Net asset value and offering price per share outstanding | $ | 10.91 | ||
The notes to the financial statements are an integral part of,
40 MainStay Moderate Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 6,617,765 | ||
Expenses | ||||
Distribution/Service—Investor Class (See Note 3) | 296,998 | |||
Distribution/Service—Class A (See Note 3) | 423,909 | |||
Distribution/Service—Class B (See Note 3) | 965,816 | |||
Distribution/Service—Class C (See Note 3) | 268,347 | |||
Transfer agent (See Note 3) | 773,157 | |||
Registration | 87,047 | |||
Shareholder communication | 78,534 | |||
Professional fees | 55,562 | |||
Trustees | 11,392 | |||
Custodian | 6,665 | |||
Miscellaneous | 16,600 | |||
Total expenses before waiver/reimbursement | 2,984,027 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (203,942 | ) | ||
Net expenses | 2,780,085 | |||
Net investment income (loss) | 3,837,680 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Affiliated investment company transactions | 14,951,206 | |||
Realized capital gain distributions from affiliated investment companies | 576,383 | |||
Net realized gain (loss) on investments from affiliated investment companies | 15,527,589 | |||
Net change in unrealized appreciation (depreciation) on investments | (6,555,156 | ) | ||
Net realized and unrealized gain (loss) on investments | 8,972,433 | |||
Net increase (decrease) in net assets resulting from operations | $ | 12,810,113 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 41 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,837,680 | $ | 3,420,795 | ||||
Net realized gain (loss) on investments from affiliated investment company transactions | 15,527,589 | (8,182,778 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (6,555,156 | ) | 51,085,445 | |||||
Net increase (decrease) in net assets resulting from operations | 12,810,113 | 46,323,462 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (1,421,737 | ) | (1,204,021 | ) | ||||
Class A | (2,286,338 | ) | (2,008,728 | ) | ||||
Class B | (555,917 | ) | (623,191 | ) | ||||
Class C | (149,275 | ) | (156,948 | ) | ||||
Class I | (25,962 | ) | (11,153 | ) | ||||
Total dividends to shareholders | (4,439,229 | ) | (4,004,041 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 72,576,541 | 74,685,446 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 4,323,981 | 3,893,632 | ||||||
Cost of shares redeemed | (75,306,365 | ) | (67,000,942 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 1,594,157 | 11,578,136 | ||||||
Net increase (decrease) in net assets | 9,965,041 | 53,897,557 | ||||||
Net Assets | ||||||||
Beginning of year | 390,495,850 | 336,598,293 | ||||||
End of year | $ | 400,460,891 | $ | 390,495,850 | ||||
Undistributed net investment income at end of year | $ | 1,086,863 | $ | 1,388,941 | ||||
The notes to the financial statements are an integral part of,
42 MainStay Moderate Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 10.58 | $ | 9.40 | $ | 8.36 | $ | 11.37 | ||||||||||
Net investment income (loss) (a) | 0.12 | 0.11 | 0.17 | 0.15 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.25 | 1.20 | 1.17 | (3.16 | ) | |||||||||||||
Total from investment operations | 0.37 | 1.31 | 1.34 | (3.01 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.14 | ) | (0.13 | ) | (0.19 | ) | — | |||||||||||
From net realized gain on investments | — | — | (0.11 | ) | — | |||||||||||||
Total dividends and distributions | (0.14 | ) | (0.13 | ) | (0.30 | ) | — | |||||||||||
Net asset value at end of period | $ | 10.81 | $ | 10.58 | $ | 9.40 | $ | 8.36 | ||||||||||
Total investment return (b) | 3.47 | % | 14.02 | % | 16.87 | % | (26.47 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.11 | % | 1.12 | % | 2.02 | % | 2.16 | % †† | ||||||||||
Net expenses (d) | 0.50 | % | 0.50 | % | 0.47 | % | 0.45 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 0.58 | % | 0.65 | % | 0.79 | % | 0.67 | % †† | ||||||||||
Portfolio turnover rate | 55 | % | 54 | % | 36 | % | 40 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 121,733 | $ | 109,893 | $ | 86,438 | $ | 61,901 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 43 |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.58 | $ | 9.40 | $ | 8.35 | $ | 13.10 | $ | 11.68 | ||||||||||||
Net investment income (loss) | 0.13 | (a) | 0.12 | (a) | 0.18 | (a) | 0.15 | (a) | 0.20 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.26 | 1.19 | 1.17 | (4.28 | ) | 1.60 | ||||||||||||||||
Total from investment operations | 0.39 | 1.31 | 1.35 | (4.13 | ) | 1.80 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.13 | ) | (0.19 | ) | (0.36 | ) | (0.15 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.26 | ) | (0.23 | ) | ||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.13 | ) | (0.30 | ) | (0.62 | ) | (0.38 | ) | ||||||||||||
Net asset value at end of year | $ | 10.82 | $ | 10.58 | $ | 9.40 | $ | 8.35 | $ | 13.10 | ||||||||||||
Total investment return (b) | 3.66 | % | 14.07 | % | 17.00 | % | (32.92 | %) | 15.83 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.21 | % | 1.22 | % | 2.18 | % | 1.30 | % | 1.46 | % | ||||||||||||
Net expenses (c) | 0.38 | % | 0.40 | % | 0.43 | % | 0.46 | % | 0.46 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 0.38 | % | 0.40 | % | 0.43 | % | 0.49 | % | 0.49 | % | ||||||||||||
Portfolio turnover rate | 55 | % | 54 | % | 36 | % | 40 | % | 13 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 160,679 | $ | 159,791 | $ | 140,284 | $ | 127,086 | $ | 207,499 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
44 MainStay Moderate Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class B | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.42 | $ | 9.27 | $ | 8.23 | $ | 12.93 | $ | 11.60 | ||||||||||||
Net investment income (loss) | 0.04 | (a) | 0.04 | (a) | 0.11 | (a) | 0.05 | (a) | 0.12 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.24 | 1.18 | 1.16 | (4.21 | ) | 1.57 | ||||||||||||||||
Total from investment operations | 0.28 | 1.22 | 1.27 | (4.16 | ) | 1.69 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.07 | ) | (0.12 | ) | (0.28 | ) | (0.13 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.26 | ) | (0.23 | ) | ||||||||||||||
Total dividends and distributions | (0.06 | ) | (0.07 | ) | (0.23 | ) | (0.54 | ) | (0.36 | ) | ||||||||||||
Net asset value at end of year | $ | 10.64 | $ | 10.42 | $ | 9.27 | $ | 8.23 | $ | 12.93 | ||||||||||||
Total investment return (b) | 2.79 | % | 13.17 | % | 16.06 | % | (33.42 | %) | 14.95 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.36 | % | 0.39 | % | 1.35 | % | 0.48 | % | 0.73 | % | ||||||||||||
Net expenses (c) | 1.25 | % | 1.25 | % | 1.21 | % | 1.22 | % | 1.21 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.33 | % | 1.40 | % | 1.54 | % | 1.37 | % | 1.24 | % | ||||||||||||
Portfolio turnover rate | 55 | % | 54 | % | 36 | % | 40 | % | 13 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 90,887 | $ | 94,448 | $ | 87,220 | $ | 76,188 | $ | 93,540 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 45 |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.42 | $ | 9.27 | $ | 8.23 | $ | 12.93 | $ | 11.60 | ||||||||||||
Net investment income (loss) | 0.04 | (a) | 0.04 | (a) | 0.11 | (a) | 0.06 | (a) | 0.13 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.24 | 1.18 | 1.16 | (4.22 | ) | 1.56 | ||||||||||||||||
Total from investment operations | 0.28 | 1.22 | 1.27 | (4.16 | ) | 1.69 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.07 | ) | (0.12 | ) | (0.28 | ) | (0.13 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.26 | ) | (0.23 | ) | ||||||||||||||
Total dividends and distributions | (0.06 | ) | (0.07 | ) | (0.23 | ) | (0.54 | ) | (0.36 | ) | ||||||||||||
Net asset value at end of year | $ | 10.64 | $ | 10.42 | $ | 9.27 | $ | 8.23 | $ | 12.93 | ||||||||||||
Total investment return (b) | 2.79 | % | 13.16 | % | 16.07 | % | (33.42 | %) | 14.95 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.36 | % | 0.37 | % | 1.39 | % | 0.50 | % | 0.73 | % | ||||||||||||
Net expenses (c) | 1.25 | % | 1.25 | % | 1.21 | % | 1.22 | % | 1.21 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.33 | % | 1.40 | % | 1.54 | % | 1.36 | % | 1.24 | % | ||||||||||||
Portfolio turnover rate | 55 | % | 54 | % | 36 | % | 40 | % | 13 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 26,065 | $ | 25,524 | $ | 21,968 | $ | 18,993 | $ | 27,284 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
46 MainStay Moderate Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.67 | $ | 9.48 | $ | 8.42 | $ | 13.20 | $ | 11.74 | ||||||||||||
Net investment income (loss) | 0.18 | (a) | 0.15 | (a) | 0.19 | (a) | 0.17 | (a) | 0.22 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.23 | 1.19 | 1.20 | (4.30 | ) | 1.63 | ||||||||||||||||
Total from investment operations | 0.41 | 1.34 | 1.39 | (4.13 | ) | 1.85 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.15 | ) | (0.22 | ) | (0.39 | ) | (0.16 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.11 | ) | (0.26 | ) | (0.23 | ) | ||||||||||||||
Total dividends and distributions | (0.17 | ) | (0.15 | ) | (0.33 | ) | (0.65 | ) | (0.39 | ) | ||||||||||||
Net asset value at end of year | $ | 10.91 | $ | 10.67 | $ | 9.48 | $ | 8.42 | $ | 13.20 | ||||||||||||
Total investment return (b) | 3.96 | % | 14.29 | % | 17.37 | % | (32.72 | %) | 16.17 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.64 | % | 1.47 | % | 2.30 | % | 1.51 | % | 1.46 | % | ||||||||||||
Net expenses (c) | 0.13 | % | 0.15 | % | 0.19 | % | 0.22 | % | 0.25 | % | ||||||||||||
Expenses (before reimbursement/waiver) (c) | 0.13 | % | 0.15 | % | 0.19 | % | 0.26 | % | 0.31 | % | ||||||||||||
Portfolio turnover rate | 55 | % | 54 | % | 36 | % | 40 | % | 13 | % | ||||||||||||
Net assets at end of year (in 000’s) | $1,096 | $ | 840 | $ | 688 | $ | 532 | $ | 681 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 47 |
MainStay Growth Allocation Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (4/4/05) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –2 | .55% | –1 | .37% | 2 | .05% | 1 | .93% | ||||||||||
Excluding sales charges | 3 | .12 | –0 | .25 | 2 | .93 | 1 | .93 | ||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –2 | .43 | –1 | .34 | 2 | .07 | 1 | .68 | ||||||||||
Excluding sales charges | 3 | .25 | –0 | .21 | 2 | .96 | 1 | .68 | ||||||||||||
Class B Shares | Maximum 5% CDSC | With sales charges | –2 | .51 | –1 | .35 | 2 | .17 | 2 | .68 | ||||||||||
if Redeemed Within the First Six Years of Purchase | Excluding sales charges | 2 | .49 | –0 | .99 | 2 | .17 | 2 | .68 | |||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | 1 | .49 | –0 | .98 | 2 | .18 | 2 | .68 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 2 | .49 | –0 | .98 | 2 | .18 | 2 | .68 | |||||||||||
Class I Shares | No Sales Charge | 3 | .55 | 0 | .03 | 3 | .28 | 1 | .43 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for Investor Class shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
48 MainStay Growth Allocation Fund
One | Five | Since | ||||||||||
Benchmark Performance | Year | Years | Inception | |||||||||
S&P 500® Index4 | 8 | .09% | 0 | .25% | 3 | .08% | ||||||
MSCI EAFE® Index5 | –4 | .08 | –2 | .41 | 2 | .96 | ||||||
Average Lipper Multi-Cap Core Fund6 | 4 | .77 | 0 | .14 | 3 | .11 | ||||||
4. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The average Lipper multi-cap core fund is representative of funds that, by portfolio practice, invest in a variety of market-capitalization ranges without concentrating 75% of their equity assets in any one market-capitalization range over an extended period of time. Multi-cap core funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 49
Cost in Dollars of a $1,000 Investment in MainStay Growth Allocation Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 890.50 | $ | 2.38 | $ | 1,022.70 | $ | 2.55 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 891.30 | $ | 2.05 | $ | 1,023.00 | $ | 2.19 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 887.70 | $ | 5.95 | $ | 1,018.90 | $ | 6.36 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 887.80 | $ | 5.95 | $ | 1,018.90 | $ | 6.36 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 892.40 | $ | 0.86 | $ | 1,024.30 | $ | 0.92 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.50% for Investor Class, 0.43% for Class A, 1.25% for Class B and Class C and 0.18% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
50 MainStay Growth Allocation Fund
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
Capital Appreciation | 47.6 | |||
Growth of Capital | 40.2 | |||
Total Return | 12.3 | |||
Other Assets, Less Liabilities | (0.1 | ) |
See Portfolio Investments on page 54 for specific holdings within these categories.
mainstayinvestments.com 51
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Growth Allocation Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Growth Allocation Fund returned 3.12% for Investor Class shares, 3.25% for Class A shares, 2.49% for Class B shares and 2.49% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 3.55%. All share classes underperformed the 4.77% return of the average Lipper2 multi-cap core fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the –4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. See page 48 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a port-folio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests in other mutual funds referred to as Underlying Funds. The Underlying Funds may invest in domestic or international equities at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large-cap equities.
The Fund’s underperformance of its peers was primarily a function of the Fund’s exposure to international equities, which underperformed domestic equities by a substantial margin.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced sig-nificant challenges relative to their benchmarks and peers. Included among these were MainStay MAP Fund, MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases and sector exposure. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
We gave mild emphasis to three investment themes during the reporting period. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively valued, to have superior access to capital and to be better positioned to bene-fit from growth in the developing world. Second, the Fund reflected a preference for growth stocks over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging issues.
How did the Fund’s allocations change over the course of the reporting period?
Among the most significant changes was a reduction in exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund primarily into MainStay Large Cap Growth Fund and MainStay MAP Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Another noteworthy change was a new position in MainStay Epoch International Small Cap Fund to access an additional market segment.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds were redirected to MainStay ICAP International Fund, MainStay 130/30 International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion of the Fund and to implement the intended bias toward U.S. equities.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Under-lying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from Underlying Funds that invest overseas, MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 49 for more information on Lipper Inc.
3. See footnote on page 49 for more information on the S&P 500® Index.
4. See footnote on page 49 for more information on the MSCI EAFE® Index.
52 MainStay Growth Allocation Fund
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and sub-stantial allocations. (Contributions take weightings and total returns into account.) One of the greatest detractors from overall performance was MainStay MAP Fund, but only because the allocation was largest near the end of the reporting period when the equity markets were declining and smallest early in the period when equities generated their largest gains. MainStay Epoch International Small Cap Fund also detracted from performance, in part because of similar positioning.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 53
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 100.1%† | ||||||||
Equity Funds 100.1% | ||||||||
MainStay 130/30 Core Fund Class I (a) | 4,005,732 | $ | 31,725,399 | |||||
MainStay 130/30 International Fund Class I (a) | 2,421,685 | 15,450,349 | ||||||
MainStay Common Stock Fund Class I | 80,883 | 920,450 | ||||||
MainStay Epoch Global Choice Fund Class I (a) | 271,492 | 3,963,782 | ||||||
MainStay Epoch International Small Cap Fund Class I | 163,393 | 2,749,902 | ||||||
MainStay Epoch U.S. All Cap Fund Class I | 984,149 | 22,920,825 | ||||||
MainStay Growth Equity Fund Class I (b) | 1,218 | 13,731 | ||||||
MainStay ICAP Equity Fund Class I | 176,998 | 6,216,178 | ||||||
MainStay ICAP International Fund Class I | 440,214 | 12,132,291 | ||||||
MainStay ICAP Select Equity Fund Class I | 206,369 | 6,907,165 | ||||||
MainStay International Equity Fund Class I | 472,291 | 5,143,249 | ||||||
MainStay Large Cap Growth Fund Class I (b) | 3,959,503 | 29,498,297 | ||||||
MainStay MAP Fund Class I | 1,373,954 | 42,729,969 | ||||||
MainStay U.S. Small Cap Fund Class I (a) | 1,542,030 | 25,489,758 | ||||||
Total Investments (Cost $198,536,638) (c) | 100.1 | % | 205,861,345 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (106,906 | ) | ||||
Net Assets | 100.0 | % | $ | 205,754,439 | ||||
† | Percentages indicated are based on Fund net assets. | |
(a) | The Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. (See Note 3) | |
(b) | Non-income producing Underlying Fund. | |
(c) | At October 31, 2011, cost is $202,301,088 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 4,900,468 | ||
Gross unrealized depreciation | (1,340,211 | ) | ||
Net unrealized appreciation | $ | 3,560,257 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies-Equity Funds | $ | 205,861,345 | $ | — | $ | — | $ | 205,861,345 | ||||||||
Total Investments in Securities | $ | 205,861,345 | $ | — | $ | — | $ | 205,861,345 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
54 MainStay Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $198,536,638) | $ | 205,861,345 | ||
Receivables: | ||||
Fund shares sold | 127,239 | |||
Manager (See Note 3) | 11,845 | |||
Other assets | 26,304 | |||
Total assets | 206,026,733 | |||
Liabilities | ||||
Payables: | ||||
Transfer agent (See Note 3) | 87,855 | |||
NYLIFE Distributors (See Note 3) | 79,595 | |||
Fund shares redeemed | 62,626 | |||
Shareholder communication | 21,788 | |||
Professional fees | 15,126 | |||
Trustees | 775 | |||
Custodian | 312 | |||
Accrued expenses | 4,217 | |||
Total liabilities | 272,294 | |||
Net assets | $ | 205,754,439 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 19,733 | ||
Additional paid-in capital | 225,936,460 | |||
225,956,193 | ||||
Accumulated net realized gain (loss) on investments | (27,526,461 | ) | ||
Net unrealized appreciation (depreciation) on investments | 7,324,707 | |||
Net assets | $ | 205,754,439 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 71,730,325 | ||
Shares of beneficial interest outstanding | 6,839,449 | |||
Net asset value per share outstanding | $ | 10.49 | ||
Maximum sales charge (5.50% of offering price) | 0.61 | |||
Maximum offering price per share outstanding | $ | 11.10 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 70,127,027 | ||
Shares of beneficial interest outstanding | 6,680,956 | |||
Net asset value per share outstanding | $ | 10.50 | ||
Maximum sales charge (5.50% of offering price) | 0.61 | |||
Maximum offering price per share outstanding | $ | 11.11 | ||
Class B | ||||
Net assets applicable to outstanding shares | $ | 49,874,044 | ||
Shares of beneficial interest outstanding | 4,854,370 | |||
Net asset value and offering price per share outstanding | $ | 10.27 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 12,483,644 | ||
Shares of beneficial interest outstanding | 1,213,502 | |||
Net asset value and offering price per share outstanding | $ | 10.29 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 1,539,399 | ||
Shares of beneficial interest outstanding | 145,002 | |||
Net asset value and offering price per share outstanding | $ | 10.62 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 55 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 2,151,052 | ||
Expenses | ||||
Distribution/Service—Investor Class (See Note 3) | 177,536 | |||
Distribution/Service—Class A (See Note 3) | 191,221 | |||
Distribution/Service—Class B (See Note 3) | 534,046 | |||
Distribution/Service—Class C (See Note 3) | 125,871 | |||
Transfer agent (See Note 3) | 497,443 | |||
Registration | 79,259 | |||
Shareholder communication | 50,741 | |||
Professional fees | 41,425 | |||
Trustees | 5,924 | |||
Custodian | 5,868 | |||
Miscellaneous | 11,280 | |||
Total expenses before waiver/reimbursement | 1,720,614 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (202,736 | ) | ||
Net expenses | 1,517,878 | |||
Net investment income (loss) | 633,174 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on affiliated investment company transactions | 12,227,328 | |||
Net change in unrealized appreciation (depreciation) on investments | (6,854,066 | ) | ||
Net realized and unrealized gain (loss) on investments | 5,373,262 | |||
Net increase (decrease) in net assets resulting from operations | $ | 6,006,436 | ||
The notes to the financial statements are an integral part of,
56 MainStay Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 633,174 | $ | 238,326 | ||||
Net realized gain (loss) on investments from affiliated investment company transactions | 12,227,328 | (8,268,603 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (6,854,066 | ) | 33,238,207 | |||||
Net increase (decrease) in net assets resulting from operations | 6,006,436 | 25,207,930 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (317,893 | ) | (316,041 | ) | ||||
Class A | (387,344 | ) | (373,510 | ) | ||||
Class I | (11,504 | ) | (9,797 | ) | ||||
Total dividends to shareholders | (716,741 | ) | (699,348 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 38,897,552 | 36,153,029 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 683,327 | 669,513 | ||||||
Cost of shares redeemed | (42,241,338 | ) | (36,201,746 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | (2,660,459 | ) | 620,796 | |||||
Net increase (decrease) in net assets | 2,629,236 | 25,129,378 | ||||||
Net Assets | ||||||||
Beginning of year | 203,125,203 | 177,995,825 | ||||||
End of year | $ | 205,754,439 | $ | 203,125,203 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 57 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 10.22 | $ | 8.97 | $ | 8.09 | $ | 11.68 | ||||||||||
Net investment income (loss) (a) | 0.05 | 0.03 | 0.10 | 0.01 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.27 | 1.27 | 1.00 | (3.60 | ) | |||||||||||||
Total from investment operations | 0.32 | 1.30 | 1.10 | (3.59 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.05 | ) | (0.05 | ) | (0.14 | ) | — | |||||||||||
From net realized gain on investments | — | — | (0.08 | ) | — | |||||||||||||
Total dividends and distributions | (0.05 | ) | (0.05 | ) | (0.22 | ) | — | |||||||||||
Net asset value at end of period | $ | 10.49 | $ | 10.22 | $ | 8.97 | $ | 8.09 | ||||||||||
Total investment return (b) | 3.12 | % | 14.54 | % | 14.13 | % | (30.74 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 0.50 | % | 0.35 | % | 1.30 | % | 0.19 | % †† | ||||||||||
Net expenses (d) | 0.50 | % | 0.50 | % | 0.50 | % | 0.50 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 0.65 | % | 0.73 | % | 0.88 | % | 0.75 | % †† | ||||||||||
Portfolio turnover rate | 53 | % | 54 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 71,730 | $ | 66,013 | $ | 54,578 | $ | 38,881 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
58 MainStay Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.22 | $ | 8.97 | $ | 8.08 | $ | 13.78 | $ | 12.08 | ||||||||||||
Net investment income (loss) (a) | 0.06 | 0.04 | 0.12 | 0.07 | 0.05 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.27 | 1.26 | 0.99 | (5.11 | ) | 2.11 | ||||||||||||||||
Total from investment operations | 0.33 | 1.30 | 1.11 | (5.04 | ) | 2.16 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.05 | ) | (0.05 | ) | (0.14 | ) | (0.32 | ) | (0.14 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.08 | ) | (0.34 | ) | (0.32 | ) | ||||||||||||||
Total dividends and distributions | (0.05 | ) | (0.05 | ) | (0.22 | ) | (0.66 | ) | (0.46 | ) | ||||||||||||
Net asset value at end of year | $ | 10.50 | $ | 10.22 | $ | 8.97 | $ | 8.08 | $ | 13.78 | ||||||||||||
Total investment return (b) | 3.25 | % | 14.57 | % | 14.29 | % | (38.20 | %) | 18.42 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.55 | % | 0.38 | % | 1.55 | % | 0.60 | % | 0.41 | % | ||||||||||||
Net expenses (c) | 0.44 | % | 0.48 | % | 0.48 | % | 0.49 | % | 0.48 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 0.44 | % | 0.48 | % | 0.52 | % | 0.57 | % | 0.55 | % | ||||||||||||
Portfolio turnover rate | 53 | % | 54 | % | 42 | % | 37 | % | 17 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 70,127 | $ | 71,983 | $ | 62,210 | $ | 58,165 | $ | 116,123 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 59 |
Financial Highlights selected per share data and ratios
Class B | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.03 | $ | 8.82 | $ | 7.94 | $ | 13.56 | $ | 11.97 | ||||||||||||
Net investment income (loss) (a) | (0.02 | ) | (0.04 | ) | 0.05 | (0.03 | ) | (0.04 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.26 | 1.25 | 0.98 | (5.01 | ) | 2.07 | ||||||||||||||||
Total from investment operations | 0.24 | 1.21 | 1.03 | (5.04 | ) | 2.03 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | — | — | (0.07 | ) | (0.24 | ) | (0.12 | ) | ||||||||||||||
From net realized gain on investments | — | — | (0.08 | ) | (0.34 | ) | (0.32 | ) | ||||||||||||||
Total dividends and distributions | — | — | (0.15 | ) | (0.58 | ) | (0.44 | ) | ||||||||||||||
Net asset value at end of year | $ | 10.27 | $ | 10.03 | $ | 8.82 | $ | 7.94 | $ | 13.56 | ||||||||||||
Total investment return (b) | 2.49 | % | 13.72 | % | 13.32 | % | (38.65 | %) | 17.44 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | (0.23 | %) | (0.38 | %) | 0.65 | % | (0.24 | %) | (0.34 | %) | ||||||||||||
Net expenses (c) | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.23 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.40 | % | 1.48 | % | 1.64 | % | 1.44 | % | 1.30 | % | ||||||||||||
Portfolio turnover rate | 53 | % | 54 | % | 42 | % | 37 | % | 17 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 49,874 | $ | 52,053 | $ | 49,206 | $ | 42,501 | $ | 59,902 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
60 MainStay Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.04 | $ | 8.84 | $ | 7.96 | $ | 13.58 | $ | 11.97 | ||||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.04 | ) | 0.05 | (0.02 | ) | (0.03 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.28 | 1.24 | 0.98 | (5.02 | ) | 2.08 | ||||||||||||||||
Total from investment operations | 0.25 | 1.20 | 1.03 | (5.04 | ) | 2.05 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | — | — | (0.07 | ) | (0.24 | ) | (0.12 | ) | ||||||||||||||
From net realized gain on investments | — | — | (0.08 | ) | (0.34 | ) | (0.32 | ) | ||||||||||||||
Total dividends and distributions | — | — | (0.15 | ) | (0.58 | ) | (0.44 | ) | ||||||||||||||
Net asset value at end of year | $ | 10.29 | $ | 10.04 | $ | 8.84 | $ | 7.96 | $ | 13.58 | ||||||||||||
Total investment return (b) | 2.49 | % | 13.57 | % | 13.29 | % | (38.58 | %) | 17.51 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | (0.27 | %) | (0.39 | %) | 0.61 | % | (0.21 | %) | (0.26 | %) | ||||||||||||
Net expenses (c) | 1.25 | % | 1.25 | % | 1.25 | % | 1.25 | % | 1.23 | % | ||||||||||||
Expenses (before waiver/reimbursement) (c) | 1.40 | % | 1.48 | % | 1.64 | % | 1.44 | % | 1.30 | % | ||||||||||||
Portfolio turnover rate | 53 | % | 54 | % | 42 | % | 37 | % | 17 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 12,484 | $ | 11,599 | $ | 10,773 | $ | 8,682 | $ | 13,668 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 61 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.33 | $ | 9.06 | $ | 8.17 | $ | 13.91 | $ | 12.17 | ||||||||||||
Net investment income (loss) (a) | 0.09 | 0.06 | 0.12 | 0.07 | 0.05 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.28 | 1.28 | 1.01 | (5.12 | ) | 2.16 | ||||||||||||||||
Total from investment operations | 0.37 | 1.34 | 1.13 | (5.05 | ) | 2.21 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.08 | ) | (0.07 | ) | (0.16 | ) | (0.35 | ) | (0.15 | ) | ||||||||||||
From net realized gain on investments | — | — | (0.08 | ) | (0.34 | ) | (0.32 | ) | ||||||||||||||
Total dividends and distributions | (0.08 | ) | (0.07 | ) | (0.24 | ) | (0.69 | ) | (0.47 | ) | ||||||||||||
Net asset value at end of year | $ | 10.62 | $ | 10.33 | $ | 9.06 | $ | 8.17 | $ | 13.91 | ||||||||||||
Total investment return (b) | 3.55 | % | 14.87 | % | 14.40 | % | (38.00 | %) | 18.68 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.84 | % | 0.64 | % | 1.50 | % | 0.62 | % | 0.41 | % | ||||||||||||
Net expenses (c) | 0.19 | % | 0.23 | % | 0.25 | % | 0.25 | % | 0.24 | % | ||||||||||||
Expenses (before reimbursement/waiver) (c) | 0.19 | % | 0.23 | % | 0.27 | % | 0.28 | % | 0.40 | % | ||||||||||||
Portfolio turnover rate | 53 | % | 54 | % | 42 | % | 37 | % | 17 | % | ||||||||||||
Net assets at end of year (in 000’s) | $1,539 | $1,478 | $ | 1,229 | $ | 849 | $ | 107 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
62 MainStay Growth Allocation Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds” and each individually, referred to as a “Fund”). These financial statements and notes relate to the MainStay Conservative Allocation Fund, MainStay Moderate Allocation Fund, MainStay Moderate Growth Allocation Fund and MainStay Growth Allocation Fund (collectively referred to as the “Allocation Funds” and each individually referred to as an “Allocation Fund”). Each is a diversified fund. Each Allocation Fund is the successor of a series of Eclipse Funds Inc. with the same name (collectively referred to as the “Predecessor Funds” and each individually referred to as a “Predecessor Fund”). The reorganizations of the Predecessor Funds with and into the respective Allocation Funds occurred on February 26, 2010. All information and references to periods prior to February 26, 2010 relate to the respective Predecessor Fund.
The Allocation Funds each currently offer five classes of shares. Class A, Class B, Class C and Class I shares commenced operations on April 4, 2005. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class B and Class C shares are offered at NAV without an initial sales charge, although a declining CDSC may be imposed on redemptions made within six years of the date of purchase of Class B shares and a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Investor Class or Class A shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The five classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class B and Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The investment objective for each of the Allocation Funds is as follows:
The MainStay Conservative Allocation Fund seeks current income and, secondarily, long-term growth of capital.
The MainStay Moderate Allocation Fund seeks long-term growth of capital and, secondarily, current income.
The MainStay Moderate Growth Allocation Fund seeks long-term growth of capital and, secondarily, current income.
The MainStay Growth Allocation Fund seeks long-term growth of capital.
The Allocation Funds are “funds-of-funds,” meaning that they seek to achieve their investment objectives by investing primarily in other MainStay Funds, for which New York Life Investment Management LLC (“New York Life Investments” or “Manager”) also serves as Manager (“Underlying Funds”).
Note 2–Significant Accounting Policies
The Allocation Funds prepare their financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follow the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Allocation Funds are open for business (“valuation date”).
“Fair value” is defined as the price that an Allocation Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Allocation Funds. Unobservable inputs reflect each Allocation Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Allocation Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Allocation Funds to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Allocation Funds may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity
mainstayinvestments.com 63
Notes to Financial Statements (continued)
security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Allocation Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Allocation Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Allocation Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for each Allocation Fund’s investments is included at the end of each Allocation Fund’s Portfolio of Investments.
Investments in Underlying Funds are valued at their NAV at the close of business each day. These securities are generally categorized as Level 1 in the hierarchy.
The Allocation Funds’ other investments and securities held by the Affiliated Underlying Funds are valued as described below.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities are valued at the evaluated bid prices supplied by a pricing agent or brokers selected by the Underlying Fund’s manager in consultation with the Underlying Fund’s subadvisor whose prices reflect broker/dealer supplied valuations and electronic data processing techniques, if such prices are deemed by the Underlying Fund’s manager, in consultation with the Underlying Fund’s subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities include corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, Yankee bonds, convertible bonds, asset-backed securities, and mortgage-backed securities.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values determined on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from a pricing service. The Underlying Funds have engaged an independent pricing service to provide market value quotations from dealers in loans.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Allocation Funds’ Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Allocation Funds’ Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Allocation Funds did not hold any securities that were fair valued in such a manner.
(B) Income Taxes. Each of the Allocation Funds is treated as a separate entity for federal income tax purposes. The Allocation Funds’ policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of each Allocation Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Allocation Funds’ tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Allocation Funds’ financial statements. The Allocation Funds’ federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The
64 MainStay Asset Allocation Funds
Conservative Allocation Fund intends to declare and pay dividends of net investment income, if any, quarterly and distributions of net realized capital gains, if any, annually. The other Allocation Funds intend to declare and pay dividends of net investment income and distributions of net realized capital gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the respective Allocation Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Allocation Funds record security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividends and distributions received by the Allocation Funds from the Underlying Funds are recorded on the ex-dividend date.
Investment income and realized and unrealized gains and losses on investments of the Allocation Funds are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Allocation Funds in proportion to the net assets of the respective Allocation Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by each Allocation Fund, including those of related parties to the Allocation Funds, are shown in the Statement of Operations.
In addition, the Allocation Funds bear a pro rata share of the fees and expenses of the Underlying Funds in which they invest. Because the Underlying Funds have varied expense and fee levels and the Allocation Funds may own different proportions of the Underlying Funds at different times, the amount of fees and expenses incurred indirectly by each Allocation Fund may vary.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Allocation Funds enter into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Allocation Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Allocation Funds that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Allocation Funds.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Allocation Funds’ Manager, pursuant to a Management Agreement (“Management Agreement”) and is responsible for the day-to-day portfolio management of the Allocation Funds. The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Allocation Funds. Except for the portion of salaries and expenses that are the responsibility of the Allocation Funds, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Allocation Funds which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Allocation Funds and certain operational expenses of the Allocation Funds. Prior to January 1, 2011, Madison Square Investors LLC (“MSI”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, served as subadvisor to the Allocation Funds and was responsible for the day-to-day portfolio management of the Allocation Funds. Pursuant to the terms of a Subadvisory Agreement between New York Life Investments and MSI, New York Life Investments paid for the services of MSI.
The Allocation Funds do not pay any fees to the Manager in return for the services performed. The Allocation Funds do, however, indirectly pay a proportionate share of the management fees paid to the managers of the Underlying Funds in which the Allocation Funds invest.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses of a class do not exceed the following percentages of average daily net assets for each class:
Investor | ||||||||||||||||||||
Class | Class A | Class B | Class C | Class I | ||||||||||||||||
MainStay Conservative Allocation Fund | 0.50 | % | 0.50 | % | 1.25 | % | 1.25 | % | 0.25 | % | ||||||||||
MainStay Moderate Allocation Fund | 0.50 | 0.50 | 1.25 | 1.25 | 0.25 | |||||||||||||||
MainStay Moderate Growth Allocation Fund | 0.50 | 0.50 | 1.25 | 1.25 | 0.25 | |||||||||||||||
MainStay Growth Allocation Fund | 0.50 | 0.50 | 1.25 | 1.25 | 0.25 | |||||||||||||||
This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
mainstayinvestments.com 65
Notes to Financial Statements (continued)
For the year ended October 31, 2011, New York Life Investments waived its fees and/or reimbursed expenses of the Allocation Funds as follows:
Total | ||||
MainStay Conservative Allocation Fund | $ | 68,782 | ||
MainStay Moderate Allocation Fund | 116,494 | |||
MainStay Moderate Growth Allocation Fund | 203,942 | |||
MainStay Growth Allocation Fund | 202,736 | |||
State Street Bank and Trust Company (“State Street”), 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Allocation Funds pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Allocation Funds, maintaining the general ledger and sub-ledger accounts for the calculation of the Allocation Funds’ respective NAVs, and assisting New York Life Investments in conducting various aspects of the Allocation Funds’ administrative operations. For providing these services to the Allocation Funds, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Allocation Funds, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Allocation Funds have adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from the Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Allocation Funds’ shares and service activities.
(C) Sales Charges. The Allocation Funds were advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares for the year ended October 31, 2011 were as follows:
MainStay Conservative Allocation Fund | ||||
Investor Class | $ | 60,635 | ||
Class A | 90,368 | |||
MainStay Moderate Allocation Fund | ||||
Investor Class | $ | 127,090 | ||
Class A | 102,443 | |||
MainStay Moderate Growth Allocation Fund | ||||
Investor Class | $ | 163,737 | ||
Class A | 64,387 | |||
MainStay Growth Allocation Fund | ||||
Investor Class | $ | 90,369 | ||
Class A | 28,562 | |||
The Allocation Funds were also advised that the Distributor retained CDSCs on redemptions of Investor Class, Class A, Class B and Class C shares, for the year ended October 31, 2011 were as follows:
MainStay Conservative Allocation Fund | ||||
Investor Class | $ | 1 | ||
Class A | 162 | |||
Class B | 48,700 | |||
Class C | 8,106 | |||
MainStay Moderate Allocation Fund | ||||
Class A | $ | 239 | ||
Class B | 128,964 | |||
Class C | 5,518 | |||
MainStay Moderate Growth Allocation Fund | ||||
Class A | $ | 139 | ||
Class B | 191,195 | |||
Class C | 5,833 | |||
MainStay Growth Allocation Fund | ||||
Investor Class | $ | 58 | ||
Class A | 1,683 | |||
Class B | 124,547 | |||
Class C | 1,770 | |||
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Allocation Funds’ transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC.
66 MainStay Asset Allocation Funds
Transfer agent expenses incurred by the Allocation Funds for the year ended October 31, 2011, were as follows:
MainStay Conservative Allocation Fund | Total | |||
Investor Class | $ | 89,620 | ||
Class A | 67,847 | |||
Class B | 76,201 | |||
Class C | 68,478 | |||
Class I | 3,770 | |||
MainStay Moderate Allocation Fund | Total | |||
Investor Class | $ | 211,532 | ||
Class A | 116,345 | |||
Class B | 186,599 | |||
Class C | 98,312 | |||
Class I | 4,842 | |||
MainStay Moderate Growth Allocation Fund | Total | |||
Investor Class | $ | 323,588 | ||
Class A | 112,669 | |||
Class B | 262,925 | |||
Class C | 73,073 | |||
Class I | 902 | |||
MainStay Growth Allocation Fund | Total | |||
Investor Class | $ | 218,440 | ||
Class A | 74,526 | |||
Class B | 164,249 | |||
Class C | 38,714 | |||
Class I | 1,514 | |||
(E) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Allocation Funds with the following values and percentages of net assets as follows:
MainStay Conservative Allocation Fund | ||||||||
Class I | $ | 14,004 | 0.2 | % | ||||
MainStay Moderate Allocation Fund | ||||||||
Class I | $ | 13,638 | 0.1 | % | ||||
MainStay Moderate Growth Allocation Fund | ||||||||
Class I | $ | 13,106 | 1.2 | % | ||||
MainStay Growth Allocation Fund | ||||||||
Class I | $ | 12,361 | 0.8 | % | ||||
At October 31, 2011, the Allocation Funds held the following percentages of outstanding shares of affiliated investment companies:
MainStay Conservative Allocation Fund | ||||
MainStay 130/30 Core Fund Class I | 3.98 | % | ||
MainStay 130/30 International Fund Class I | 1.71 | |||
MainStay Cash Reserves Fund Class I | 1.40 | |||
MainStay Common Stock Fund Class I | 1.53 | |||
MainStay Convertible Fund Class I | 1.34 | |||
MainStay Epoch Global Choice Fund Class I | 1.69 | |||
MainStay Epoch International Small Cap Fund Class I | 1.39 | |||
MainStay Epoch U.S. All Cap Fund Class I | 2.73 | |||
MainStay Flexible Bond Opportunities Fund Class I | 13.97 | |||
MainStay Floating Rate Fund Class I | 5.90 | |||
MainStay Global High Income Fund Class I | 0.45 | |||
MainStay Growth Equity Fund Class I | 1.27 | |||
MainStay High Yield Corporate Bond Fund Class I | 0.34 | |||
MainStay High Yield Opportunities Fund Class I | 1.34 | |||
MainStay ICAP Equity Fund Class I | 1.36 | |||
MainStay ICAP International Fund Class I | 0.69 | |||
MainStay ICAP Select Equity Fund Class I | 0.22 | |||
MainStay Indexed Bond Fund Class I | 10.74 | |||
MainStay Intermediate Term Bond Fund Class I | 8.62 | |||
MainStay Large Cap Growth Fund Class I | 0.21 | |||
MainStay MAP Fund Class I | 1.96 | |||
MainStay U.S. Small Cap Fund Class I | 2.14 | |||
MainStay Moderate Allocation Fund | ||||
MainStay 130/30 Core Fund Class I | 9.27 | % | ||
MainStay 130/30 International Fund Class I | 9.02 | |||
MainStay Cash Reserves Fund Class I | 2.32 | |||
MainStay Common Stock Fund Class I | 7.56 | |||
MainStay Convertible Fund Class I | 1.98 | |||
MainStay Epoch Global Choice Fund Class I | 11.33 | |||
MainStay Epoch International Small Cap Fund Class I | 2.11 | |||
MainStay Epoch U.S. All Cap Fund Class I | 6.18 | |||
MainStay Flexible Bond Opportunities Fund Class I | 23.04 | |||
MainStay Floating Rate Fund Class I | 6.67 | |||
MainStay Global High Income Fund Class I | 0.48 | |||
MainStay Growth Equity Fund Class I | 2.78 | |||
MainStay High Yield Corporate Bond Fund Class I | 0.40 | |||
MainStay High Yield Opportunities Fund Class I | 1.29 | |||
MainStay ICAP Equity Fund Class I | 3.13 | |||
MainStay ICAP International Fund Class I | 2.29 | |||
MainStay ICAP Select Equity Fund Class I | 0.40 | |||
mainstayinvestments.com 67
Notes to Financial Statements (continued)
MainStay Moderate Allocation Fund (continued) | ||||
MainStay Indexed Bond Fund Class I | 5.11 | % | ||
MainStay Intermediate Term Bond Fund Class I | 10.34 | |||
MainStay International Equity Fund Class I | 0.41 | |||
MainStay Large Cap Growth Fund Class I | 0.45 | |||
MainStay MAP Fund Class I | 4.41 | |||
MainStay U.S. Small Cap Fund Class I | 5.33 | |||
MainStay Moderate Growth Allocation Fund | ||||
MainStay 130/30 Core Fund Class I | 13.28 | % | ||
MainStay 130/30 International Fund Class I | 15.45 | |||
MainStay Cash Reserves Fund Class I | 2.02 | |||
MainStay Common Stock Fund Class I | 4.04 | |||
MainStay Convertible Fund Class I | 1.38 | |||
MainStay Epoch Global Choice Fund Class I | 10.76 | |||
MainStay Epoch International Small Cap Fund Class I | 2.12 | |||
MainStay Epoch U.S. All Cap Fund Class I | 6.76 | |||
MainStay Flexible Bond Opportunities Fund Class I | 19.83 | |||
MainStay Floating Rate Fund Class I | 5.67 | |||
MainStay Growth Equity Fund Class I | 4.15 | |||
MainStay High Yield Corporate Bond Fund Class I | 0.41 | |||
MainStay High Yield Opportunities Fund Class I | 0.70 | |||
MainStay ICAP Equity Fund Class I | 1.87 | |||
MainStay ICAP International Fund Class I | 2.88 | |||
MainStay ICAP Select Equity Fund Class I | 0.37 | |||
MainStay International Equity Fund Class I | 3.14 | |||
MainStay Large Cap Growth Fund Class I | 0.54 | |||
MainStay MAP Fund Class I | 5.58 | |||
MainStay U.S. Small Cap Fund Class I | 19.65 | |||
MainStay Growth Allocation Fund | ||||
MainStay 130/30 Core Fund Class I | 8.32 | % | ||
MainStay 130/30 International Fund Class I | 10.83 | |||
MainStay Common Stock Fund Class I | 0.82 | |||
MainStay Epoch Global Choice Fund Class I | 5.38 | |||
MainStay Epoch International Small Cap Fund Class I | 1.07 | |||
MainStay Epoch U.S. All Cap Fund Class I | 3.92 | |||
MainStay Growth Equity Fund Class I | 0.65 | |||
MainStay ICAP Equity Fund Class I | 0.86 | |||
MainStay ICAP International Fund Class I | 1.77 | |||
MainStay ICAP Select Equity Fund Class I | 0.26 | |||
MainStay International Equity Fund Class I | 2.79 | |||
MainStay Large Cap Growth Fund Class I | 0.35 | |||
MainStay MAP Fund Class I | 3.59 | |||
MainStay U.S. Small Cap Fund Class I | 14.70 | |||
(F) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Allocation Funds have implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Allocation Funds by the Office of the General Counsel of New York Life Investments was payable directly by the Allocation Funds through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were as follows:
MainStay Conservative Allocation Fund | $ | 3,158 | ||
MainStay Moderate Allocation Fund | 5,787 | |||
MainStay Moderate Growth Allocation Fund | 5,622 | |||
MainStay Growth Allocation Fund | 2,943 | |||
Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Allocation Funds are no longer directly responsible for any portion of the cost of legal services provided to the Allocation Funds by OGC.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||||
MainStay Conservative Allocation Fund | $ | 335,137 | $ | 2,675,721 | $ | — | $ | 4,275,054 | $ | 7,285,912 | ||||||||||
MainStay Moderate Allocation Fund | 3,720,709 | (12,155,368 | ) | — | 11,449,248 | 3,014,589 | ||||||||||||||
MainStay Moderate Growth Allocation Fund | 1,086,863 | (29,186,053 | ) | — | 9,274,321 | (18,824,869 | ) | |||||||||||||
MainStay Growth Allocation Fund | — | (23,762,011 | ) | — | 3,560,257 | (20,201,754 | ) | |||||||||||||
68 MainStay Asset Allocation Funds
The difference between book-basis and tax basis unrealized appreciations is primarily due to wash sale deferrals.
The following table discloses the current year reclassifications between accumulated undistributed net investment income and accumulated net realized gain on investments arising from permanent differences; net assets at October 31, 2010 were not affected.
Accumulated | Accumulated | |||||||||||
Undistributed | Net Realized | |||||||||||
Net Investment | Gain (Loss) on | Additional | ||||||||||
Income (Loss) | Investments | Paid In Capital | ||||||||||
MainStay Conservative Allocation Fund | $ | 897,905 | $ | (897,905 | ) | $ | — | |||||
MainStay Moderate Allocation Fund | 1,119,495 | (1,119,495 | ) | — | ||||||||
MainStay Moderate Growth Allocation Fund | 299,471 | (299,471 | ) | — | ||||||||
MainStay Growth Allocation Fund | 83,567 | — | (83,567 | ) | ||||||||
The reclassifications for the Allocation Funds are primarily due to reclassifications of distributions and distributions in excess of current earnings.
Under the Regulated Investment Company Modernization Act of 2010, the Allocation Funds will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
MainStay Conservative Allocation Fund
The MainStay Conservative Allocation Fund utilized $12,295,628 of capital loss carryforwards during the year ended October 31, 2011.
MainStay Moderate Allocation Fund
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $12,155,368 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the MainStay Moderate Allocation Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2017 | $ | 7,152 | ||||
2018 | 5,003 | |||||
Total | $ | 12,155 | ||||
The MainStay Moderate Allocation Fund utilized $17,980,729 of capital loss carryforwards during the year ended October 31, 2011.
MainStay Moderate Growth Allocation Fund
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $29,186,053 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the MainStay Moderate Growth Allocation Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2017 | $ | 20,803 | ||||
2018 | 8,383 | |||||
Total | $ | 29,186 | ||||
The MainStay Moderate Growth Allocation Fund utilized $13,130,715 of capital loss carryforwards during the year ended October 31, 2011.
MainStay Growth Allocation Fund
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $23,762,011 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the MainStay Growth Allocation Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2017 | $ | 13,675 | ||||
2018 | 10,087 | |||||
Total | $ | 23,762 | ||||
The MainStay Growth Allocation Fund utilized $8,133,595 of capital loss carryforwards during the year ended October 31, 2011.
mainstayinvestments.com 69
Notes to Financial Statements (continued)
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||||||||||||||||||
Tax Based | Tax Based | Tax Based | Tax Based | |||||||||||||||||||||
Distributions | Distributions | Distributions | Distributions | |||||||||||||||||||||
from Ordinary | from Long-Term | from Ordinary | from Long-Term | |||||||||||||||||||||
Income | Capital Gains | Total | Income | Capital Gains | Total | |||||||||||||||||||
MainStay Conservative Allocation Fund | $ | 5,914,796 | $ | — | $ | 5,914,796 | $ | 4,071,051 | $ | — | $ | 4,071,051 | ||||||||||||
MainStay Moderate Allocation Fund | 7,604,929 | — | 7,604,929 | 5,948,084 | — | 5,948,084 | ||||||||||||||||||
MainStay Moderate Growth Allocation Fund | 4,439,229 | — | 4,439,229 | 4,004,041 | — | 4,004,041 | ||||||||||||||||||
MainStay Growth Allocation Fund | 716,741 | — | 716,741 | 699,348 | — | 699,348 | ||||||||||||||||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Allocation Funds. Custodial fees are charged to the Allocation Funds based on the market value of securities in the Allocation Funds and the number of certain cash transactions incurred by the Allocation Funds.
Note 6–Line of Credit
The Allocation Funds and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Allocation Funds on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities were as follows:
Purchases | Sales | |||||||
MainStay Conservative Allocation Fund | $ | 169,573 | $ | 133,899 | ||||
MainStay Moderate Allocation Fund | 265,919 | 259,339 | ||||||
MainStay Moderate Growth Allocation Fund | 227,326 | 225,605 | ||||||
MainStay Growth Allocation Fund | 113,577 | 116,576 | ||||||
Note 8–Capital Share Transactions
MainStay Conservative Allocation Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,231,031 | $ | 13,575,602 | |||||
Shares issued to shareholders in reinvestment of dividends | 88,724 | 967,445 | ||||||
Shares redeemed | (649,357 | ) | (7,165,749 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 670,398 | 7,377,298 | ||||||
Shares converted into Investor Class (See Note 1) | 270,718 | 2,933,458 | ||||||
Shares converted from Investor Class (See Note 1) | (388,318 | ) | (4,294,247 | ) | ||||
Net increase (decrease) | 552,798 | $ | 6,016,509 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,272,615 | $ | 13,108,678 | |||||
Shares issued to shareholders in reinvestment of dividends | 64,931 | 666,390 | ||||||
Shares redeemed | (511,712 | ) | (5,272,444 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 825,834 | 8,502,624 | ||||||
Shares converted into Investor Class (See Note 1) | 212,631 | 2,201,452 | ||||||
Shares converted from Investor Class (See Note 1) | (348,219 | ) | (3,604,600 | ) | ||||
Net increase (decrease) | 690,246 | $ | 7,099,476 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 3,732,239 | $ | 41,018,746 | |||||
Shares issued to shareholders in reinvestment of dividends | 298,992 | 3,258,971 | ||||||
Shares redeemed | (2,541,271 | ) | (28,028,719 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,489,960 | 16,248,998 | ||||||
Shares converted into Class A (See Note 1) | 501,118 | 5,531,807 | ||||||
Shares converted from Class A (See Note 1) | (132,456 | ) | (1,414,331 | ) | ||||
Net increase (decrease) | 1,858,622 | $ | 20,366,474 | |||||
70 MainStay Asset Allocation Funds
Class A | Shares | Amount | ||||||
Year ended October 31, 2010: | ||||||||
Shares sold | 3,324,275 | $ | 34,262,636 | |||||
Shares issued to shareholders in reinvestment of dividends | 217,173 | 2,227,781 | ||||||
Shares redeemed | (2,254,484 | ) | (23,253,208 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,286,964 | 13,237,209 | ||||||
Shares converted into Class A (See Note 1) | 462,810 | 4,788,103 | ||||||
Shares converted from Class A (See Note 1) | (70,095 | ) | (737,389 | ) | ||||
Net increase (decrease) | 1,679,679 | $ | 17,287,923 | |||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 813,813 | $ | 8,914,605 | |||||
Shares issued to shareholders in reinvestment of dividends | 52,544 | 570,914 | ||||||
Shares redeemed | (440,206 | ) | (4,824,638 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 426,151 | 4,660,881 | ||||||
Shares converted from Class B (See Note 1) | (252,085 | ) | (2,756,687 | ) | ||||
Net increase (decrease) | 174,066 | $ | 1,904,194 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 841,150 | $ | 8,635,556 | |||||
Shares issued to shareholders in reinvestment of dividends | 41,398 | 422,699 | ||||||
Shares redeemed | (501,971 | ) | (5,141,901 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 380,577 | 3,916,354 | ||||||
Shares converted from Class B (See Note 1) | (258,150 | ) | (2,647,566 | ) | ||||
Net increase (decrease) | 122,427 | $ | 1,268,788 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,035,807 | $ | 11,368,832 | |||||
Shares issued to shareholders in reinvestment of dividends | 41,081 | 446,351 | ||||||
Shares redeemed | (758,224 | ) | (8,274,894 | ) | ||||
Net increase (decrease) | 318,664 | $ | 3,540,289 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 918,173 | $ | 9,429,966 | |||||
Shares issued to shareholders in reinvestment of dividends | 30,861 | 315,028 | ||||||
Shares redeemed | (678,099 | ) | (6,965,387 | ) | ||||
Net increase (decrease) | 270,935 | $ | 2,779,607 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 268,211 | $ | 2,995,431 | |||||
Shares issued to shareholders in reinvestment of dividends | 18,277 | 200,504 | ||||||
Shares redeemed | (23,288 | ) | (258,081 | ) | ||||
Net increase (decrease) | 263,200 | $ | 2,937,854 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 411,893 | $ | 4,220,912 | |||||
Shares issued to shareholders in reinvestment of dividends | 9,075 | 93,890 | ||||||
Shares redeemed | (9,174 | ) | (94,810 | ) | ||||
Net increase (decrease) | 411,794 | $ | 4,219,992 | |||||
MainStay Moderate Allocation Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,173,695 | $ | 24,290,792 | |||||
Shares issued to shareholders in reinvestment of dividends | 140,065 | 1,537,922 | ||||||
Shares redeemed | (1,179,061 | ) | (13,133,985 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,134,699 | 12,694,729 | ||||||
Shares converted into Investor Class (See Note 1) | 499,753 | 5,454,051 | ||||||
Shares converted from Investor Class (See Note 1) | (741,945 | ) | (8,324,739 | ) | ||||
Net increase (decrease) | 892,507 | $ | 9,824,041 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,963,067 | $ | 20,157,776 | |||||
Shares issued to shareholders in reinvestment of dividends | 119,553 | 1,209,844 | ||||||
Shares redeemed | (1,122,124 | ) | (11,480,471 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 960,496 | 9,887,149 | ||||||
Shares converted into Investor Class (See Note 1) | 416,693 | 4,275,033 | ||||||
Shares converted from Investor Class (See Note 1) | (558,097 | ) | (5,751,131 | ) | ||||
Net increase (decrease) | 819,092 | $ | 8,411,051 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 3,482,658 | $ | 38,820,675 | |||||
Shares issued to shareholders in reinvestment of dividends | 383,697 | 4,209,163 | ||||||
Shares redeemed | (5,225,508 | ) | (57,772,763 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (1,359,153 | ) | (14,742,925 | ) | ||||
Shares converted into Class A (See Note 1) | 977,907 | 10,957,474 | ||||||
Shares converted from Class A (See Note 1) | (210,595 | ) | (2,236,522 | ) | ||||
Net increase (decrease) | (591,841 | ) | $ | (6,021,973 | ) | |||
mainstayinvestments.com 71
Notes to Financial Statements (continued)
Class A | Shares | Amount | ||||||
Year ended October 31, 2010: | ||||||||
Shares sold | 4,221,034 | $ | 43,540,034 | |||||
Shares issued to shareholders in reinvestment of dividends | 310,694 | 3,141,111 | ||||||
Shares redeemed | (3,822,538 | ) | (39,081,017 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 709,190 | 7,600,128 | ||||||
Shares converted into Class A (See Note 1) | 803,116 | 8,260,200 | ||||||
Shares converted from Class A (See Note 1) | (88,016 | ) | (923,758 | ) | ||||
Shares converted from Class A (a) | (14,050 | ) | (141,066 | ) | ||||
Net increase (decrease) | 1,410,240 | $ | 14,795,504 | |||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,477,509 | $ | 16,321,256 | |||||
Shares issued to shareholders in reinvestment of dividends | 82,892 | 903,526 | ||||||
Shares redeemed | (1,065,576 | ) | (11,715,976 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 494,825 | 5,508,806 | ||||||
Shares converted from Class B (See Note 1) | (530,996 | ) | (5,850,264 | ) | ||||
Net increase (decrease) | (36,171 | ) | $ | (341,458 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,462,183 | $ | 14,860,776 | |||||
Shares issued to shareholders in reinvestment of dividends | 80,744 | 812,281 | ||||||
Shares redeemed | (1,141,578 | ) | (11,526,687 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 401,349 | 4,146,370 | ||||||
Shares converted from Class B (See Note 1) | (579,240 | ) | (5,860,344 | ) | ||||
Net increase (decrease) | (177,891 | ) | $ | (1,713,974 | ) | |||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,071,686 | $ | 11,963,011 | |||||
Shares issued to shareholders in reinvestment of dividends | 36,863 | 402,188 | ||||||
Shares redeemed | (1,018,630 | ) | (11,205,790 | ) | ||||
Net increase (decrease) | 89,919 | $ | 1,159,409 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 984,769 | $ | 10,061,723 | |||||
Shares issued to shareholders in reinvestment of dividends | 36,117 | 363,340 | ||||||
Shares redeemed | (887,066 | ) | (9,007,820 | ) | ||||
Net increase (decrease) | 133,820 | $ | 1,417,243 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 168,023 | $ | 1,881,114 | |||||
Shares issued to shareholders in reinvestment of dividends | 16,537 | 182,081 | ||||||
Shares redeemed | (94,078 | ) | (1,059,094 | ) | ||||
Net increase (decrease) | 90,482 | $ | 1,004,101 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 470,412 | $ | 4,774,851 | |||||
Shares issued to shareholders in reinvestment of dividends | 9,026 | 91,561 | ||||||
Shares redeemed | (137,732 | ) | (1,407,382 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 341,706 | 3,459,030 | ||||||
Shares converted into Class I (a) | 14,009 | 141,066 | ||||||
Net increase (decrease) | 355,715 | $ | 3,600,096 | |||||
(a) In addition to any automatic conversion features described above in Note 1 with respect to Investor Class, Class A and Class B shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: | ||||||||
• Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion; and | ||||||||
• All Class B shares are ineligible for a voluntary conversion. | ||||||||
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class, Class A and Class B shares. | ||||||||
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, they may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time. |
72 MainStay Asset Allocation Funds
MainStay Moderate Growth Allocation Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,469,201 | $ | 27,357,851 | |||||
Shares issued to shareholders in reinvestment of dividends | 129,822 | 1,417,662 | ||||||
Shares redeemed | (1,529,147 | ) | (16,843,831 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,069,876 | 11,931,682 | ||||||
Shares converted into Investor Class (See Note 1) | 633,715 | 6,737,718 | ||||||
Shares converted from Investor Class (See Note 1) | (831,147 | ) | (9,232,995 | ) | ||||
Net increase (decrease) | 872,444 | $ | 9,436,405 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 2,545,088 | $ | 25,270,104 | |||||
Shares issued to shareholders in reinvestment of dividends | 121,674 | 1,202,108 | ||||||
Shares redeemed | (1,491,708 | ) | (14,729,589 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,175,054 | 11,742,623 | ||||||
Shares converted into Investor Class (See Note 1) | 531,286 | 5,268,732 | ||||||
Shares converted from Investor Class (See Note 1) | (511,051 | ) | (5,100,057 | ) | ||||
Net increase (decrease) | 1,195,289 | $ | 11,911,298 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,041,507 | $ | 22,698,834 | |||||
Shares issued to shareholders in reinvestment of dividends | 201,337 | 2,198,599 | ||||||
Shares redeemed | (3,307,648 | ) | (36,613,597 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (1,064,804 | ) | (11,716,164 | ) | ||||
Shares converted into Class A (See Note 1) | 1,083,663 | 12,019,264 | ||||||
Shares converted from Class A (See Note 1) | (268,437 | ) | (2,737,119 | ) | ||||
Net increase (decrease) | (249,578 | ) | $ | (2,434,019 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 2,689,273 | $ | 26,869,688 | |||||
Shares issued to shareholders in reinvestment of dividends | 195,391 | 1,927,906 | ||||||
Shares redeemed | (3,422,884 | ) | (33,918,541 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (538,220 | ) | (5,120,947 | ) | ||||
Shares converted into Class A (See Note 1) | 828,201 | 8,249,330 | ||||||
Shares converted from Class A (See Note 1) | (111,157 | ) | (1,135,492 | ) | ||||
Net increase (decrease) | 178,824 | $ | 1,992,891 | |||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,404,395 | $ | 15,363,842 | |||||
Shares issued to shareholders in reinvestment of dividends | 50,806 | 549,722 | ||||||
Shares redeemed | (1,354,520 | ) | (14,760,941 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 100,681 | 1,152,623 | ||||||
Shares converted from Class B (See Note 1) | (626,207 | ) | (6,786,868 | ) | ||||
Net increase (decrease) | (525,526 | ) | $ | (5,634,245 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,709,624 | $ | 16,740,837 | |||||
Shares issued to shareholders in reinvestment of dividends | 62,979 | 616,569 | ||||||
Shares redeemed | (1,368,005 | ) | (13,330,092 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 404,598 | 4,027,314 | ||||||
Shares converted from Class B (See Note 1) | (746,529 | ) | (7,282,513 | ) | ||||
Net increase (decrease) | (341,931 | ) | $ | (3,255,199 | ) | |||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 552,525 | $ | 6,054,893 | |||||
Shares issued to shareholders in reinvestment of dividends | 12,231 | 132,343 | ||||||
Shares redeemed | (565,431 | ) | (6,153,913 | ) | ||||
Net increase (decrease) | (675 | ) | $ | 33,323 | ||||
Year ended October 31, 2010: | ||||||||
Shares sold | 580,786 | $ | 5,719,600 | |||||
Shares issued to shareholders in reinvestment of dividends | 13,881 | 135,896 | ||||||
Shares redeemed | (514,103 | ) | (4,988,663 | ) | ||||
Net increase (decrease) | 80,564 | $ | 866,833 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 102,289 | $ | 1,101,121 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,335 | 25,655 | ||||||
Shares redeemed | (82,903 | ) | (934,083 | ) | ||||
Net increase (decrease) | 21,721 | $ | 192,693 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 8,465 | $ | 85,217 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,122 | 11,153 | ||||||
Shares redeemed | (3,428 | ) | (34,057 | ) | ||||
Net increase (decrease) | 6,159 | $ | 62,313 | |||||
mainstayinvestments.com 73
Notes to Financial Statements (continued)
MainStay Growth Allocation Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,348,695 | $ | 14,593,990 | |||||
Shares issued to shareholders in reinvestment of dividends | 29,542 | 317,382 | ||||||
Shares redeemed | (981,304 | ) | (10,596,717 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 396,933 | 4,314,655 | ||||||
Shares converted into Investor Class (See Note 1) | 393,782 | 4,056,872 | ||||||
Shares converted from Investor Class (See Note 1) | (412,374 | ) | (4,478,740 | ) | ||||
Net increase (decrease) | 378,341 | $ | 3,892,787 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,495,246 | $ | 14,302,491 | |||||
Shares issued to shareholders in reinvestment of dividends | 32,807 | 315,270 | ||||||
Shares redeemed | (1,082,793 | ) | (10,281,933 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 445,260 | 4,335,828 | ||||||
Shares converted into Investor Class (See Note 1) | 318,289 | 3,035,630 | ||||||
Shares converted from Investor Class (See Note 1) | (388,946 | ) | (3,771,980 | ) | ||||
Net increase (decrease) | 374,603 | $ | 3,599,478 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,100,551 | $ | 11,925,426 | |||||
Shares issued to shareholders in reinvestment of dividends | 33,129 | 355,815 | ||||||
Shares redeemed | (1,846,946 | ) | (19,926,306 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (713,266 | ) | (7,645,065 | ) | ||||
Shares converted into Class A (See Note 1) | 530,096 | 5,745,374 | ||||||
Shares converted from Class A (See Note 1) | (181,284 | ) | (1,779,755 | ) | ||||
Net increase (decrease) | (364,454 | ) | $ | (3,679,446 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,062,680 | $ | 10,154,424 | |||||
Shares issued to shareholders in reinvestment of dividends | 35,847 | 344,446 | ||||||
Shares redeemed | (1,466,617 | ) | (14,028,997 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (368,090 | ) | (3,530,127 | ) | ||||
Shares converted into Class A (See Note 1) | 519,624 | 5,023,595 | ||||||
Shares converted from Class A (See Note 1) | (39,936 | ) | (393,783 | ) | ||||
Shares converted from Class A (a) | (727 | ) | (6,836 | ) | ||||
Net increase (decrease) | 110,871 | $ | 1,092,849 | |||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 808,168 | $ | 8,608,982 | |||||
Shares redeemed | (806,886 | ) | (8,603,762 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,282 | 5,220 | ||||||
Shares converted from Class B (See Note 1) | (336,218 | ) | (3,543,751 | ) | ||||
Net increase (decrease) | (334,936 | ) | $ | (3,538,531 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 904,614 | $ | 8,516,103 | |||||
Shares redeemed | (876,132 | ) | (8,183,484 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 28,482 | 332,619 | ||||||
Shares converted from Class B (See Note 1) | (415,474 | ) | (3,893,462 | ) | ||||
Net increase (decrease) | (386,992 | ) | $ | (3,560,843 | ) | |||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 315,992 | $ | 3,388,671 | |||||
Shares redeemed | (257,425 | ) | (2,734,571 | ) | ||||
Net increase (decrease) | 58,567 | $ | 654,100 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 277,537 | $ | 2,638,164 | |||||
Shares redeemed | (341,778 | ) | (3,224,797 | ) | ||||
Net increase (decrease) | (64,241 | ) | $ | (586,633 | ) | |||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 35,418 | $ | 380,483 | |||||
Shares issued to shareholders in reinvestment of dividends | 934 | 10,130 | ||||||
Shares redeemed | (34,403 | ) | (379,982 | ) | ||||
Net increase (decrease) | 1,949 | $ | 10,631 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 56,448 | $ | 541,847 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,011 | 9,797 | ||||||
Shares redeemed | (50,697 | ) | (482,535 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 6,762 | 69,109 | ||||||
Shares converted into Class I (a) | 720 | 6,836 | ||||||
Net increase (decrease) | 7,482 | $ | 75,945 | |||||
(a) In addition to any automatic conversion features described above in Note 1 with respect to Investor Class, Class A and Class B shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: | ||||||||
• Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion; and | ||||||||
• All Class B shares are ineligible for a voluntary conversion. | ||||||||
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class, Class A and Class B shares. |
74 MainStay Asset Allocation Funds
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, they may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time. |
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Allocation Funds as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Allocation Funds’ management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified, except the following:
At a meeting on December 14, 2011, the Board approved a revision to the expense limitation agreement as follows:
Investor | ||||||||||||||||||||
Class | Class A | Class B | Class C | Class I | ||||||||||||||||
MainStay Conservative Allocation Fund | 0.55 | % | 0.50 | % | 1.30 | % | 1.30 | % | 0.25 | % | ||||||||||
MainStay Moderate Allocation Fund | 0.55 | 0.50 | 1.30 | 1.30 | 0.25 | |||||||||||||||
MainStay Moderate Growth Allocation Fund | 0.55 | 0.50 | 1.30 | 1.30 | 0.25 | |||||||||||||||
MainStay Growth Allocation Fund | 0.55 | 0.50 | 1.30 | 1.30 | 0.25 | |||||||||||||||
The effective date of the revised expense limitation agreement will be February 28, 2012 and it will expire or terminate on February 28, 2013 and may only be amended or terminated prior to that date by action of the Board.
mainstayinvestments.com 75
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the MainStay Conservative Allocation Fund, MainStay Moderate Allocation Fund, MainStay Moderate Growth Allocation Fund and MainStay Growth Allocation Fund (“the Funds”), four of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the transfer agent of the underlying funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Conservative Allocation Fund, MainStay Moderate Allocation Fund, MainStay Moderate Growth Allocation Fund and MainStay Growth Allocation Fund of MainStay Funds Trust as of October 31, 2011, the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
76 MainStay Asset Allocation Funds
Federal Income Tax Information (Unaudited)
The Allocation Funds are required under the Internal Revenue Code to advise shareholders within 60 days of the Allocation Funds’ fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Allocation Funds during such fiscal years.
For the fiscal year ended October 31, 2011, the Allocation Funds designated approximately the following amounts under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
MainStay Conservative Allocation Fund | $ | 1,002,545 | ||
MainStay Moderate Allocation Fund | 2,802,456 | |||
MainStay Moderate Growth Allocation Fund | 3,344,313 | |||
MainStay Growth Allocation Fund | 2,147,723 | |||
The dividends paid by the following Allocation Funds during the fiscal year ended October 31, 2011 which are not designated as capital gain distributions should be multiplied by the following percentage to arrive at the amount eligible for the corporate dividend received deduction.
DRD% | ||||
MainStay Conservative Allocation Fund | 11.8 | % | ||
MainStay Moderate Allocation Fund | 20.5 | |||
MainStay Moderate Growth Allocation Fund | 42.1 | |||
MainStay Growth Allocation Fund | 100.0 | % | ||
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Allocation Funds’ fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Allocation Funds’ securities is available without charge, upon request, (i) by visiting the Allocation Funds’ website at mainstayinvestments.com; and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The MainStay Funds are required to file with the SEC their proxy voting records for each Allocation Fund for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
Each Allocation Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. Each Allocation Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 77
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
78 MainStay Asset Allocation Funds
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 79
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
80 MainStay Asset Allocation Funds
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 81
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
82 MainStay Asset Allocation Funds
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24938 MS284-11 | MSAA11-12/11 |
NA2
MainStay Epoch Global Choice Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 14 | |
Notes to Financial Statements | 21 | |
Report of Independent Registered Public Accounting Firm | 27 | |
Federal Income Tax Information | 28 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 28 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 28 | |
Board Members and Officers | 29 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | ||||||||||||||||||||
Inception | Gross | |||||||||||||||||||
of Class | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (7/25/05) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –5 | .57% | –2 | .61% | –0 | .73% | 2 | .10% | ||||||||||
Excluding sales charges | –0 | .07 | –1 | .50 | 0 | .17 | 2 | .10 | ||||||||||||
Since | ||||||||||||||||||||
Inception | Gross | |||||||||||||||||||
of Class | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (8/15/06) | Ratio2 | |||||||||||||||
Class A Shares4 | Maximum 5.5% Initial Sales Charge | With sales charges | –5 | .36% | –2 | .54% | –1 | .15% | 1 | .88% | ||||||||||
Excluding sales charges | 0 | .15 | –1 | .43 | –0 | .07 | 1 | .88 | ||||||||||||
Since | ||||||||||||||||||||
Inception | Gross | |||||||||||||||||||
of Class | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (7/25/05) | Ratio2 | |||||||||||||||
Class C Shares3 | Maximum 1% CDSC | With sales charges | –1 | .77% | –1 | .86% | –0 | .28% | 2 | .85% | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | –0 | .78 | –1 | .86 | –0 | .28 | 2 | .85 | |||||||||||
Since | ||||||||||||||||||||
Inception | Gross | |||||||||||||||||||
of Class | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (7/25/05) | Ratio2 | |||||||||||||||
Class I Shares4 | No Sales Charge | 0 | .42% | –0 | .80% | 0 | .79% | 1 | .63% | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class and Class C shares, first offered on November 16, 2009, include the historical performance of Class I shares from July 25, 2005 through November 15, 2009 adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class and Class C shares might have been lower. |
4. | Performance figures for Class I shares and Class A shares include the historical performance of the Institutional shares from July 25, 2005 and |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
Since | ||||||||||||
One | Five | Inception | ||||||||||
Benchmark Performance | Year | Years | of the Fund | |||||||||
MSCI World Index5 | 1 | .76% | –1 | .00% | 2 | .58% | ||||||
Average Lipper Global Large-Cap Growth Fund6 | –0 | .14 | 0 | .09 | 3 | .46 | ||||||
the Class P shares from August 15, 2006, respectively, of the Epoch U.S. All Cap Equity Fund (the predecessor to the Fund) through November 15, 2009. The Epoch U.S. All Cap Equity Fund was subject to a different fee structure and was advised by Epoch Investment Partners, Inc.
5. | The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an Index. |
6. | The average Lipper global large-cap growth fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies both inside and outside of the U.S. with market capitalizations (on a three-year weighted basis) above Lipper’s global large-cap floor. Global large-cap growth funds typically have an above-average price-to-cash flow ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to their large-cap-specific subset of the S&P/Citigroup Word BMI. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on total returns with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Epoch Global Choice Fund
Cost in Dollars of a $1,000 Investment in MainStay Epoch Global Choice Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 888.10 | $ | 8.47 | $ | 1,016.20 | $ | 9.05 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 889.50 | $ | 7.33 | $ | 1,017.40 | $ | 7.83 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 885.00 | $ | 12.07 | $ | 1,012.40 | $ | 12.88 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 890.80 | $ | 6.15 | $ | 1,018.70 | $ | 6.56 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.78% for Investor Class, 1.54% for Class A, 2.54% for Class C and 1.29% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Portfolio Composition as of October 31, 2011 (Unaudited)
Common Stocks | 92.90 | |||
Preferred Stock | 3.20 | |||
Other Assets, Less Liabilities | 2.00 | |||
Short-term Investment | 1.90 |
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | SES S.A. | |
2. | Microsoft Corp. | |
3. | Comcast Corp. Class A | |
4. | Oracle Corp. | |
5. | Apple, Inc. | |
6. | Visa, Inc. Class A | |
7. | Nalco Holding Co. | |
8. | Coca-Cola Co. (The) | |
9. | Subsea 7 S.A. | |
10. | Deere & Co. |
8 MainStay Epoch Global Choice Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers William Priest, CFA, Michael Welhoelter, CFA, and David Pearl of Epoch Investment Partners, Inc., the Fund’s Subadvisor.
How did MainStay Epoch Global Choice Fund perform relative to its peers and its benchmark for the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Epoch Global Choice Fund returned –0.07% for Investor Class shares, 0.15% for Class A shares and –0.78% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 0.42%. Investor Class, Class A and Class I shares outperformed—and Class C shares underperformed—the –0.14% return of the average Lipper1 global large-cap growth fund for the same period. All share classes underperformed the 1.76% return of the MSCI World Index2 for the 12 months ended October 31, 2011. The MSCI World Index is the Fund’s broad-based securities market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
Global equity markets averaged modest gains amid an environment of heightened volatility as investors assessed multiple threats to the global economy, including fallout from the European sovereign debt crisis. While stock selection in the health care and consumer staples sectors hindered returns, the Fund was helped by its focus on what we considered to be “global champions” with growing cash flow and exposure to fast-growing markets around the world.
During the reporting period, which sectors were the strongest contributors to the Fund’s relative perfor-
mance and which sectors were particularly weak?
mance and which sectors were particularly weak?
During the reporting period, the information technology and consumer discretionary sectors made the strongest positive contributions to the Fund’s performance relative to the MSCI World Index. (Contributions take weightings and total returns into account.) The Fund benefited from strong stock selection in each of these sectors. Having no exposure to the utilities sector, which lagged in the MSCI World Index during the reporting period, also contributed positively to the Fund’s relative performance.
During the reporting period, the consumer staples and health care sectors made the weakest sector contributions to the Fund’s relative performance, primarily because of stock selection. The Fund’s underweight position in materials also detracted from the Fund’s relative performance, as the materials sector outpaced the MSCI World Index during the reporting period.
During the reporting period, which individual stocks made the strongest contributions to the Fund’s absolute performance and which stocks detracted the most?
During the reporting period, the stocks that made the strongest contributions to the Fund’s absolute performance were specialty chemicals company Nalco Holding, household products manufacturer Tupperware Brands and media company Comcast.
Nalco Holding produces chemicals used in water treatment. Its shares advanced after the company agreed to be purchased by Ecolab for $5.4 billion. Tupperware Brands—which specializes in kitchen, home and beauty products—performed well, as it reported brisk sales in emerging markets. Cable provider Comcast benefited from growing Internet-access subscrip-
tions that offset weak results from its NBC network. Comcast returned a significant portion of the free cash generated by its cable business to shareholders in the form of dividends and share buybacks.
tions that offset weak results from its NBC network. Comcast returned a significant portion of the free cash generated by its cable business to shareholders in the form of dividends and share buybacks.
The greatest detractors from the Fund’s absolute performance during the reporting period were German financial exchange operator Deutsche Boerse, Canadian gold producer Agnico-Eagle Mines and French tire maker Michelin.
Deutsche Boerse faced regulatory challenges in its acquisition of fellow financial exchange operator NYSE Euronext. Shares of Agnico-Eagle Mines dropped after the company suspended operations at one of its mines in October. Shares of Michelin fell in sympathy with the French equity market.
Did the Fund make any significant purchases or sales during the reporting period?
Nalco Holding was one of the Fund’s most significant purchases during the reporting period. We were attracted to the company for its growing revenues and free cash flow as well as for its expanding exposure to emerging markets. After the Fund’s purchase, Nalco Holding was acquired by Ecolab.
The Fund initiated a position in Coca-Cola because of the company’s ability to increase volumes and raise prices, which we viewed as an increasingly rare combination. We did not think the market adequately took into account the sales, profit and cash flow upside stemming from Coca-Cola’s 2010 acquisition of the North American bottling business, which previously was a separate entity.
We sold the Fund’s position in Brazilian oil and natural gas explorer OGX Petroleo e Gas Participacoes after the company announced that it was postponing the sale of a minority interest in its offshore Brazilian acreage. We saw this potential transaction as a key value-realization catalyst and decided to exit the position once the delay was announced.
We sold the Fund’s position in Boeing as we consolidated the Fund’s exposure to the aerospace industry into companies
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the MSCI World Index.
mainstayinvestments.com 9
where we saw a more stable outlook for cash flows stemming from the aerospace replacement cycle. We maintained a positive view on the commercial aerospace industry but repositioned the Fund to reduce its exposure to possible cuts in defense spending.
How did the Fund’s sector weightings change during the reporting period?
The most significant change in the Fund’s sector weightings relative to the MSCI World Index was a reduction in its over-weight exposure to the health care sector. We also reduced
the Fund’s allocations to the energy and financials sectors. We moved from a close-to-neutral position relative to the MSCI World Index to an underweight allocation in the energy sector and made the Fund’s underweight exposure to the financials sector even more substantially underweight.
the Fund’s allocations to the energy and financials sectors. We moved from a close-to-neutral position relative to the MSCI World Index to an underweight allocation in the energy sector and made the Fund’s underweight exposure to the financials sector even more substantially underweight.
Over the same period, we increased the Fund’s overweight position in the information technology sector and brought its allocation to the consumer staples sector from an underweight position to a slightly overweight exposure relative to the MSCI World Index.
How was the Fund positioned at the end of October 2011?
As of October 31, 2011, the Fund’s most substantially underweight sector position relative to the MSCI World Index was in the financials sector. The Fund also held meaningfully underweight positions in the energy and utilities sectors. As of the same date, the Fund’s most substantially overweight sector positions relative to the MSCI World Index were in the information technology, consumer discretionary and telecommunication services sectors.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Epoch Global Choice Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 92.9%† | ||||||||
Belgium 2.3% | ||||||||
Anheuser-Busch InBev N.V. (Beverages) | 31,600 | $ | 1,754,417 | |||||
Germany 8.2% | ||||||||
Bayer A.G. (Pharmaceuticals) | 31,450 | 2,005,877 | ||||||
Deutsche Telekom A.G., Registered (Diversified Telecommunication Services) | 145,450 | 1,844,056 | ||||||
Fresenius Medical Care A.G. & Co. KGaA (Health Care Providers & Services) | 34,500 | 2,509,991 | ||||||
6,359,924 | ||||||||
Hong Kong 3.0% | ||||||||
China Mobile, Ltd., Sponsored ADR (Wireless Telecommunication Services) (a) | 49,350 | 2,347,086 | ||||||
Israel 3.3% | ||||||||
Teva Pharmaceutical Industries, Ltd., Sponsored ADR (Pharmaceuticals) (a) | 61,950 | 2,530,658 | ||||||
Luxembourg 7.0% | ||||||||
X SES S.A. (Media) | 112,500 | 2,870,311 | ||||||
X Subsea 7 S.A. (Energy Equipment & Services) (b) | 117,750 | 2,542,759 | ||||||
5,413,070 | ||||||||
United Kingdom 16.7% | ||||||||
Imperial Tobacco Group PLC (Tobacco) | 68,100 | 2,481,783 | ||||||
Meggitt PLC (Aerospace & Defense) | 274,500 | 1,691,313 | ||||||
Pearson PLC (Media) | 120,477 | 2,217,986 | ||||||
Rexam PLC (Containers & Packaging) | 332,979 | 1,840,859 | ||||||
Rolls-Royce Holdings PLC Class C (Aerospace & Defense) (b)(c) | 14,562,450 | 23,415 | ||||||
Rolls-Royce Holdings PLC (Aerospace & Defense) (b) | 211,050 | 2,371,273 | ||||||
Vodafone Group PLC (Wireless Telecommunication Services) | 846,400 | 2,347,307 | ||||||
12,973,936 | ||||||||
United States 52.4% | ||||||||
Anadarko Petroleum Corp. (Oil, Gas & Consumable Fuels) | 31,400 | 2,464,900 | ||||||
X Apple, Inc. (Computers & Peripherals) (b) | 6,650 | 2,691,787 | ||||||
Automatic Data Processing, Inc. (IT Services) | 29,500 | 1,543,735 | ||||||
CIT Group, Inc. (Commercial Banks) (b) | 47,500 | 1,655,375 | ||||||
X Coca-Cola Co. (The) (Beverages) | 37,400 | 2,555,168 | ||||||
Coca-Cola Enterprises, Inc. (Beverages) | 75,150 | 2,015,523 | ||||||
X Comcast Corp. Class A (Media) | 120,450 | 2,770,350 | ||||||
Danaher Corp. (Industrial Conglomerates) | 37,150 | 1,796,202 | ||||||
X Deere & Co. (Machinery) | 33,400 | 2,535,060 | ||||||
Electronic Arts, Inc. (Software) (b) | 101,845 | 2,378,081 | ||||||
Laboratory Corp. of America Holdings (Health Care Providers & Services) (b) | 25,800 | 2,163,330 | ||||||
McDonald’s Corp. (Hotels, Restaurants & Leisure) | 22,700 | 2,107,695 | ||||||
X Microsoft Corp. (Software) | 105,800 | 2,817,454 | ||||||
X Nalco Holding Co. (Chemicals) | 68,607 | 2,587,170 | ||||||
X Oracle Corp. (Software) | 83,180 | 2,725,808 | ||||||
UnitedHealth Group, Inc. (Health Care Providers & Services) | 31,400 | 1,506,886 | ||||||
X Visa, Inc. Class A (IT Services) | 27,960 | 2,607,550 | ||||||
Visteon Corp. (Auto Components) (b) | 30,300 | 1,685,286 | ||||||
40,607,360 | ||||||||
Total Common Stocks (Cost $66,993,591) | 71,986,451 | |||||||
Preferred Stock 3.2% | ||||||||
Bermuda 3.2% | ||||||||
PartnerRe, Ltd. 7.25% (Insurance) | 95,750 | 2,465,562 | ||||||
Total Preferred Stock (Cost $2,423,103) | 2,465,562 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 1.9% | ||||||||
Repurchase Agreement 1.9% | ||||||||
United States 1.9% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $1,474,140 (Collateralized by a United States Treasury Bond with a rate of 4.625% and a maturity date of 2/15/40, with a Principal Amount of $1,185,000 and a Market Value of $1,506,419) (Capital Markets) | $ | 1,474,139 | 1,474,139 | |||||
Total Short-Term Investment (Cost $1,474,139) | 1,474,139 | |||||||
Total Investments (Cost $70,890,833) (d) | 98.0 | % | 75,926,152 | |||||
Other Assets, Less Liabilities | 2.0 | 1,534,591 | ||||||
Net Assets | 100.0 | % | $ | 77,460,743 | ||||
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. Any of the ten largest holdings may be a security traded on more than one exchange. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
(a) | ADR—American Depositary Receipt | |
(b) | Non-income producing security | |
(c) | Fair valued security—The total market value of this security at October 31, 2011 is $23,415, which represents less than one-tenth of a percent of the Fund’s net assets. | |
(d) | At October 31, 2011, cost is $71,244,716 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 5,224,724 | ||
Gross unrealized depreciation | (543,288 | ) | ||
Net unrealized appreciation | $ | 4,681,436 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks (b)(c) | $ | 45,485,104 | $ | 26,477,932 | $ | 23,415 | $ | 71,986,451 | ||||||||
Preferred Stock | 2,465,562 | — | — | 2,465,562 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 1,474,139 | — | 1,474,139 | ||||||||||||
Total Investments in Securities | $ | 47,950,666 | $ | 27,952,071 | $ | 23,415 | $ | 75,926,152 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | Level 1 assets represent ADRs and securities listed under United States. |
(c) | The Level 3 security valued at $23,415 is a security listed under United Kingdom within the Aerospace and Defense industry within the Common Stocks section of the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
During the year ended October 31, 2011, certain foreign equity securities with a market value of $7,041,634 held by the Fund at October 31, 2010, transferred from Level 1 to Level 2 due to these securities being fair valued at year end by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures. (See Note 2)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Change in | ||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||||||||||||||||||
(Depreciation) | ||||||||||||||||||||||||||||||||||||||||
from | ||||||||||||||||||||||||||||||||||||||||
Balance | Change in | Balance | Investments | |||||||||||||||||||||||||||||||||||||
as of | Accrued | Realized | Unrealized | Transfers | Transfers | as of | Still Held at | |||||||||||||||||||||||||||||||||
October 31, | Discounts | Gain | Appreciation | in to | out of | October 31, | October 31, | |||||||||||||||||||||||||||||||||
Investments in Securities | 2010 | (Premiums) | (Loss) | (Depreciation) | Purchases | Sales | Level 3 | Level 3 | 2011 | 2011 (a) | ||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||||
Aerospace & Defense | $ | 14,577 | $ | — | $ | (65 | ) | $ | (43 | ) | $ | 23,291 | $ | (14,345 | ) | $ | — | $ | — | $ | 23,415 | $ | 124 | |||||||||||||||||
Total | $ | 14,577 | $ | — | $ | (65 | ) | $ | (43 | ) | $ | 23,291 | $ | (14,345 | ) | $ | — | $ | — | $ | 23,415 | $ | 124 | |||||||||||||||||
(a) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
The notes to the financial statements are an integral part of,
12 MainStay Epoch Global Choice Fund | and should be read in conjunction with, the financial statements. |
The table below sets forth the diversification of MainStay Epoch Global Choice Fund investments by industry.
Industry Diversification (Unaudited)
Value | Percent † | |||||||
Aerospace & Defense | $ | 4,086,001 | 5.3 | % | ||||
Auto Components | 1,685,286 | 2.2 | ||||||
Beverages | 6,325,108 | 8.2 | ||||||
Capital Markets | 1,474,139 | 1.9 | ||||||
Chemicals | 2,587,170 | 3.3 | ||||||
Commercial Banks | 1,655,375 | 2.1 | ||||||
Computers & Peripherals | 2,691,787 | 3.5 | ||||||
Containers & Packaging | 1,840,859 | 2.4 | ||||||
Diversified Telecommunication Services | 1,844,056 | 2.4 | ||||||
Energy Equipment & Services | 2,542,759 | 3.3 | ||||||
Health Care Providers & Services | 6,180,207 | 8.0 | ||||||
Hotels, Restaurants & Leisure | 2,107,695 | 2.7 | ||||||
Industrial Conglomerates | 1,796,202 | 2.3 | ||||||
Insurance | 2,465,562 | 3.2 | ||||||
IT Services | 4,151,285 | 5.3 | ||||||
Machinery | 2,535,060 | 3.3 | ||||||
Media | 7,858,647 | 10.1 | ||||||
Oil, Gas & Consumable Fuels | 2,464,900 | 3.2 | ||||||
Pharmaceuticals | 4,536,535 | 5.8 | ||||||
Software | 7,921,343 | 10.2 | ||||||
Tobacco | 2,481,783 | 3.2 | ||||||
Wireless Telecommunication Services | 4,694,393 | 6.1 | ||||||
75,926,152 | 98.0 | |||||||
Other Assets, Less Liabilities | 1,534,591 | 2.0 | ||||||
Net Assets | $ | 77,460,743 | 100.0 | % | ||||
† | Percentages indicated are based on Fund net assets. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $70,890,833) | $ | 75,926,152 | ||
Cash denominated in foreign currencies (identified cost $256,792) | 255,631 | |||
Receivables: | ||||
Investment securities sold | 1,191,364 | |||
Fund shares sold | 86,682 | |||
Dividends | 82,894 | |||
Other assets | 40,886 | |||
Total assets | 77,583,609 | |||
Liabilities | ||||
Payables: | ||||
Manager (See Note 3) | 54,503 | |||
Investment securities purchased | 26,209 | |||
Shareholder communication | 16,769 | |||
Professional fees | 15,892 | |||
Custodian | 2,969 | |||
Fund shares redeemed | 2,843 | |||
Transfer agent (See Note 3) | 1,940 | |||
NYLIFE Distributors (See Note 3) | 502 | |||
Trustees | 156 | |||
Accrued expenses | 1,083 | |||
Total liabilities | 122,866 | |||
Net assets | $ | 77,460,743 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 5,313 | ||
Additional paid-in capital | 83,344,329 | |||
83,349,642 | ||||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (10,925,371 | ) | ||
Net unrealized appreciation (depreciation) on investments | 5,035,319 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | 1,153 | |||
Net assets | $ | 77,460,743 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 246,531 | ||
Shares of beneficial interest outstanding | 17,351 | |||
Net asset value per share outstanding | $ | 14.21 | ||
Maximum sales charge (5.50% of offering price) | 0.83 | |||
Maximum offering price per share outstanding | $ | 15.04 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 3,432,182 | ||
Shares of beneficial interest outstanding | 240,881 | |||
Net asset value per share outstanding | $ | 14.25 | ||
Maximum sales charge (5.50% of offering price) | 0.83 | |||
Maximum offering price per share outstanding | $ | 15.08 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 59,360 | ||
Shares of beneficial interest outstanding | 4,238 | |||
Net asset value and offering price per share outstanding | $ | 14.01 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 73,722,670 | ||
Shares of beneficial interest outstanding | 5,050,457 | |||
Net asset value and offering price per share outstanding | $ | 14.60 | ||
The notes to the financial statements are an integral part of,
14 MainStay Epoch Global Choice Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 854,246 | ||
Expenses | ||||
Manager (See Note 3) | 525,712 | |||
Registration | 69,595 | |||
Professional fees | 56,852 | |||
Shareholder communication | 32,827 | |||
Custodian | 29,455 | |||
Transfer agent (See Note 3) | 12,805 | |||
Distribution/Service—Investor Class (See Note 3) | 463 | |||
Distribution/Service—Class A (See Note 3) | 3,771 | |||
Distribution/Service—Class C (See Note 3) | 483 | |||
Trustees | 1,343 | |||
Miscellaneous | 21,331 | |||
Total expenses before waiver/reimbursement | 754,637 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (71,257 | ) | ||
Net expenses | 683,380 | |||
Net investment income (loss) | 170,866 | |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Security transactions | 2,667,257 | |||
Foreign currency transactions | (10,949 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 2,656,308 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 665,893 | |||
Translation of other assets and liabilities in foreign currencies | (17,247 | ) | ||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 648,646 | |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 3,304,954 | |||
Net increase (decrease) in net assets resulting from operations | $ | 3,475,820 | ||
(a) | Dividends recorded net of foreign withholding taxes in the amount of $62,220. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Statements of Changes in Net Assets
for the year ended October 31, 2011, the period January 1, 2010 through October 31, 2010 (a) and the year ended December 31, 2009
2011 | 2010 | 2009 | ||||||||||
Increase (Decrease) in Net Assets | ||||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | 170,866 | $ | 153,793 | $ | 389,464 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 2,656,308 | (195,401 | ) | (7,201,136 | ) | |||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 648,646 | 2,877,788 | 22,464,691 | |||||||||
Net increase (decrease) in net assets resulting from operations | 3,475,820 | 2,836,180 | 15,653,019 | |||||||||
Dividends to shareholders: | ||||||||||||
From net investment income: | ||||||||||||
Investor Class | — | — | (88 | ) | ||||||||
Class A | (1,344 | ) | — | (16,477 | ) | |||||||
Class C | — | — | (71 | ) | ||||||||
Class I | (197,166 | ) | — | (376,919 | ) | |||||||
Total dividends to shareholders | (198,510 | ) | — | (393,555 | ) | |||||||
Capital share transactions: | ||||||||||||
Net proceeds from sale of shares | 51,507,857 | 32,585,851 | 42,609,969 | |||||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 189,249 | — | 349,914 | |||||||||
Cost of shares redeemed | (34,220,736 | ) | (20,719,033 | )(b) | (73,269,346 | ) | ||||||
Increase (decrease) in net assets derived from capital share transactions | 17,476,370 | 11,866,818 | (30,309,463 | ) | ||||||||
Net increase (decrease) in net assets | 20,753,680 | 14,702,998 | (15,049,999 | ) | ||||||||
Net Assets | ||||||||||||
Beginning of period | 56,707,063 | 42,004,065 | 57,054,064 | |||||||||
End of period | $ | 77,460,743 | $ | 56,707,063 | $ | 42,004,065 | ||||||
Distributions in excess of net investment income at end of period | $ | — | $ | (106,356 | ) | $ | (66,130 | ) | ||||
(a) | The Fund changed its fiscal year end from December 31 to October 31. |
(b) | Cost of shares redeemed net of redemption fees of $1 for the ten-month period ended October 31, 2010. (See Note 2 (J)) |
The notes to the financial statements are an integral part of,
16 MainStay Epoch Global Choice Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||
January 1, | November 16, | |||||||||||||
Year | 2010 | 2009** | ||||||||||||
ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 14.22 | $ | 13.49 | $ | 13.36 | ||||||||
Net investment income (loss) (a) | (0.02 | ) | (0.02 | ) | 0.00 | ‡ | ||||||||
Net realized and unrealized gain (loss) on investments | 0.01 | 0.80 | 0.18 | |||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.05 | ) | (0.00 | )‡ | ||||||||
Total from investment operations | (0.01 | ) | 0.73 | 0.18 | ||||||||||
Less dividends: | ||||||||||||||
From net investment income | — | — | (0.05 | ) | ||||||||||
Net asset value at end of period | $ | 14.21 | $ | 14.22 | $ | 13.49 | ||||||||
Total investment return (b) | (0.07 | %) | 5.41 | % (c) | 1.33 | % (c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | (0.11 | %) | (0.17 | %)†† | 0.03 | %†† | ||||||||
Net expenses | 1.76 | % | 1.76 | % †† | 1.53 | %†† | ||||||||
Expenses (before waiver/reimbursement) | 1.90 | % | 2.10 | % †† | 1.72 | %†† | ||||||||
Portfolio turnover rate | 162 | % | 151 | % | 74 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 247 | $ | 119 | $ | 28 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 17 |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||||||
January 1, | August 15, | |||||||||||||||||||||||||
Year | 2010 | 2006** | ||||||||||||||||||||||||
ended | through | through | ||||||||||||||||||||||||
October 31, | October 31, | Year ended December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010*** | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 14.24 | $ | 13.49 | $ | 10.84 | $ | 17.43 | $ | 16.97 | $ | 15.31 | ||||||||||||||
Net investment income (loss) | 0.02 | 0.01 | (a) | 0.04 | (a) | 0.02 | (a) | 0.01 | (0.01 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | 0.79 | 2.70 | (6.58 | ) | 1.45 | 1.67 | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.05 | ) | (0.01 | ) | — | — | — | |||||||||||||||||
Total from investment operations | 0.02 | 0.75 | 2.73 | (6.56 | ) | 1.46 | 1.66 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.01 | ) | — | (0.08 | ) | (0.03 | ) | (0.01 | ) | — | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.00 | )‡ | (1.05 | ) | — | ||||||||||||||||||
Total dividends and distributions | (0.01 | ) | — | (0.08 | ) | (0.03 | ) | (1.06 | ) | — | ||||||||||||||||
Redemption fee (b) | — | — | — | — | 0.06 | — | ||||||||||||||||||||
Net asset value at end of period | $ | 14.25 | $ | 14.24 | $ | 13.49 | $ | 10.84 | $ | 17.43 | $ | 16.97 | ||||||||||||||
Total investment return (c) | 0.15 | % | 5.56 | % (d) | 25.17 | % | (37.63 | %) | 8.90 | % | 10.84 | % (d) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.13 | % | 0.11 | %†† | 0.30 | % | 0.21 | % | 0.01 | % | (0.21 | %)†† | ||||||||||||||
Net expenses | 1.54 | % | 1.54 | %†† | 1.55 | % | 1.54 | % | 1.54 | % | 1.54 | % †† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.68 | % | 1.88 | %†† | 1.78 | % | 1.75 | % | 1.95 | % | 1.97 | % †† | ||||||||||||||
Portfolio turnover rate | 162 | % | 151 | % | 74 | % | 47 | % | 43 | % | 64 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,432 | $ | 1,855 | $ | 2,973 | $ | 339 | $ | 120 | $ | 142 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
18 MainStay Epoch Global Choice Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||
January 1, | November 16, | |||||||||||||
Year | 2010 | 2009** | ||||||||||||
ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 14.12 | $ | 13.49 | $ | 13.36 | ||||||||
Net investment income (loss) (a) | (0.12 | ) | (0.10 | ) | (0.01 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | 0.01 | 0.78 | 0.17 | |||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.05 | ) | (0.00 | )‡ | ||||||||
Total from investment operations | (0.11 | ) | 0.63 | 0.16 | ||||||||||
Less dividends: | ||||||||||||||
From net investment income | — | — | (0.03 | ) | ||||||||||
Net asset value at end of period | $ | 14.01 | $ | 14.12 | $ | 13.49 | ||||||||
Total investment return (b) | (0.78 | %) | 4.67 | % (c) | 1.23 | % (c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | (0.86 | %) | (0.92 | %)†† | (0.78 | %)†† | ||||||||
Net expenses | 2.51 | % | 2.51 | % †† | 2.28 | % †† | ||||||||
Expenses (before waiver/reimbursement) | 2.65 | % | 2.85 | % †† | 2.47 | % †† | ||||||||
Portfolio turnover rate | 162 | % | 151 | % | 74 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 59 | $ | 38 | $ | 28 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 19 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||||||
January 1, | ||||||||||||||||||||||||||
Year | 2010 | |||||||||||||||||||||||||
ended | through | |||||||||||||||||||||||||
October 31, | October 31, | Year ended December 31, | ||||||||||||||||||||||||
2011 | 2010*** | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 14.59 | $ | 13.79 | $ | 11.06 | $ | 17.47 | $ | 16.99 | $ | 14.91 | ||||||||||||||
Net investment income (loss) | 0.05 | (a) | 0.04 | (a) | 0.07 | (a) | 0.05 | (a) | 0.04 | 0.01 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.01 | 0.81 | 2.76 | (6.41 | ) | 1.54 | 2.07 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.05 | ) | (0.01 | ) | — | — | — | |||||||||||||||||
Total from investment operations | 0.06 | 0.80 | 2.82 | (6.36 | ) | 1.58 | 2.08 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.05 | ) | — | (0.09 | ) | (0.05 | ) | (0.05 | ) | (0.00 | )‡ | |||||||||||||||
From net realized gain on investments | — | — | — | (0.00 | )‡ | (1.05 | ) | — | ||||||||||||||||||
Total dividends and distributions | (0.05 | ) | — | (0.09 | ) | (0.05 | ) | (1.10 | ) | (0.00 | )‡ | |||||||||||||||
Redemption fee (b) | — | 0.00 | ‡ | — | 0.00 | ‡ | — | — | ||||||||||||||||||
Net asset value at end of period | $ | 14.60 | $ | 14.59 | $ | 13.79 | $ | 11.06 | $ | 17.47 | $ | 16.99 | ||||||||||||||
Total investment return (c) | 0.42 | % | 5.80 | % (d) | 25.53 | % | (36.37 | %) | 9.27 | % | 13.96 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.33 | % | 0.35 | %†† | 0.62 | % | 0.42 | % | 0.26 | % | 0.05 | % | ||||||||||||||
Net expenses | 1.29 | % | 1.29 | %†† | 1.29 | % | 1.29 | % | 1.29 | % | 1.29 | % | ||||||||||||||
Expenses (before reimbursement/waiver) | 1.43 | % | 1.63 | %†† | 1.54 | % | 1.50 | % | 1.70 | % | 1.72 | % | ||||||||||||||
Portfolio turnover rate | 162 | % | 151 | % | 74 | % | 47 | % | 43 | % | 64 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 73,723 | $ | 54,695 | $ | 38,976 | $ | 56,715 | $ | 34,911 | $ | 27,108 |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
20 MainStay Epoch Global Choice Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Epoch Global Choice Fund (the “Fund”), a diversified fund. The Fund is the successor to the Epoch U.S. All Cap Equity Fund (the “Predecessor Fund”), which was a series of a different registered investment company for which Epoch Investment Partners, Inc. served as investment advisor. The financial statements of the Fund reflect the historical results of the Institutional Class and Class P shares of the Predecessor Fund prior to its reorganization on November 16, 2009. Upon the completion of the reorganization, the Class I and Class A shares of the Fund assumed the performance, financial and other information of the Institutional Class and Class P shares of the Predecessor Fund, respectively. All information and references to periods prior to the commencement of operations of the Fund refer to the Predecessor Fund.
The Fund currently offers four classes of shares. Investor Class and Class C shares commenced operations on November 16, 2009. Class I and Class A shares commenced operations (under former designations) on July 25, 2005 and August 15, 2006, respectively. Effective January 4, 2010, the Fund changed its fiscal year end from December 31 to October 31. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The four classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek long-term capital appreciation.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
mainstayinvestments.com 21
Notes to Financial Statements (continued)
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund held securities with a value of $23,415 that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or Subadvisor conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. At October 31, 2011, certain foreign equity securities held by the Fund were fair valued in such a manner.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required. Investment income received by the Fund from foreign sources may be subject to foreign income taxes. These foreign income taxes are generally withheld at the source.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased, other than Short-Term Investments, for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities or, in the case of a callable security, over the period to the first date of call. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses
22 MainStay Epoch Global Choice Fund
can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Foreign Currency Transactions. The books and records of the Fund are kept in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling exchange rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date, and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(I) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(J) Redemption Fee. Prior to April 1, 2010, the Fund imposed a 2.00% redemption fee on redemptions (including exchanges) of Fund shares made within 60 days of their date of purchase for any class. The redemption fee was designed to offset brokerage commissions and other costs associated with short-term trading and was not assessed on shares acquired through the reinvestment of dividends or distributions paid by the Fund. The redemption fees are included in the Statement of Changes in Net Assets’ shares redeemed amount and were retained by the Fund for the period ended October 31, 2010.
(K) Concentration of Risk. The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets.
(L) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no
mainstayinvestments.com 23
Notes to Financial Statements (continued)
assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. Epoch Investment Partners, Inc. (“Epoch” or “Subadvisor”), a registered investment adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and Epoch, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of 1.00% of the Fund’s average daily net assets.
The Manager has contractually agreed to waive a portion of the management fees and/or reimburse expenses so that Total Annual Fund Operating Expenses of a class do not exceed the following percentages of average daily net assets: Class A, 1.54% and Class I, 1.29%. New York Life Investments will apply an equivalent waiver or reimbursement, in an amount equal to the number of basis points waived for Class A shares, to Investor Class and Class C shares of the Fund. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $525,712 and waived its fees and/or reimbursed expenses in the amount of $71,257.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class C Plan, Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $837 and $1,738, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Class C shares of $206 for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 455 | ||
Class A | 342 | |||
Class C | 120 | |||
Class I | 11,888 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Investor Class | $ | 26,686 | 10.8 | % | ||||
Class C | 26,286 | 44.3 | ||||||
24 MainStay Epoch Global Choice Fund
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $749. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | — | $ | (10,571,488 | ) | $ | — | $ | 4,682,589 | $ | (5,888,899 | ) | |||||||
The difference between book-basis and tax basis unrealized appreciation (depreciation) is primarily due to wash sale deferrals.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||
Undistributed | Net Realized | |||
Net Investment | Gain (Loss) on | Additional | ||
Income (Loss) | Investments | Paid-In Capital | ||
$134,000 | $7,343 | $(141,343) | ||
The reclassifications for the Funds are primarily due to foreign currency gain (loss), net operating loss, distributions in excess of current earnings and passive foreign investment companies (“PFIC”) gain (loss).
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $10,571,488 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2017 | $ | 5,539 | ||||
2018 | 5,032 | |||||
Total | $ | 10,571 | ||||
The Fund utilized $2,800,876 of capital loss carryforwards during the year ended October 31, 2011.
The tax character of distributions paid during the year ended October 31, 2011, the period January 1, 2010 through October 31, 2010, and the year ended December 31, 2009 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | 2009 | ||||||||||
Distributions paid from: | ||||||||||||
Ordinary Income | $ | 198,510 | $ | — | $ | 393,555 | ||||||
Note 5–Foreign Currency Transactions
As of October 31, 2011, the Fund held the following foreign currencies:
Currency | Cost | Value | ||||||||||
Brazilian Real | BRL | 13,615 | USD | 8,535 | USD | 7,930 | ||||||
Canadian Dollar | CAD | 1,538 | 1,522 | 1,543 | ||||||||
Euro | EUR | 119,916 | 166,951 | 165,928 | ||||||||
Pound Sterling | GBP | 49,885 | 79,764 | 80,210 | ||||||||
South Korean Won | KRW | 21,846 | 20 | 20 | ||||||||
Total | USD | 256,792 | USD | 255,631 | ||||||||
Note 6–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the
mainstayinvestments.com 25
Notes to Financial Statements (continued)
commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $99,743 and $83,414, respectively.
Note 9–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 13,364 | $ | 198,056 | |||||
Shares redeemed | (5,413 | ) | (78,039 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 7,951 | 120,017 | ||||||
Shares converted into Investor Class (See Note 1) | 2,253 | 30,455 | ||||||
Shares converted from Investor Class (See Note 1) | (1,190 | ) | (17,985 | ) | ||||
Net increase (decrease) | 9,014 | $ | 132,487 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 6,305 | $ | 85,170 | |||||
Shares redeemed | (30 | ) | (401 | ) | ||||
Net increase (decrease) | 6,275 | $ | 84,769 | |||||
Period ended December 31, 2009 (a): | ||||||||
Shares sold | 2,056 | $ | 27,501 | |||||
Shares issued to shareholders in reinvestment of dividends | 6 | 88 | ||||||
Net increase (decrease) | 2,062 | $ | 27,589 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 205,957 | $ | 2,930,580 | |||||
Shares issued to shareholders in reinvestment of dividends | 84 | 1,225 | ||||||
Shares redeemed | (94,388 | ) | (1,414,256 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 111,653 | 1,517,549 | ||||||
Shares converted into Class A (See Note 1) | 1,188 | 17,985 | ||||||
Shares converted from Class A (See Note 1) | (2,248 | ) | (30,455 | ) | ||||
Net increase (decrease) | 110,593 | $ | 1,505,079 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 28,573 | $ | 389,854 | |||||
Shares redeemed | (118,700 | ) | (1,577,933 | ) | ||||
Net increase (decrease) | (90,127 | ) | $ | (1,188,079 | ) | |||
Year ended December 31, 2009: | ||||||||
Shares sold | 232,099 | $ | 2,718,761 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,055 | 14,207 | ||||||
Shares redeemed | (44,035 | ) | (489,842 | ) | ||||
Net increase (decrease) | 189,119 | $ | 2,243,126 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,414 | $ | 34,307 | |||||
Shares redeemed | (897 | ) | (12,586 | ) | ||||
Net increase (decrease) | 1,517 | $ | 21,721 | |||||
Ten-month period ended October 31, 2010: | �� | |||||||
Shares sold | 1,063 | $ | 14,340 | |||||
Shares redeemed | (407 | ) | (5,555 | ) | ||||
Net increase (decrease) | 656 | $ | 8,785 | |||||
Period ended December 31, 2009 (a): | ||||||||
Shares sold | 2,060 | $ | 27,500 | |||||
Shares issued to shareholders in reinvestment of dividends | 5 | 71 | ||||||
Net increase (decrease) | 2,065 | $ | 27,571 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 3,433,675 | $ | 48,344,914 | |||||
Shares issued to shareholders in reinvestment of dividends | 12,661 | 188,024 | ||||||
Shares redeemed | (2,144,493 | ) | (32,715,855 | ) | ||||
Net increase (decrease) | 1,301,843 | $ | 15,817,083 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 2,328,069 | $ | 32,096,487 | |||||
Shares redeemed | (1,404,901 | ) | (19,135,144 | ) | ||||
Net increase (decrease) | 923,168 | $ | 12,961,343 | |||||
Year ended December 31, 2009: | ||||||||
Shares sold | 3,257,545 | $ | 39,836,207 | |||||
Shares issued to shareholders in reinvestment of dividends | 24,319 | 335,548 | ||||||
Shares redeemed | (5,582,489 | ) | (72,779,504 | ) | ||||
Net increase (decrease) | (2,300,625 | ) | $ | (32,607,749 | ) | |||
(a) Investor Class shares and Class C shares were first offered on November 16, 2009. |
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
26 MainStay Epoch Global Choice Fund
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Epoch Global Choice Fund (the “Fund”), one of the funds comprising MainStay Funds Trust, as of October 31, 2011 and the related statement of operations for the year then ended, the statements of changes in net assets for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009, and the financial highlights for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the years or periods presented through December 31, 2008 were audited by other auditors, whose report dated February 27, 2009 expressed an unqualified opinion thereon.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Epoch Global Choice Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
mainstayinvestments.com 27
Federal Income Tax Information (Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2011, the Fund designated approximately $873,890 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2011, should be multiplied by 77.3% to arrive at the amount eligible for the corporate dividends received deduction.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; and (ii) on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the Fund’s website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
28 MainStay Epoch Global Choice Fund
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
mainstayinvestments.com 29
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
30 MainStay Epoch Global Choice Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
mainstayinvestments.com 31
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
32 MainStay Epoch Global Choice Fund
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
mainstayinvestments.com 33
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-25008 MS284-11 | MSEGC11-12/11 |
NF2
MainStay Epoch Global Equity Yield Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 15 | |
Notes to Financial Statements | 22 | |
Report of Independent Registered Public Accounting Firm | 29 | |
Federal Income Tax Information | 30 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 30 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 30 | |
Board Members and Officers | 31 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
�� | ||||||||||||||||||||
Since | ||||||||||||||||||||
Inception | Gross | |||||||||||||||||||
of Class | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (12/27/05) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | 0 | .56% | 1 | .03% | 3 | .83% | 1 | .31% | ||||||||||
Excluding sales charges | 6 | .41 | 2 | .18 | 4 | .84 | 1 | .31 | ||||||||||||
Since | ||||||||||||||||||||
Inception | Gross | |||||||||||||||||||
of Class | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (8/2/06) | Ratio2 | |||||||||||||||
Class A Shares4 | Maximum 5.5% Initial Sales Charge | With sales charges | 0 | .60% | 1 | .03% | 2 | .47% | 1 | .39% | ||||||||||
Excluding sales charges | 6 | .45 | 2 | .18 | 3 | .58 | 1 | .39 | ||||||||||||
Since | ||||||||||||||||||||
Inception | Gross | |||||||||||||||||||
of Class | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (12/27/05) | Ratio2 | |||||||||||||||
Class C Shares3 | Maximum 1% CDSC | With sales charges | 4 | .67% | 1 | .31% | 3 | .97% | 2 | .06% | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 5 | .67 | 1 | .31 | 3 | .97 | 2 | .06 | |||||||||||
Since | ||||||||||||||||||||
Inception | Gross | |||||||||||||||||||
of Class | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (12/27/05) | Ratio2 | |||||||||||||||
Class I Shares4 | No Sales Charge | 6 | .76% | 2 | .30% | 4 | .98% | 1 | .13% | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class and Class C shares, first offered on November 16, 2009, include the historical performance of Class I shares from December 27, 2005 through November 15, 2009, adjusted for differences in certain expenses |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
Since | ||||||||||||
One | Five | Inception | ||||||||||
Benchmark Performance | Year | Years | of the Fund | |||||||||
MSCI World Index5 | 1 | .76% | –1 | .00% | 1 | .44% | ||||||
Average Lipper Global Large-Cap Core Fund6 | 0 | .49 | –0 | .55 | 1 | .88 | ||||||
and fees. Unadjusted, the performance shown for Investor Class and Class C shares might have been lower.
4. | Performance figures for Class I shares and Class A shares include the historical performance of the Institutional shares from December 27, 2005 and the Class P shares from August 2, 2006, respectively, of the Epoch Global Equity Shareholder Yield Fund (the predecessor to the Fund) through November 15, 2009. The Epoch Global Equity Shareholder Yield Fund was subject to a different fee structure and was advised by Epoch Investment Partners, Inc. |
5. | The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The average Lipper global large-cap core fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies both inside and outside of the U.S. with market capitalizations (on a three-year weighted basis) above Lipper’s global large-cap floor. Global large-cap core funds typically have an average price-to-cash flow ratio, price-to-book ratio, and three-year sales-per-share growth value compared to their large-cap-specific subset of the S&P/Citigroup World BMI. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on total returns with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Epoch Global Equity Yield Fund
Cost in Dollars of a $1,000 Investment in MainStay Epoch Global Equity Yield Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled ”Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 941.40 | $ | 5.68 | $ | 1,019.40 | $ | 5.90 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 941.30 | $ | 5.72 | $ | 1,019.30 | $ | 5.95 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 937.50 | $ | 9.38 | $ | 1,015.50 | $ | 9.75 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 942.40 | $ | 4.50 | $ | 1,020.60 | $ | 4.69 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.16% for Investor Class, 1.17% for Class A, 1.92% for Class C and 0.92% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Portfolio Composition as of October 31, 2011 (Unaudited)
Common Stocks | 95.80 | |||
Short-Term Investment | 6.40 | |||
Preferred Stock | 0.70 | |||
Other Assets, Less Liabilities | (2.90 | ) |
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | Imperial Tobacco Group PLC | |
2. | Vodafone Group PLC | |
3. | BCE, Inc. | |
4. | Pearson PLC | |
5. | Vivendi S.A. | |
6. | Nestle S.A. Registered | |
7. | NiSource, Inc. | |
8. | National Grid PLC | |
9. | Royal Dutch Shell PLC Class A, ADR | |
10. | Total S.A. |
8 MainStay Epoch Global Equity Yield Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Eric Sappenfield, Michael Welhoelter, CFA, and William Priest, CFA, of Epoch Investment Partners, Inc., the Fund’s Subadvisor.
How did MainStay Epoch Global Equity Yield Fund perform relative to its peers and its benchmark for the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Epoch Global Equity Yield Fund returned 6.41% for Investor Class shares, 6.45% for Class A shares and 5.67% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 6.76%. All share classes outperformed the 0.49% return of the average Lipper1 global large-cap core fund and the 1.76% return of the MSCI World Index2 for the 12 months ended October 31, 2011. The MSCI World Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
In a period of slowing economic growth and elevated market volatility, the Fund emphasized companies with growing free cash flow and a policy of allocating excess cash to shareholders by providing dividends, repurchasing shares and debt pay-downs. This positioning helped the Fund’s relative performance during the reporting period.
During the reporting period, which sectors were the strongest contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the sector that provided the strongest positive contribution to the Fund’s performance relative to the MSCI World Index was financials. (Contributions take weightings and total returns into account.) The Fund had an average sector weighting in financials of roughly one-quarter that of the benchmark, which provided a boost to relative returns. Stock selection within the sector, which included avoiding investments in large banks, was also a major contributor to relative performance. The consumer staples and utilities sectors also strengthened the Fund’s performance relative to the MSCI World Index during the reporting period, primarily because of stock selection.
During the reporting period, the weakest contributions to the Fund’s relative performance came from the health care and industrials sectors. While returns from the Fund’s holdings in the telecommunication services sector were positive, the contribution from the sector on a relative basis was slightly negative as the Fund’s holdings lagged those of the benchmark.
During the reporting period, which individual stocks made the strongest contributions to the Fund’s absolute performance and which stocks detracted the most?
On an absolute basis, U.S. tobacco manufacturer Lorillard, U.S. utility company NiSource and Canadian telecommunications company BCE made the strongest contributions to the Fund’s performance.
Lorillard continued to generate significant cash flow during the reporting period, driven by its leading market-share position in the menthol segment and by its strong operating margins. In addition, concerns over a potential ban on menthol cigarettes in the United States dissipated, and Lorillard’s stock reacted positively to the news. NiSource manages pipelines and distributes electricity and natural gas. The company reported strong results during the reporting period, exceeding expectations for revenue and earnings. The company also benefited from a positive regulatory review in one of its markets. BCE, Canada’s largest telecommunications company, reported growth across its business segments, driven by market-leading wireless additions and traction gained in fiber-optic TV and Internet services.
The greatest detractors from the Fund’s absolute performance were U.K.-based transportation company FirstGroup, French telecommunication services company France Telecom and Spanish wireless telecommunication services company Telefonica.
Shares of train and bus operator FirstGroup declined during the reporting period on weakness in the U.S. school transit market because of budget cuts and poor weather. These setbacks offset gains in the company’s U.K. rail operations and growth in North American contract bus services. France Telecom experienced weakness on worries about the company’s foreign acquisitions and new competitive threats in its domestic market. Management sought to reassure investors about the free cash flow the company generates and the company’s commitment to pay a high cash dividend. Telefonica faced pricing pressures and higher costs for infrastructure development during the reporting period.
Did the Fund make any significant purchases or sales during the reporting period?
Among the stocks that the Fund purchased during the reporting period were U.S. movie-theater operator Regal Entertainment, U.S.-based defense contractor Lockheed Martin and U.S. energy infrastructure company Williams Partners.
Regal Entertainment has growing operations and, in our view, the financial strength to sustain its shareholder yield. We added Lockheed Martin to the Fund after the company satisfactorily addressed its long-term pension obligations without impairing its dividend. The position in Lockheed Martin helped increase the overall yield and diversity of the Fund. We added Williams Partners for its solid balance sheet and record of high cash distributions.
During the reporting period, we sold the Fund’s position in Norwegian energy group Statoil as the company shifted its capital allocation policy toward expanding production capacity
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the MSCI World Index.
mainstayinvestments.com 9
and finding new sources of oil rather than toward shareholder yield. U.S. kitchen, home and beauty product company Tupperware Brands had good share price performance, and we sold the Fund’s position in the stock as it reached our price target.
How did the Fund’s sector weightings change during the reporting period?
The only sector with a meaningful increase in its Fund weighting during the reporting period was consumer discretionary. The Fund moved from a substantially underweight position relative to the benchmark to a position that was closer to the sector weighting in the MSCI World Index. During the reporting period, we reduced the degree of the Fund’s overweight positions in the utilities and consumer staples sectors.
How was the Fund positioned at the end of October 2011?
As of October 31, 2011, the Fund’s most substantially overweight sector positions relative to the MSCI World Index were in telecommunication services, utilities and consumer staples. As of the same date, the Fund’s most substantially underweight sector positions relative to the MSCI World Index were in financials and information technology.
The Fund continues to focus on companies with strong balance sheets and growing free cash flow that deliver returns to shareholders through significant cash dividends, share repurchases and debt paydowns.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Epoch Global Equity Yield Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 95.8%† | ||||||||
Australia 1.6% | ||||||||
BHP Billiton, Ltd., Sponsored ADR (Metals & Mining) (a) | 63,500 | $ | 4,958,080 | |||||
JB Hi-Fi, Ltd. (Specialty Retail) | 317,100 | 5,228,548 | ||||||
Westpac Banking Corp. (Commercial Banks) | 250,902 | 5,839,735 | ||||||
16,026,363 | ||||||||
Belgium 2.0% | ||||||||
Anheuser-Busch InBev N.V. (Beverages) | 256,300 | 14,229,651 | ||||||
Mobistar S.A. (Wireless Telecommunication Services) | 118,100 | 6,699,555 | ||||||
20,929,206 | ||||||||
Brazil 0.9% | ||||||||
CPFL Energia S.A. (Electric Utilities) | 714,700 | 9,145,795 | ||||||
Canada 3.5% | ||||||||
X BCE, Inc. (Diversified Telecommunication Services) | 515,500 | 20,433,815 | ||||||
Rogers Communications, Inc. Class B (Wireless Telecommunication Services) | 240,950 | 8,787,090 | ||||||
Shaw Communications, Inc. (Media) | 366,100 | 7,415,660 | ||||||
36,636,565 | ||||||||
France 7.1% | ||||||||
Air Liquide S.A. (Chemicals) | 43,933 | 5,685,606 | ||||||
France Telecom S.A. (Diversified Telecommunication Services) | 699,900 | 12,591,935 | ||||||
SCOR SE (Insurance) | 366,800 | 8,531,979 | ||||||
X Total S.A. (Oil, Gas & Consumable Fuels) | 304,600 | 15,928,595 | ||||||
Vinci S.A. (Construction & Engineering) | 239,000 | 11,730,478 | ||||||
X Vivendi S.A. (Diversified Telecommunication Services) | 822,300 | 18,421,773 | ||||||
72,890,366 | ||||||||
Germany 4.4% | ||||||||
BASF S.E. (Chemicals) | 192,700 | 14,004,821 | ||||||
Bayer A.G. (Pharmaceuticals) | 86,000 | 5,485,068 | ||||||
Daimler A.G. (Automobiles) | 197,800 | 10,048,771 | ||||||
Deutsche Telekom A.G., Registered (Diversified Telecommunication Services) | 590,400 | 7,485,257 | ||||||
Muenchener Rueckversicherungs-Gesellschaft A.G. Registered (Insurance) | 64,970 | 8,709,529 | ||||||
45,733,446 | ||||||||
Hong Kong 1.1% | ||||||||
China Mobile, Ltd., Sponsored ADR (Wireless Telecommunication Services) (a) | 233,900 | 11,124,284 | ||||||
Italy 1.6% | ||||||||
Enel S.p.A. (Electric Utilities) | 1,209,200 | 5,684,764 | ||||||
Terna S.p.A. (Electric Utilities) | 2,788,700 | 10,648,949 | ||||||
16,333,713 | ||||||||
Norway 0.5% | ||||||||
Orkla ASA (Industrial Conglomerates) | 619,600 | 5,368,428 | ||||||
Philippines 0.6% | ||||||||
Philippine Long Distance Telephone Co., Sponsored ADR (Wireless Telecommunication Services) (a) | 119,431 | 6,633,198 | ||||||
Spain 0.8% | ||||||||
Telefonica S.A. (Diversified Telecommunication Services) | 368,200 | 7,855,530 | ||||||
Switzerland 4.6% | ||||||||
X Nestle S.A. Registered (Food Products) | 293,400 | 16,978,978 | ||||||
Novartis A.G. (Pharmaceuticals) | 137,600 | 7,773,383 | ||||||
Roche Holding A.G., Genusscheine (Pharmaceuticals) | 49,500 | 8,137,988 | ||||||
Swisscom A.G. (Diversified Telecommunication Services) | 36,200 | 14,570,619 | ||||||
47,460,968 | ||||||||
Taiwan 1.7% | ||||||||
HTC Corp. (Communications Equipment) | 175,280 | 3,897,619 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR (Semiconductors & Semiconductor Equipment) (a) | 1,072,300 | 13,532,426 | ||||||
17,430,045 | ||||||||
United Kingdom 21.2% | ||||||||
AstraZeneca PLC, Sponsored ADR (Pharmaceuticals) (a) | 303,200 | 14,526,312 | ||||||
BAE Systems PLC (Aerospace & Defense) | 2,250,000 | 9,938,571 | ||||||
British American Tobacco PLC (Tobacco) | 191,400 | 8,758,903 | ||||||
Compass Group PLC (Hotels, Restaurants & Leisure) | 775,500 | 7,038,740 | ||||||
Diageo PLC, Sponsored ADR (Beverages) (a) | 124,400 | 10,310,272 | ||||||
FirstGroup PLC (Road & Rail) | 2,484,700 | 13,267,767 | ||||||
GlaxoSmithKline PLC (Pharmaceuticals) | 360,500 | 8,080,439 | ||||||
X Imperial Tobacco Group PLC (Tobacco) | 569,400 | 20,750,768 | ||||||
Logica PLC (IT Services) | 3,676,000 | 5,529,477 | ||||||
Meggitt PLC (Aerospace & Defense) | 1,272,700 | 7,841,654 | ||||||
X National Grid PLC (Multi-Utilities) | 1,636,810 | 16,212,304 | ||||||
X Pearson PLC (Media) | 1,024,700 | 18,864,765 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. Any of the ten largest holdings may be a security traded on more than one exchange. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
United Kingdom (continued) | ||||||||
Reckitt Benckiser Group PLC (Household Products) | 147,300 | $ | 7,555,487 | |||||
X Royal Dutch Shell PLC Class A, ADR (Oil, Gas & Consumable Fuels) (a) | 227,000 | 16,096,570 | ||||||
Scottish & Southern Energy PLC (Electric Utilities) | 516,400 | 11,098,054 | ||||||
Unilever PLC (Food Products) | 171,900 | 5,738,174 | ||||||
United Utilities Group PLC (Water Utilities) | 1,059,659 | 10,308,327 | ||||||
X Vodafone Group PLC (Wireless Telecommunication Services) | 7,431,200 | 20,608,819 | ||||||
WM Morrison Supermarkets PLC (Food & Staples Retailing) | 1,345,350 | 6,510,288 | ||||||
219,035,691 | ||||||||
United States 44.2% | ||||||||
Abbott Laboratories (Pharmaceuticals) | 109,800 | 5,914,926 | ||||||
Altria Group, Inc. (Tobacco) | 540,300 | 14,885,265 | ||||||
Arthur J. Gallagher & Co. (Insurance) | 322,100 | 9,952,890 | ||||||
AT&T, Inc. (Diversified Telecommunication Services) | 375,655 | 11,010,448 | ||||||
Automatic Data Processing, Inc. (IT Services) | 113,000 | 5,913,290 | ||||||
Bristol-Myers Squibb Co. (Pharmaceuticals) | 404,700 | 12,784,473 | ||||||
CenturyLink, Inc. (Diversified Telecommunication Services) | 410,000 | 14,456,600 | ||||||
Chevron Corp. (Oil, Gas & Consumable Fuels) | 74,000 | 7,773,700 | ||||||
CMS Energy Corp. (Multi-Utilities) | 359,200 | 7,478,544 | ||||||
Coca-Cola Co. (The) (Beverages) | 82,000 | 5,602,240 | ||||||
Coca-Cola Enterprises, Inc. (Beverages) | 200,300 | 5,372,046 | ||||||
Comcast Corp. Class A (Media) | 349,900 | 8,047,700 | ||||||
ConocoPhillips (Oil, Gas & Consumable Fuels) | 164,500 | 11,457,425 | ||||||
Diamond Offshore Drilling, Inc. (Energy Equipment & Services) | 124,300 | 8,146,622 | ||||||
Diebold, Inc. (Computers & Peripherals) | 179,900 | 5,807,172 | ||||||
Duke Energy Corp. (Electric Utilities) | 269,050 | 5,494,001 | ||||||
E.I. du Pont de Nemours & Co. (Chemicals) | 189,800 | 9,123,686 | ||||||
Emerson Electric Co. (Electrical Equipment) | 117,000 | 5,630,040 | ||||||
Enterprise Products Partners, L.P. (Oil, Gas & Consumable Fuels) | 168,500 | 7,553,855 | ||||||
ExxonMobil Corp. (Oil, Gas & Consumable Fuels) | 69,400 | 5,419,446 | ||||||
Genuine Parts Co. (Distributors) | 108,400 | 6,225,412 | ||||||
H.J. Heinz Co. (Food Products) | 101,800 | 5,440,192 | ||||||
Honeywell International, Inc. (Aerospace & Defense) | 118,400 | 6,204,160 | ||||||
Integrys Energy Group, Inc. (Multi-Utilities) | 99,850 | 5,283,064 | ||||||
Johnson & Johnson (Pharmaceuticals) | 119,700 | 7,707,483 | ||||||
Kimberly-Clark Corp. (Household Products) | 165,300 | 11,523,063 | ||||||
Kinder Morgan Energy Partners, L.P. (Oil, Gas & Consumable Fuels) | 140,200 | 10,653,798 | ||||||
Lockheed Martin Corp. (Aerospace & Defense) | 128,300 | 9,737,970 | ||||||
Lorillard, Inc. (Tobacco) | 115,800 | 12,814,428 | ||||||
MarkWest Energy Partners, L.P. (Oil, Gas & Consumable Fuels) | 105,800 | 5,272,014 | ||||||
Mattel, Inc. (Leisure Equipment & Products) | 272,450 | 7,693,988 | ||||||
McDonald’s Corp. (Hotels, Restaurants & Leisure) | 66,800 | 6,202,380 | ||||||
Merck & Co., Inc. (Pharmaceuticals) | 199,700 | 6,889,650 | ||||||
Microchip Technology, Inc. (Semiconductors & Semiconductor Equipment) | 140,400 | 5,076,864 | ||||||
Microsoft Corp. (Software) | 310,200 | 8,260,626 | ||||||
X NiSource, Inc. (Multi-Utilities) | 736,000 | 16,258,240 | ||||||
Oracle Corp. (Software) | 336,700 | 11,033,659 | ||||||
PepsiCo., Inc. (Beverages) | 74,000 | 4,658,300 | ||||||
Philip Morris International, Inc. (Tobacco) | 176,000 | 12,297,120 | ||||||
Pitney Bowes, Inc. (Commercial Services & Supplies) | 422,600 | 8,612,588 | ||||||
Progress Energy, Inc. (Electric Utilities) | 212,300 | 11,060,830 | ||||||
R.R. Donnelley & Sons Co. (Commercial Services & Supplies) | 378,900 | 6,176,070 | ||||||
Regal Entertainment Group Class A (Media) | 734,700 | 10,609,068 | ||||||
Reynolds American, Inc. (Tobacco) | 335,300 | 12,969,404 | ||||||
SCANA Corp. (Multi-Utilities) | 138,900 | 5,872,692 | ||||||
Southern Co. (Electric Utilities) | 236,700 | 10,225,440 | ||||||
Spectra Energy Corp. (Oil, Gas & Consumable Fuels) | 194,400 | 5,565,672 | ||||||
TECO Energy, Inc. (Multi-Utilities) | 494,700 | 9,186,579 | ||||||
Time Warner, Inc. (Media) | 203,700 | 7,127,463 | ||||||
Travelers Cos., Inc. (The) (Insurance) | 91,900 | 5,362,365 | ||||||
Vectren Corp. (Multi-Utilities) | 254,600 | 7,225,548 | ||||||
Verizon Communications, Inc. (Diversified Telecommunication Services) | 342,600 | 12,669,348 | ||||||
Waste Management, Inc. (Commercial Services & Supplies) | 230,200 | 7,580,486 | ||||||
Williams Partners, L.P. (Oil, Gas & Consumable Fuels) | 150,000 | 8,899,500 | ||||||
456,199,833 | ||||||||
Total Common Stocks (Cost $937,113,397) | 988,803,431 | |||||||
Preferred Stock 0.7% | ||||||||
United States 0.7% | ||||||||
MetLife, Inc. 6.50% (Insurance) | 275,800 | 6,977,740 | ||||||
Total Preferred Stock (Cost $6,716,331) | 6,977,740 | |||||||
The notes to the financial statements are an integral part of,
12 MainStay Epoch Global Equity Yield Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Short-Term Investment 6.4% | ||||||||
Repurchase Agreement 6.4% | ||||||||
United States 6.4% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $66,155,907 (Collateralized by a Federal Home Loan Mortgage Corp. security with a rate of 0.78% and a maturity date of 9/8/14, with a Principal Amount of $67,445,000 and a Market Value of $67,483,309) (Capital Markets) | $ | 66,155,889 | $ | 66,155,889 | ||||
Total Short-Term Investment (Cost $66,155,889) | 66,155,889 | |||||||
Total Investments (Cost $1,009,985,617)(b) | 102.9 | % | 1,061,937,060 | |||||
Other Assets, Less Liabilities | (2.9 | ) | (29,510,667 | ) | ||||
Net Assets | 100.0 | % | $ | 1,032,426,393 | ||||
(a) | ADR—American Depositary Receipt. | |
(b) | At October 31, 2011, cost is $1,012,353,553 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 69,248,301 | ||
Gross unrealized depreciation | (19,664,794 | ) | ||
Net unrealized appreciation | $ | 49,583,507 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks (b) | $ | 581,762,053 | $ | 407,041,378 | $ | — | $ | 988,803,431 | ||||||||
Preferred Stock | 6,977,740 | — | — | 6,977,740 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 66,155,889 | — | 66,155,889 | ||||||||||||
Total Investments in Securities | $ | 588,739,793 | $ | 473,197,267 | $ | — | $ | 1,061,937,060 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | Level 1 assets represent ADRs, securities listed under Brazil, Canada, United States and the following common stocks whose primary exchange is the New York Stock Exchange: Air Liquide S.A. under France. |
The Fund recognizes transfers between the levels as of the beginning of the period.
During the year ended October 31, 2011, certain foreign equity securities with a market value of $155,537,641 held by the Fund at October 31, 2010, transferred from Level 1 to Level 2 due to these securities being fair valued at period end by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments October 31, 2011 (continued)
The table below sets forth the diversification of MainStay Epoch Global Equity Yield Fund investments by industry.
Industry Diversification (Unaudited)
Value | Percent † | |||||||
Aerospace & Defense | $ | 33,722,355 | 3.3 | % | ||||
Automobiles | 10,048,771 | 1.0 | ||||||
Beverages | 40,172,509 | 3.9 | ||||||
Capital Markets | 66,155,889 | 6.4 | ||||||
Chemicals | 28,814,113 | 2.8 | ||||||
Commercial Banks | 5,839,735 | 0.6 | ||||||
Commercial Services & Supplies | 22,369,144 | 2.2 | ||||||
Communications Equipment | 3,897,619 | 0.4 | ||||||
Computers & Peripherals | 5,807,172 | 0.6 | ||||||
Construction & Engineering | 11,730,478 | 1.1 | ||||||
Distributors | 6,225,412 | 0.6 | ||||||
Diversified Telecommunication Services | 119,495,325 | 11.6 | ||||||
Electric Utilities | 63,357,833 | 6.1 | ||||||
Electrical Equipment | 5,630,040 | 0.5 | ||||||
Energy Equipment & Services | 8,146,622 | 0.8 | ||||||
Food & Staples Retailing | 6,510,288 | 0.6 | ||||||
Food Products | 28,157,344 | 2.7 | ||||||
Hotels, Restaurants & Leisure | 13,241,120 | 1.3 | ||||||
Household Products | 19,078,550 | 1.9 | ||||||
Industrial Conglomerates | 5,368,428 | 0.5 | ||||||
Insurance | 39,534,503 | 3.8 | ||||||
IT Services | 11,442,767 | 1.1 | ||||||
Leisure Equipment & Products | 7,693,988 | 0.7 | ||||||
Media | 52,064,656 | 5.0 | ||||||
Metals & Mining | 4,958,080 | 0.5 | ||||||
Multi-Utilities | 67,516,971 | 6.5 | ||||||
Oil, Gas & Consumable Fuels | 94,620,575 | 9.2 | ||||||
Pharmaceuticals | 77,299,722 | 7.5 | ||||||
Road & Rail | 13,267,767 | 1.3 | ||||||
Semiconductors & Semiconductor Equipment | 18,609,290 | 1.8 | ||||||
Software | 19,294,285 | 1.9 | ||||||
Specialty Retail | 5,228,548 | 0.5 | ||||||
Tobacco | 82,475,888 | 8.0 | ||||||
Water Utilities | 10,308,327 | 1.0 | ||||||
Wireless Telecommunication Services | 53,852,946 | 5.2 | ||||||
1,061,937,060 | 102.9 | |||||||
Other Assets, Less Liabilities | (29,510,667 | ) | (2.9 | ) | ||||
Net Assets | $ | 1,032,426,393 | 100.0 | % | ||||
† | Percentages indicated are based on Fund net assets. |
The notes to the financial statements are an integral part of,
14 MainStay Epoch Global Equity Yield Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $1,009,985,617) | $ | 1,061,937,060 | ||
Cash denominated in foreign currencies (identified cost $64,260) | 64,288 | |||
Receivables: | ||||
Fund shares sold | 10,763,445 | |||
Investment securities sold | 2,895,848 | |||
Dividends and interest | 1,924,903 | |||
Other assets | 58,067 | |||
Total assets | 1,077,643,611 | |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 43,221,377 | |||
Fund shares redeemed | 1,153,337 | |||
Manager (See Note 3) | 515,320 | |||
Transfer agent (See Note 3) | 185,823 | |||
NYLIFE Distributors (See Note 3) | 66,770 | |||
Professional fees | 34,628 | |||
Shareholder communication | 30,575 | |||
Custodian | 5,124 | |||
Trustees | 3,180 | |||
Accrued expenses | 1,084 | |||
Total liabilities | 45,217,218 | |||
Net assets | $ | 1,032,426,393 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 67,955 | ||
Additional paid-in capital | 1,097,781,429 | |||
1,097,849,384 | ||||
Undistributed net investment income | 118,340 | |||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (117,549,630 | ) | ||
Net unrealized appreciation (depreciation) on investments | 51,951,443 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | 56,856 | |||
Net assets | $ | 1,032,426,393 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 1,406,109 | ||
Shares of beneficial interest outstanding | 92,596 | |||
Net asset value per share outstanding | $ | 15.19 | ||
Maximum sales charge (5.50% of offering price) | 0.88 | |||
Maximum offering price per share outstanding | $ | 16.07 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 204,365,980 | ||
Shares of beneficial interest outstanding | 13,434,892 | |||
Net asset value per share outstanding | $ | 15.21 | ||
Maximum sales charge (5.50% of offering price) | 0.89 | |||
Maximum offering price per share outstanding | $ | 16.10 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 35,975,362 | ||
Shares of beneficial interest outstanding | 2,375,383 | |||
Net asset value and offering price per share outstanding | $ | 15.15 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 790,678,942 | ||
Shares of beneficial interest outstanding | 52,051,689 | |||
Net asset value and offering price per share outstanding | $ | 15.19 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 26,784,471 | ||
Interest | 462 | |||
Total income | 26,784,933 | |||
Expenses | ||||
Manager (See Note 3) | 4,265,615 | |||
Transfer agent (See Note 3) | 1,024,663 | |||
Distribution/Service—Investor Class (See Note 3) | 2,051 | |||
Distribution/Service—Class A (See Note 3) | 299,485 | |||
Distribution/Service—Class C (See Note 3) | 195,841 | |||
Professional fees | 104,132 | |||
Custodian | 100,612 | |||
Registration | 82,228 | |||
Shareholder communication | 70,565 | |||
Trustees | 18,310 | |||
Miscellaneous | 43,651 | |||
Total expenses | 6,207,153 | |||
Net investment income (loss) | 20,577,780 | |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Security transactions | 24,704,507 | |||
Foreign currency transactions | (467,684 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 24,236,823 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,933,996 | ) | ||
Translation of other assets and liabilities in foreign currencies | 34,453 | |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (1,899,543 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 22,337,280 | |||
Net increase (decrease) in net assets resulting from operations | $ | 42,915,060 | ||
(a) | Dividends recorded net of foreign withholding taxes in the amount of $1,443,717. |
The notes to the financial statements are an integral part of,
16 MainStay Epoch Global Equity Yield Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the year ended October 31, 2011, the period January 1, 2010 through October 31, 2010 (a) and the year ended December 31, 2009
2011 | 2010 | 2009 | ||||||||||
Increase (Decrease) in Net Assets | ||||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | 20,577,780 | $ | 11,574,322 | $ | 13,501,084 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 24,236,823 | 6,266,260 | (55,755,456 | ) | ||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (1,899,543 | ) | 24,011,180 | 122,178,121 | ||||||||
Net increase (decrease) in net assets resulting from operations | 42,915,060 | 41,851,762 | 79,923,749 | |||||||||
Dividends to shareholders: | ||||||||||||
From net investment income: | ||||||||||||
Investor Class | (28,600 | ) | (3,160 | ) | (151 | ) | ||||||
Class A | (4,028,901 | ) | (595,753 | ) | (665,965 | ) | ||||||
Class C | (527,347 | ) | (65,459 | ) | (181 | ) | ||||||
Class I | (15,240,097 | ) | (10,622,360 | ) | (10,698,508 | ) | ||||||
Total dividends to shareholders | (19,824,945 | ) | (11,286,732 | ) | (11,364,805 | ) | ||||||
Capital share transactions: | ||||||||||||
Net proceeds from sale of shares | 745,472,098 | 124,739,455 | 184,852,742 | |||||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 15,520,790 | 9,885,810 | 10,140,348 | |||||||||
Cost of shares redeemed | (190,742,375 | ) | (132,730,489 | )(b) | (170,919,032 | )(b) | ||||||
Increase (decrease) in net assets derived from capital share transactions | 570,250,513 | 1,894,776 | 24,074,058 | |||||||||
Net increase (decrease) in net assets | 593,340,628 | 32,459,806 | 92,633,002 | |||||||||
Net Assets | ||||||||||||
Beginning of period | 439,085,765 | 406,625,959 | 313,992,957 | |||||||||
End of period | $ | 1,032,426,393 | $ | 439,085,765 | $ | 406,625,959 | ||||||
Undistributed net investment income at end of period | $ | 118,340 | $ | 1,490,800 | $ | 1,392,718 | ||||||
(a) | The Fund changed its fiscal year end from December 31 to October 31. |
(b) | Cost of shares redeemed net of redemption fees of $11,487 and $136 for the ten-month period ended October 31, 2010 and the year ended December 31, 2009, respectively (See Note 2(J)). |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||
January 1, | November 16, | |||||||||||||
Year | 2010 | 2009** | ||||||||||||
ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 14.72 | $ | 13.72 | $ | 13.46 | ||||||||
Net investment income (loss) | 0.51 | (a) | 0.38 | (a) | 0.05 | |||||||||
Net realized and unrealized gain (loss) on investments | 0.44 | 1.02 | 0.29 | |||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.01 | ) | — | |||||||||
Total from investment operations | 0.94 | 1.39 | 0.34 | |||||||||||
Less dividends: | ||||||||||||||
From net investment income | (0.47 | ) | (0.39 | ) | (0.08 | ) | ||||||||
Net asset value at end of period | $ | 15.19 | $ | 14.72 | $ | 13.72 | ||||||||
Total investment return (b) | 6.41 | % | 10.44 | %(c) | 2.54 | %(c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | 3.32 | % | 3.36 | %†† | 2.67 | %†† | ||||||||
Net expenses | 1.15 | % | 1.16 | %†† | 1.09 | %†† | ||||||||
Expenses (before waiver/reimbursement) | 1.15 | % | 1.31 | %†† | 1.09 | %†† | ||||||||
Portfolio turnover rate | 28 | % | 41 | % | 59 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 1,406 | $ | 230 | $ | 26 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
18 MainStay Epoch Global Equity Yield Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||||||
January 1, | August 2, | |||||||||||||||||||||||||
Year | 2010 | 2006** | ||||||||||||||||||||||||
ended | through | through | ||||||||||||||||||||||||
October 31, | October 31, | Year ended December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010*** | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 14.73 | $ | 13.72 | $ | 11.52 | $ | 17.72 | $ | 17.94 | $ | 16.00 | ||||||||||||||
Net investment income (loss) | 0.50 | (a) | 0.36 | (a) | 0.44 | 0.59 | (a) | 0.69 | 0.19 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.45 | 1.03 | 2.14 | (6.18 | ) | 0.79 | 1.99 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.01 | ) | (0.03 | ) | — | — | — | |||||||||||||||||
Total from investment operations | 0.94 | 1.38 | 2.55 | (5.59 | ) | 1.48 | 2.18 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.46 | ) | (0.37 | ) | (0.35 | ) | (0.48 | ) | (0.72 | ) | (0.21 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | (0.08 | ) | (0.99 | ) | (0.03 | ) | |||||||||||||||||
Return of capital | — | — | — | (0.05 | ) | — | — | |||||||||||||||||||
Total dividends and distributions | (0.46 | ) | (0.37 | ) | (0.35 | ) | (0.61 | ) | (1.71 | ) | (0.24 | ) | ||||||||||||||
Redemption fee (b) | — | — | 0.00 | ‡ | 0.00 | ‡ | 0.01 | — | ||||||||||||||||||
Net asset value at end of period | $ | 15.21 | $ | 14.73 | $ | 13.72 | $ | 11.52 | $ | 17.72 | $ | 17.94 | ||||||||||||||
Total investment return (c) | 6.45 | % | 10.40 | %(d) | 22.47 | % | (32.19 | %) | 8.34 | % | 13.73 | %(d) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 3.27 | % | 3.22 | %†† | 3.66 | % | 4.01 | % | 3.97 | % | 2.74 | %†† | ||||||||||||||
Net expenses | 1.19 | % | 1.24 | %†† | 1.21 | % | 1.18 | % | 1.16 | % | 1.30 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.19 | % | 1.39 | %†† | 1.21 | % | 1.18 | % | 1.16 | % | 1.30 | %†† | ||||||||||||||
Portfolio turnover rate | 28 | % | 41 | % | 59 | % | 72 | % | 47 | % | 32 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 204,366 | $ | 33,559 | $ | 23,336 | $ | 16,480 | $ | 19,390 | $ | 1,593 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment 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. | mainstayinvestments.com 19 |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||
January 1, | November 16, | |||||||||||||
Year | 2010 | 2009** | ||||||||||||
ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 14.68 | $ | 13.72 | $ | 13.46 | ||||||||
Net investment income (loss) | 0.38 | (a) | 0.27 | (a) | 0.03 | |||||||||
Net realized and unrealized gain (loss) on investments | 0.47 | 1.04 | 0.30 | |||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.01 | ) | — | |||||||||
Total from investment operations | 0.84 | 1.30 | 0.33 | |||||||||||
Less dividends: | ||||||||||||||
From net investment income | (0.37 | ) | (0.34 | ) | (0.07 | ) | ||||||||
Net asset value at end of period | $ | 15.15 | $ | 14.68 | $ | 13.72 | ||||||||
Total investment return (b) | 5.67 | % | 9.83 | %(c) | 2.45 | %(c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | 2.52 | % | 2.33 | %†† | 1.80 | %†† | ||||||||
Net expenses | 1.90 | % | 1.91 | %†† | 1.84 | %†† | ||||||||
Expenses (before waiver/reimbursement) | 1.90 | % | 2.06 | %†† | 1.84 | %†† | ||||||||
Portfolio turnover rate | 28 | % | 41 | % | 59 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 35,975 | $ | 6,547 | $ | 36 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
20 MainStay Epoch Global Equity Yield Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||||||
January 1, | ||||||||||||||||||||||||||
Year | 2010 | |||||||||||||||||||||||||
ended | through | |||||||||||||||||||||||||
October 31, | October 31, | Year ended December 31, | ||||||||||||||||||||||||
2011 | 2010*** | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 14.70 | $ | 13.70 | $ | 11.53 | $ | 17.75 | $ | 18.02 | $ | 14.92 | ||||||||||||||
Net investment income (loss) | 0.52 | (a) | 0.41 | (a) | 0.44 | 0.66 | (a) | 0.77 | 0.63 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.47 | 1.00 | 2.13 | (6.24 | ) | 0.72 | 3.13 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.01 | ) | (0.03 | ) | — | — | — | |||||||||||||||||
Total from investment operations | 0.98 | 1.40 | 2.54 | (5.58 | ) | 1.49 | 3.76 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.49 | ) | (0.40 | ) | (0.37 | ) | (0.51 | ) | (0.77 | ) | (0.63 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | (0.08 | ) | (0.99 | ) | (0.03 | ) | |||||||||||||||||
Return of capital | — | — | — | (0.05 | ) | — | — | |||||||||||||||||||
Total dividends and distributions | (0.49 | ) | (0.40 | ) | (0.37 | ) | (0.64 | ) | (1.76 | ) | (0.66 | ) | ||||||||||||||
Redemption fee (b) | — | — | 0.00 | ‡ | 0.00‡ | 0.00 | ‡ | — | ||||||||||||||||||
Net asset value at end of period | $ | 15.19 | $ | 14.70 | $ | 13.70 | $ | 11.53 | $ | 17.75 | $ | 18.02 | ||||||||||||||
Total investment return (c) | 6.76 | % | 10.54 | %(d) | 22.49 | % | (32.10 | %) | 8.28 | % | 25.71 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 3.44 | % | 3.61 | %†† | 3.85 | % | 4.40 | % | 4.21 | % | 3.88 | % | ||||||||||||||
Net expenses | 0.94 | % | 0.99 | %†† | 0.96 | % | 0.93 | % | 0.91 | % | 1.05 | % | ||||||||||||||
Expenses (before reimbursement/waiver) | 0.94 | % | 1.13 | %†† | 0.96 | % | 0.93 | % | 0.91 | % | 1.05 | % | ||||||||||||||
Portfolio turnover rate | 28 | % | 41 | % | 59 | % | 72 | % | 47 | % | 32 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 790,679 | $ | 398,750 | $ | 383,228 | $ | 297,513 | $ | 535,229 | $ | 272,016 |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(d) | Total investment 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. | mainstayinvestments.com 21 |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Epoch Global Equity Yield Fund (the “Fund”), a diversified fund. The Fund is the successor to the Epoch Global Equity Shareholder Yield Fund (the “Predecessor Fund”), which was a series of a different registered investment company for which Epoch Investment Partners, Inc. served as investment advisor. The financial statements of the Fund reflect the historical results of the Institutional Class and Class P shares of the Predecessor Fund prior to its reorganization on November 16, 2009. Upon the completion of the reorganization, the Class I and Class A shares of the Fund assumed the performance, financial and other information of the Institutional Class and Class P shares of the Predecessor Fund, respectively. All information and references to periods prior to the commencement of operations of the Fund refer to the Predecessor Fund.
The Fund currently offers four classes of shares. Investor Class and Class C shares commenced operations on November 16, 2009. Class I and Class A shares commenced operations (under former designations) on December 27, 2005 and August 2, 2006, respectively. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The four classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
Effective January 4, 2010, the Fund changed its fiscal year end from December 31 to October 31.
The Fund’s investment objective is to seek to provide a high level of income. Capital appreciation is a secondary investment objective.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
22 MainStay Epoch Global Equity Yield Fund
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund did not hold any securities that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or Subadvisor conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. At October 31, 2011, certain foreign equity securities held by the Fund were fair valued in such a manner.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Investment income received by the Fund from foreign sources may be subject to foreign income taxes. These foreign income taxes are generally withheld at the source.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income, if any, quarterly and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution
mainstayinvestments.com 23
Notes to Financial Statements (continued)
plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Foreign Currency Transactions. The books and records of the Fund are kept in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling exchange rates last quoted by any major U.S. bank at the following dates:
(i) market value of investment securities, other assets and liabilities—at the valuation date, and
(ii) purchases and sales of investment securities, income and expenses—at the date of such transactions.
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(I) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(J) Redemption Fee. Prior to April 1, 2010, the Fund imposed a 2.00% redemption fee on redemptions (including exchanges) of Fund shares made within 60 days of their date of purchase for any class. The redemption fee was designed to offset brokerage commissions and other costs associated with short-term trading and was not assessed on shares acquired through the reinvestment of dividends or distributions paid by the Fund. The redemption fees are included in the Statement of Changes in Net Assets’ shares redeemed amount and were retained by the Fund for the ten-month period ended October 31, 2010 and the fiscal year ended December 31, 2009.
(K) Concentration of Risk. The Fund invests in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.
(L) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential
24 MainStay Epoch Global Equity Yield Fund
indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(M) Large Transaction Risks. From time to time, the Fund may receive large purchase or redemption orders from affiliated or unaffiliated mutual funds or other investors. Such large transactions could have adverse effects on a Fund’s performance if the Fund were required to sell securities or invest cash at times when it otherwise would not do so. This activity could also accelerate the realization of capital gains and increase the Fund’s transaction costs. The Fund has adopted procedures designed to mitigate the negative impacts of such large transactions, but there can be no assurance that these procedures will be effective.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. Epoch Investment Partners, Inc. (“Epoch” or “Subadvisor”), a registered investment adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and Epoch, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of 0.70% of the Fund’s average daily net assets.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for Class A and Class I do not exceed the following percentages of average daily net assets: Class A, 1.24% and Class I, 0.99%. New York Life Investments will apply an equivalent waiver or reimbursement, in an amount equal to the number of basis points waived for Class A shares, to Investor Class and Class C shares of the Fund. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $4,265,615.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution and service plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class C Plan, Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $4,953 and $73,511, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Class A and Class C shares of $95,875 and $9,794, respectively, for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 1,117 | ||
Class A | 201,916 | |||
Class C | 26,667 | |||
Class I | 794,963 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has
mainstayinvestments.com 25
Notes to Financial Statements (continued)
implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Investor Class | $ | 30,130 | 2.1 | % | ||||
Class C | 29,733 | 0.1 | ||||||
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $7,297. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 527,177 | $ | (115,610,833 | ) | $ | — | $ | 49,660,665 | $ | (65,422,991 | ) | |||||||
The difference between book-basis and tax basis unrealized appreciation (depreciation) is primarily due to wash sale deferrals, marking to market of foreign currency forward contracts, distributions from partnership and partnership basis adjustments.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed Net | Net Realized | |||||||||
Investment Income | Gain (Loss) on | Additional | ||||||||
(Loss) | Investments | Paid-In Capital | ||||||||
$ | (2,125,295 | ) | $ | 2,421,190 | $ | (295,895 | ) | |||
The reclassifications for the Fund are primarily due to partnership basis adjustments and foreign currency gain (loss).
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $115,610,833 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2016 | $ | 41,384 | ||||
2017 | 74,227 | |||||
Total | $ | 115,611 | ||||
The Fund utilized $26,287,843 of capital loss carryforwards during the year ended October 31, 2011.
The tax character of distributions paid during the year ended October 31, 2011, the period January 1, 2010 through October 31, 2010, and the year ended December 31, 2009 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | 2009 | ||||||||||
Distributions paid from: | ||||||||||||
Ordinary Income | $ | 19,824,945 | $ | 11,286,732 | $ | 11,364,805 | ||||||
Note 5–Foreign Currency Transactions
As of October 31, 2011, the Fund held the following foreign currencies:
Currency | Cost | Value | ||||||||||
Australian Dollar | AUD | 46 | USD | 49 | USD | 48 | ||||||
Brazilian Real | BRL | 27,059 | 15,835 | 15,761 | ||||||||
Canadian Dollar | CAD | 18,924 | 19,078 | 18,986 | ||||||||
Euro | EUR | 33 | 46 | 45 | ||||||||
New Taiwan Dollar | TWD | 881,019 | 29,252 | 29,448 | ||||||||
Total | USD | 64,260 | USD | 64,288 | ||||||||
Note 6–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an
26 MainStay Epoch Global Equity Yield Fund
annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $707,212 and $167,579, respectively.
Note 9–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 104,119 | $ | 1,600,654 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,847 | 28,144 | ||||||
Shares redeemed | (18,058 | ) | (268,013 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 87,908 | 1,360,785 | ||||||
Shares converted into Investor Class (See Note 1) | 5,300 | 76,096 | ||||||
Shares converted from Investor Class (See Note 1) | (16,241 | ) | (251,185 | ) | ||||
Net increase (decrease) | 76,967 | $ | 1,185,696 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 16,671 | $ | 229,496 | |||||
Shares issued to shareholders in reinvestment of dividends | 238 | 3,160 | ||||||
Shares redeemed | (2,217 | ) | (29,558 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 14,692 | 203,098 | ||||||
Shares converted into Investor Class (See Note 1) | 733 | 10,398 | ||||||
Shares converted from Investor Class (See Note 1) | (1,665 | ) | (23,456 | ) | ||||
Net increase (decrease) | 13,760 | $ | 190,040 | |||||
Period ended December 31, 2009 (a): | ||||||||
Shares sold | 1,858 | $ | 25,000 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 11 | 151 | ||||||
Net increase (decrease) | 1,869 | $ | 25,151 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 13,478,356 | $ | 203,756,811 | |||||
Shares issued to shareholders in reinvestment of dividends | 204,171 | 3,116,505 | ||||||
Shares redeemed | (2,537,317 | ) | (37,878,974 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 11,145,210 | 168,994,342 | ||||||
Shares converted into Class A (See Note 1) | 16,223 | 251,185 | ||||||
Shares converted from Class A (See Note 1) | (5,293 | ) | (76,096 | ) | ||||
Net increase (decrease) | 11,156,140 | $ | 169,169,431 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 1,222,520 | $ | 16,982,139 | |||||
Shares issued to shareholders in reinvestment of dividends | 40,192 | 535,377 | ||||||
Shares redeemed | (685,609 | ) | (9,115,426 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 577,103 | 8,402,090 | ||||||
Shares converted into Class A (See Note 1) | 1,665 | 23,456 | ||||||
Shares converted from Class A (See Note 1) | (733 | ) | (10,398 | ) | ||||
Net increase (decrease) | 578,035 | $ | 8,415,148 | |||||
Year ended December 31, 2009: | ||||||||
Shares sold | 873,503 | $ | 9,944,403 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 50,639 | 619,790 | ||||||
Shares redeemed | (653,938 | ) | (8,219,128 | ) | ||||
Net increase (decrease) | 270,204 | $ | 2,345,065 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,136,270 | $ | 32,217,041 | |||||
Shares issued to shareholders in reinvestment of dividends | 17,787 | 271,558 | ||||||
Shares redeemed | (224,531 | ) | (3,348,997 | ) | ||||
Net increase (decrease) | 1,929,526 | $ | 29,139,602 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 453,369 | $ | 6,239,385 | |||||
Shares issued to shareholders in reinvestment of dividends | 4,266 | 56,160 | ||||||
Shares redeemed | (14,387 | ) | (185,272 | ) | ||||
Net increase (decrease) | 443,248 | $ | 6,110,273 | |||||
Period ended December 31, 2009 (a): | ||||||||
Shares sold | 2,596 | $ | 35,007 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13 | 182 | ||||||
Net increase (decrease) | 2,609 | $ | 35,189 | |||||
mainstayinvestments.com 27
Notes to Financial Statements (continued)
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 33,930,977 | $ | 507,897,592 | |||||
Shares issued to shareholders in reinvestment of dividends | 795,188 | 12,104,583 | ||||||
Shares redeemed | (9,795,229 | ) | (149,246,391 | ) | ||||
Net increase (decrease) | 24,930,936 | $ | 370,755,784 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 7,514,498 | $ | 101,288,435 | |||||
Shares issued to shareholders in reinvestment of dividends | 701,597 | 9,291,113 | ||||||
Shares redeemed | (9,075,573 | ) | (123,400,233 | ) | ||||
Net increase (decrease) | (859,478 | ) | $ | (12,820,685 | ) | |||
Year ended December 31, 2009: | ||||||||
Shares sold | 15,386,586 | $ | 174,848,332 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 777,370 | 9,520,225 | ||||||
Shares redeemed | (13,991,520 | ) | (162,699,904 | ) | ||||
Net increase (decrease) | 2,172,436 | $ | 21,668,653 | |||||
(a) Investor Class shares and Class C shares were first offered on November 16, 2009. |
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
28 MainStay Epoch Global Equity Yield Fund
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Epoch Global Equity Yield Fund (the “Fund”), one of the funds comprising MainStay Funds Trust, as of October 31, 2011 and the related statement of operations for the year then ended, the statements of changes in net assets for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009, and the financial highlights for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the years or periods presented through December 31, 2008 were audited by other auditors, whose report dated February 27, 2009 expressed an unqualified opinion thereon.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Epoch Global Equity Yield Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
mainstayinvestments.com 29
Federal Income Tax Information (Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2011, the Fund designated approximately $26,104,661 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2011, should be multiplied by 55.1% to arrive at the amount eligible for the corporate dividends received deduction.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; and (ii) on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the Fund’s website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
30 MainStay Epoch Global Equity Yield Fund
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
mainstayinvestments.com 31
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
32 MainStay Epoch Global Equity Yield Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
mainstayinvestments.com 33
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
34 MainStay Epoch Global Equity Yield Fund
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
mainstayinvestments.com 35
This page intentionally left blank
This page intentionally left blank
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-25003 MS284-11 | MSEGEY11-12/11 |
NF3
MainStay Epoch International Small Cap Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 17 | |
Notes to Financial Statements | 24 | |
Report of Independent Registered Public Accounting Firm | 32 | |
Federal Income Tax Information | 33 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 33 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 33 | |
Board Members and Officers | 34 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (1/25/05) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –16 | .73% | –1 | .47% | 5 | .06% | 1 | .88% | ||||||||||
Excluding sales charges | –11 | .89 | –0 | .35 | 5 | .94 | 1 | .88 | ||||||||||||
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (8/2/06) | Ratio2 | |||||||||||||||
Class A Shares4 | Maximum 5.5% Initial Sales Charge | With sales charges | –16 | .67% | –1 | .48% | –0 | .32% | 1 | .92% | ||||||||||
Excluding sales charges | –11 | .82 | –0 | .35 | 0 | .76 | 1 | .92 | ||||||||||||
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (1/25/05) | Ratio2 | |||||||||||||||
Class C Shares3 | Maximum 1% CDSC | With sales charges | –13 | .43% | –1 | .02% | 5 | .32% | 2 | .63% | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | –12 | .57 | –1 | .02 | 5 | .32 | 2 | .63 | |||||||||||
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (1/25/05) | Ratio2 | |||||||||||||||
Class I Shares4 | No Sales Charge | –11 | .59% | –0 | .04% | 6 | .37% | 1 | .67% | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class and Class C shares, first offered on November 16, 2009, include the historical performance of Class I shares from January 25, 2005 through November 15, 2009 adjusted for differences in certain expenses and fees. Unadjusted, the performance for Investor Class and Class C shares might have been lower. |
4. | Performance figures for Class I shares and Class A shares include the historical performance of the Institutional shares from January 25, 2005 and the Class P shares from August 2, 2006, respectively, of the Epoch International Small Cap Fund (the predecessor to the Fund), through November 15, 2009. The Epoch International Small Cap Fund was subject to a different fee structure and was advised by Epoch Investment Partners Inc. |
The footnotes on the next page are an integral part of the tables and graphs and should be carefully read in conjunction with them.
mainstayinvestments.com 5
Since | ||||||||||||
One | Five | Inception | ||||||||||
Benchmark Performance | Year | Years | of the Fund | |||||||||
MSCI World Ex U.S. Small Cap Index5 | –2 | .01% | –0 | .43% | 4 | .69% | ||||||
Average Lipper International Small/Mid-Cap Growth Fund6 | –4 | .01 | 0 | .52 | 6 | .58 | ||||||
5. | The MSCI World Ex U.S. Small Cap Index is composed of small capitalization stocks designed to measure equity performance in global developed markets, excluding the U.S. The MSCI World Ex U.S. Small Cap Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The average Lipper international small/mid-cap growth fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies strictly outside of the U.S. with market capitalizations (on a three-year weighted basis) below Lipper’s international large-cap floor. International small/mid-cap growth funds typically have an above-average price-to-cash flow ratio, price-to book ratio, and three-year sales-per-share growth value compared to their cap-specific subset of the S&P/Citigroup World ex-U.S. BMI. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Epoch International Small Cap Fund
Cost in Dollars of a $1,000 Investment in MainStay Epoch International Small Cap Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 772.50 | $ | 8.00 | $ | 1,016.20 | $ | 9.10 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 772.80 | $ | 7.46 | $ | 1,016.80 | $ | 8.49 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 769.60 | $ | 11.28 | $ | 1,012.50 | $ | 12.83 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 774.10 | $ | 6.31 | $ | 1,018.10 | $ | 7.17 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.79% for Investor Class, 1.67% for Class A, 2.53% for Class C and 1.41% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Portfolio Composition as of October 31, 2011 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | JGC Corp. | |
2. | Localiza Rent a Car S.A. | |
3. | Sysmex Corp. | |
4. | Subsea 7 S.A. | |
5. | Societe BIC S.A. | |
6. | SBM Offshore N.V. | |
7. | Amplifon S.p.A. | |
8. | Babcock International Group PLC | |
9. | Biosensors International Group, Ltd. | |
10. | Ashtead Group PLC |
8 MainStay Epoch International Small Cap Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Emily Baker, Eric Citerne, CFA, Michael Welhoelter, CFA, and William Priest, CFA, of Epoch Investment Partners, Inc., the Fund’s Subadvisor.
How did MainStay Epoch International Small Cap Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Epoch International Small Cap Fund returned –11.89% for Investor Class shares, –11.82% for Class A shares and –12.57% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned –11.59%. All share classes underperformed the –4.01% return of the average Lipper1 international small/mid-cap growth fund and the –2.01% return of the MSCI World Ex U.S. Small Cap Index2 during the 12 months ended October 31, 2011. The MSCI World Ex U.S. Small Cap Index is the Fund’s broad-based securities market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
Small-cap equity markets outside the U.S. declined amid an environment of heightened volatility, as investors assessed multiple threats to the global economy, including fallout from the European sovereign debt crisis. Losses from several consumer-oriented stock holdings hurt the Fund’s results relative to the MSCI World Ex U.S. Small Cap Index. Exposure to select Chinese and Brazilian stocks that are not in the benchmark also hindered the Fund’s relative performance.
During the reporting period, which sectors were the strongest contributors to the Fund’s relative perfor-mance and which sectors were particularly weak?
During the reporting period, the sectors that made the strongest contributions to the Fund’s performance relative to the MSCI World Ex U.S. Small Cap Index were industrials, health care and telecommunication services. (Contributions take weightings and total returns into account.) The Fund benefited from overweight positions in each of these sectors and from stock selection in industrials. Although Fund returns for the health care sector were negative, the Fund’s health care holdings declined less than health care positions in the benchmark.
During the reporting period, the sectors that detracted the most from the Fund’s performance relative to the MSCI World Ex U.S. Small Cap Index were consumer discretionary, consumer staples and financials, primarily because of stock selection in each. Each of these sectors had negative returns in the Fund.
During the reporting period, which individual stocks made the strongest contributions to the Fund’s absolute performance and which stocks detracted the most?
On an absolute basis, French specialty chemicals company Rhodia, Japanese Internet software & services company Gree and Japanese construction & engineering firm JGC were the strongest positive contributors to the Fund’s performance.
Shares of Rhodia advanced after the company agreed to be acquired by its Belgian rival Solvay. Gree, a company that provides social games to 25 million mobile online users, had exceptionally strong returns during the reporting period. JGC, an industrial engineering company for the energy sector, also generated strong returns and saw growing demand for its services.
On an absolute basis, Asian Bamboo, a Germany-based supplier of furniture, food and construction materials; Canadian oil and natural gas producer Crew Energy; and Chinese sofa and recliner manufacturing company Man Wah Holdings were the greatest detractors from the Fund’s performance during the reporting period.
Asian Bamboo, which harvests bamboo primarily in China, was hurt during the reporting period by weak demand for trees and fiber. Crew Energy experienced meaningful weather delays from heavy rainfall that resulted in lower-than-expected production during early 2011. Man Wah Holdings was hurt by higher prices for raw materials during the reporting period.
Did the Fund make any significant purchases or sales during the reporting period?
Among the stocks that the Fund purchased during the reporting period was Babcock International Group, a U.K. company that provides support services and facilities management to a variety of industries. We were attracted to the company’s growing pipeline of opportunities. The Fund also purchased shares of Societe BIC, a French manufacturer of consumer products such as lighters, shavers, stationery and pens. In our view, Societe BIC, has been benefiting from stable sales growth in developed markets, strong exposure to higher-growth emerging markets, and restructuring within its promotional product business.
We sold the Fund’s position in Rhodia, after the company accepted an acquisition offer from Solvay. In the industrials sector, we sold the Fund’s position in Italian construction & engineering firm Maire Tecnimot following reports of structural problems with some of the company’s power contracts in Latin America.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the MSCI World Ex U.S. Small Cap Index.
mainstayinvestments.com 9
How did the Fund’s sector weightings change during the reporting period?
The only sector with a substantial increase in its weighting during the reporting period was health care. We modestly increased the Fund’s weightings in the telecommunication services and utilities sectors during the reporting period.
The Fund reduced its overweight exposure to the industrials sector. The Fund’s weightings in the consumer discretionary, consumer staples, financials and materials sectors were also reduced. At the end of the reporting period, the Fund held underweight positions relative to the MSCI World Ex U.S. Small Cap Index in each of these sectors.
How was the Fund positioned at the end of October 2011?
As of October 31, 2011, the Fund’s most substantially overweight sector positions relative to the MSCI World Ex U.S. Small Cap Index were in health care, industrials and energy. As of the same date, the Fund’s most substantially underweight sector positions relative to the benchmark were in financials, materials and consumer staples.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Epoch International Small Cap Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 92.8%† | ||||||||
Australia 2.7% | ||||||||
Centamin Egypt, Ltd. (Metals & Mining) (a) | 592,300 | $ | 1,022,078 | |||||
Challenger, Ltd. (Diversified Financial Services) | 116,900 | 550,772 | ||||||
Flight Centre, Ltd. (Hotels, Restaurants & Leisure) | 55,550 | 1,140,055 | ||||||
Monadelphous Group, Ltd. (Construction & Engineering) | 33,150 | 629,462 | ||||||
Pacific Brands, Ltd. (Distributors) | 728,100 | 449,644 | ||||||
SAI Global, Ltd. (Professional Services) | 600,874 | 2,976,111 | ||||||
Western Areas NL (Metals & Mining) | 90,300 | 528,616 | ||||||
7,296,738 | ||||||||
Austria 0.8% | ||||||||
Andritz A.G. (Machinery) | 24,600 | 2,170,935 | ||||||
Belgium 1.1% | ||||||||
Telenet Group Holding N.V. (Diversified Telecommunication Services) (a) | 77,832 | 2,992,550 | ||||||
Bermuda 3.6% | ||||||||
X Biosensors International Group, Ltd. (Health Care Equipment & Supplies) (a) | 3,237,900 | 3,604,757 | ||||||
Dockwise, Ltd. (Energy Equipment & Services) (a) | 112,750 | 1,794,707 | ||||||
Huabao International Holdings, Ltd. (Chemicals) | 597,000 | 379,073 | ||||||
Lancashire Holdings, Ltd. (Insurance) | 285,400 | 3,269,471 | ||||||
Peace Mark Holdings, Ltd. (Textiles, Apparel & Luxury Goods) (a)(b)(c) | 1,118,750 | 1,440 | ||||||
Ship Finance International, Ltd. (Oil, Gas & Consumable Fuels) | 39,800 | 569,538 | ||||||
9,618,986 | ||||||||
Brazil 4.9% | ||||||||
BR Properties S.A. (Real Estate Management & Development) | 136,700 | 1,377,470 | ||||||
Diagnosticos da America S.A. (Health Care Providers & Services) | 358,400 | 2,849,498 | ||||||
X Localiza Rent a Car S.A. (Road & Rail) | 372,600 | 5,631,808 | ||||||
Mills Estruturas e Servicos de Engenharia S.A. (Trading Companies & Distributors) | 259,100 | 2,588,208 | ||||||
Rossi Residencial S.A. (Household Durables) | 101,550 | 641,767 | ||||||
13,088,751 | ||||||||
British Virgin Islands 0.6% | ||||||||
Playtech, Ltd. (Software) | 381,550 | 1,668,693 | ||||||
Canada 9.2% | ||||||||
Algonquin Power & Utilities Corp. (Independent Power Producers & Energy Traders) (c) | 97,100 | 545,533 | ||||||
Algonquin Power & Utilities Corp. (Independent Power Producers & Energy Traders) | 359,033 | 2,017,141 | ||||||
ARC Resources, Ltd. (Oil, Gas & Consumable Fuels) | 55,350 | 1,407,698 | ||||||
Aurizon Mines, Ltd. (Metals & Mining) (a) | 209,700 | 1,186,564 | ||||||
Calfrac Well Services, Ltd. (Energy Equipment & Services) | 36,500 | 1,131,527 | ||||||
Capstone Mining Corp. (Metals & Mining) (a) | 243,000 | 824,018 | ||||||
CCL Industries, Inc. Class B (Containers & Packaging) | 48,050 | 1,397,994 | ||||||
Cott Corp. (Beverages) (a) | 192,350 | 1,350,840 | ||||||
Crew Energy, Inc. (Oil, Gas & Consumable Fuels) (a) | 284,200 | 3,124,988 | ||||||
Detour Gold Corp. (Metals & Mining) (a) | 65,900 | 2,181,791 | ||||||
Dorel Industries, Inc. Class B (Household Durables) | 25,850 | 628,647 | ||||||
Gluskin Sheff + Associates, Inc. (Capital Markets) | 24,850 | 402,636 | ||||||
Great Canadian Gaming Corp. (Hotels, Restaurants & Leisure) (a) | 85,700 | 705,031 | ||||||
Laurentian Bank of Canada (Commercial Banks) | 32,500 | 1,499,223 | ||||||
Paramount Resources, Ltd. (Oil, Gas & Consumable Fuels) (a) | 65,650 | 2,388,889 | ||||||
Provident Energy, Ltd. (Oil, Gas & Consumable Fuels) | 61,350 | 555,797 | ||||||
SEMAFO, Inc. (Metals & Mining) (a) | 175,239 | 1,344,949 | ||||||
SouthGobi Resources, Ltd. (Oil, Gas & Consumable Fuels) (a) | 206,250 | 1,721,595 | ||||||
24,414,861 | ||||||||
Cayman Islands 3.7% | ||||||||
China High Precision Automation Group, Ltd. (Electronic Equipment & Instruments) (c) | 2,809,600 | 1,000,140 | ||||||
China ZhengTong Auto Services Holdings, Ltd. (Specialty Retail) (a) | 1,641,500 | 1,737,975 | ||||||
Kingboard Chemical Holdings, Ltd. (Electronic Equipment & Instruments) | 277,000 | 929,339 | ||||||
New World Department Store China, Ltd. (Multiline Retail) | 1,062,000 | 689,625 | ||||||
Shenguan Holdings Group, Ltd. (Food Products) | 3,252,000 | 1,751,664 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Cayman Islands (continued) | ||||||||
Sino Biopharmaceutical, Ltd. (Biotechnology) | 6,345,750 | $ | 1,923,350 | |||||
Xingda International Holdings, Ltd. (Metals & Mining) | 3,053,000 | 1,737,611 | ||||||
9,769,704 | ||||||||
China 0.5% | ||||||||
Dalian Port PDA Co., Ltd. (Transportation Infrastructure) | 2,116,426 | 543,763 | ||||||
Lianhua Supermarket Holdings Co., Ltd. (Food & Staples Retailing) | 118,000 | 189,721 | ||||||
Shandong Weigao Group Medical Polymer Co., Ltd. (Health Care Equipment & Supplies) | 484,000 | 499,603 | ||||||
1,233,087 | ||||||||
Denmark 0.8% | ||||||||
Christian Hansen Holding A/S (Chemicals) | 93,450 | 2,028,403 | ||||||
France 7.0% | ||||||||
Alten, Ltd. (IT Services) | 100,800 | 2,855,417 | ||||||
Altran Technologies S.A. (IT Services) (a) | 651,100 | 3,278,626 | ||||||
Eurofins Scientific (Life Sciences Tools & Services) | 23,050 | 2,053,920 | ||||||
Guyenne et Gascogne S.A. (Food & Staples Retailing) | 4,000 | 457,212 | ||||||
IPSOS (Media) | 77,250 | 2,529,430 | ||||||
Mersen (Electrical Equipment) | 44,550 | 1,728,443 | ||||||
Saft Groupe S.A. (Electrical Equipment) | 22,806 | 692,301 | ||||||
X Societe BIC S.A. (Commercial Services & Supplies) | 54,900 | 4,897,598 | ||||||
18,492,947 | ||||||||
Germany 1.7% | ||||||||
GFK SE (Media) | 31,650 | 1,447,617 | ||||||
Hamburger Hafen und Logistik A.G. (Transportation Infrastructure) | 19,505 | 598,142 | ||||||
Morphosys A.G. (Life Sciences Tools & Services) (a) | 99,800 | 2,421,705 | ||||||
Software A.G. (Software) | 3,800 | 157,485 | ||||||
4,624,949 | ||||||||
Hong Kong 0.8% | ||||||||
Television Broadcasts, Ltd. (Media) | 220,000 | 1,263,664 | ||||||
Vitasoy International Holdings, Ltd. (Food Products) | 1,256,000 | 884,888 | ||||||
2,148,552 | ||||||||
Ireland 0.1% | ||||||||
Smurfit Kappa Group PLC (Containers & Packaging) (a) | 54,300 | 370,452 | ||||||
Italy 5.5% | ||||||||
X Amplifon S.p.A. (Health Care Providers & Services) | 822,100 | 3,940,331 | ||||||
Astaldi S.p.A (Construction & Engineering) | 111,298 | 654,448 | ||||||
Danieli & Co. S.p.A. (Machinery) | 72,500 | 983,913 | ||||||
Exor S.p.A. (Diversified Financial Services) | 51,164 | 1,114,346 | ||||||
Mediolanum S.p.A. (Insurance) | 315,250 | 1,210,522 | ||||||
Safilo Group S.p.A. (Textiles, Apparel & Luxury Goods) (a) | 90,100 | 744,409 | ||||||
Salvatore Ferragamo Italia S.p.A (Textiles, Apparel & Luxury Goods) (a) | 185,870 | 2,986,230 | ||||||
Tod’s S.p.A. (Textiles, Apparel & Luxury Goods) | 28,519 | 2,841,974 | ||||||
14,476,173 | ||||||||
Japan 16.1% | ||||||||
Air Water, Inc. (Chemicals) | 137,160 | 1,741,478 | ||||||
Daicel Corp. (Chemicals) | 216,000 | 1,226,064 | ||||||
GMO internet, Inc. (Internet Software & Services) | 270,600 | 1,171,119 | ||||||
Gree, Inc. (Internet Software & Services) | 80,600 | 2,628,659 | ||||||
X JGC Corp. (Construction & Engineering) | 220,750 | 6,197,788 | ||||||
Kansai Paint Co., Ltd. (Chemicals) | 118,440 | 1,114,181 | ||||||
McDonald’s Holdings Co. Japan, Ltd. (Hotels, Restaurants & Leisure) | 106,500 | 2,816,841 | ||||||
Nabtesco Corp. (Machinery) | 125,100 | 2,732,719 | ||||||
NET One Systems Co., Ltd. (IT Services) | 586 | 1,533,386 | ||||||
Nifco, Inc./Japan (Auto Components) | 119,750 | 3,135,512 | ||||||
Nippon Shokubai Co, Ltd. (Chemicals) | 175,000 | 1,784,604 | ||||||
Oracle Corp. Japan (Software) | 9,500 | 327,481 | ||||||
ORIX Corp. (Diversified Financial Services) | 4,400 | 384,451 | ||||||
Osaka Securities Exchange Co., Ltd. (Diversified Financial Services) | 150 | 707,357 | ||||||
Santen Pharmaceutical Co., Ltd. (Pharmaceuticals) | 43,400 | 1,618,352 | ||||||
Sawai Pharmaceutical Co., Ltd. (Pharmaceuticals) | 38,100 | 3,568,464 | ||||||
Sohgo Security Services Co., Ltd. (Commercial Services & Supplies) | 62,500 | 654,592 | ||||||
Start Today Co., Ltd. (Internet & Catalog Retail) | 43,700 | 922,988 | ||||||
Sundrug Co., Ltd. (Food & Staples Retailing) | 98,300 | 2,907,610 | ||||||
X Sysmex Corp. (Health Care Equipment & Supplies) | 169,200 | 5,571,967 | ||||||
42,745,613 | ||||||||
Luxembourg 2.3% | ||||||||
L’Occitane International S.A. (Specialty Retail) | 536,950 | 1,178,230 | ||||||
X Subsea 7 S.A. (Energy Equipment & Services) (a) | 233,851 | 5,049,908 | ||||||
6,228,138 | ||||||||
The notes to the financial statements are an integral part of,
12 MainStay Epoch International Small Cap Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Netherlands 6.3% | ||||||||
BinckBank N.V. (Capital Markets) | 136,450 | $ | 1,577,609 | |||||
Core Laboratories N.V. (Energy Equipment & Services) | 24,250 | 2,625,305 | ||||||
Delta Lloyd N.V. (Insurance) | 91,400 | 1,602,219 | ||||||
Imtech N.V. (Construction & Engineering) | 111,450 | 3,276,808 | ||||||
Koninklijke Vopak N.V. (Transportation Infrastructure) | 46,850 | 2,414,116 | ||||||
X SBM Offshore N.V. (Energy Equipment & Services) | 207,521 | 4,561,908 | ||||||
Ten Cate N.V. (Textiles, Apparel & Luxury Goods) | 17,615 | 602,736 | ||||||
16,660,701 | ||||||||
Norway 0.8% | ||||||||
Marine Harvest (Food Products) | 288,600 | 128,625 | ||||||
Petroleum Geo-Services ASA (Energy Equipment & Services) (a) | 111,550 | 1,213,344 | ||||||
Sparebank 1 SR Bank (Commercial Banks) | 90,696 | 754,546 | ||||||
2,096,515 | ||||||||
Republic of Korea 2.2% | ||||||||
BS Financial Group, Inc. (Commercial Banks) (a) | 182,520 | 2,017,727 | ||||||
Glovis Co., Ltd. (Air Freight & Logistics) | 14,926 | 2,801,583 | ||||||
LIG Insurance Co., Ltd. (Insurance) | 52,800 | 1,126,515 | ||||||
5,945,825 | ||||||||
Spain 1.0% | ||||||||
Ebro Puleva S.A. (Food Products) | 9,541 | 193,331 | ||||||
Obrascon Huarte Lain S.A. (Construction & Engineering) | 85,440 | 2,381,168 | ||||||
2,574,499 | ||||||||
Switzerland 2.6% | ||||||||
EFG International A.G. (Capital Markets) (a) | 141,250 | 1,179,702 | ||||||
Helvetia Holding A.G. (Insurance) | 5,400 | 1,958,557 | ||||||
Partners Group Holding A.G. (Capital Markets) | 8,200 | 1,531,960 | ||||||
Sulzer A.G. (Machinery) | 2,050 | 238,795 | ||||||
Temenos Group A.G. Registered (Software) (a) | 98,124 | 1,857,913 | ||||||
6,766,927 | ||||||||
Taiwan 1.2% | ||||||||
First Steamship Co., Ltd. (Marine) | 297,000 | 494,968 | ||||||
Tong Yang Industry Co., Ltd. (Auto Components) | 158,360 | 152,377 | ||||||
TXC Corp. (Electronic Equipment & Instruments) | 1,233,629 | 1,435,419 | ||||||
WPG Holdings, Ltd. (Electronic Equipment & Instruments) | 986,532 | 1,193,021 | ||||||
3,275,785 | ||||||||
United Kingdom 17.3% | ||||||||
Afren PLC (Oil, Gas & Consumable Fuels) (a) | 1,607,850 | 2,545,478 | ||||||
Aggreko PLC (Commercial Services & Supplies) | 23,726 | 648,698 | ||||||
X Ashtead Group PLC (Trading Companies & Distributors) | 1,453,350 | 3,601,282 | ||||||
X Babcock International Group PLC (Commercial Services & Supplies) | 341,650 | 3,845,334 | ||||||
Bovis Homes Group PLC (Household Durables) | 65,200 | 491,994 | ||||||
Cookson Group PLC (Industrial Conglomerates) | 154,750 | 1,190,770 | ||||||
Domino’s Pizza UK & IRL PLC (Hotels, Restaurants & Leisure) | 238,550 | 1,747,192 | ||||||
FirstGroup PLC (Road & Rail) | 350,450 | 1,871,328 | ||||||
Homeserve PLC (Commercial Services & Supplies) | 475,115 | 2,662,354 | ||||||
Informa PLC (Media) | 327,747 | 1,904,389 | ||||||
Intermediate Capital Group PLC (Capital Markets) | 794,850 | 3,115,324 | ||||||
Intertek Group PLC (Professional Services) | 63,650 | 2,091,135 | ||||||
Jazztel PLC (Diversified Telecommunication Services) (a) | 481,072 | 2,763,393 | ||||||
Meggitt PLC (Aerospace & Defense) | 520,200 | 3,205,177 | ||||||
Micro Focus International PLC (Software) | 120,000 | 648,352 | ||||||
Millennium & Copthorne Hotels PLC (Hotels, Restaurants & Leisure) | 263,600 | 1,886,240 | ||||||
Misys PLC (Software) (a) | 122,531 | 572,137 | ||||||
Premier Oil PLC (Oil, Gas & Consumable Fuels) (a) | 303,200 | 1,782,841 | ||||||
Restaurant Group PLC (Hotels, Restaurants & Leisure) | 664,300 | 3,193,775 | ||||||
Rexam PLC (Containers & Packaging) | 130,500 | 721,463 | ||||||
SThree PLC (Professional Services) | 585,194 | 2,668,150 | ||||||
Whitbread PLC (Hotels, Restaurants & Leisure) | 109,100 | 2,894,792 | ||||||
46,051,598 | ||||||||
Total Common Stocks (Cost $248,822,196) | 246,741,382 | |||||||
Preferred Stock 1.1% | ||||||||
Germany 1.1% | ||||||||
ProSiebenSat.1 Media A.G. 0.09% (Media) | 135,950 | 2,869,255 | ||||||
Total Preferred Stock (Cost $2,789,236) | 2,869,255 | |||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Short-Term Investment 5.3% | ||||||||
Repurchase Agreement 5.3% | ||||||||
United States 5.3% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $14,170,294 (Collateralized by a Federal Home Loan Mortgage Corp. security with a rate of 0.90% and a maturity date of 9/12/14, with a Principal Amount of $14,425,000 and a Market Value of $14,454,066) (Capital Markets) | $ | 14,170,290 | $ | 14,170,290 | ||||
Total Short-Term Investment (Cost $14,170,290) | 14,170,290 | |||||||
Total Investments (Cost $265,781,722) (d) | 99.2 | % | 263,780,927 | |||||
Other Assets, Less Liabilities | 0.8 | 2,090,925 | ||||||
Net Assets | 100.0 | % | $ | 265,871,852 | ||||
(a) | Non-income producing security. | |
(b) | Illiquid security. The total market value of this security at October 31, 2011 is $1,440, which represents less than one-tenth of a percent of the Fund’s net assets. | |
(c) | Fair valued security. The total market value of these securities at October 31, 2011 is $1,547,113, which represents 0.6% of the Fund’s net assets. | |
(d) | At October 31, 2011, cost is $268,322,079 for federal income tax purposes and net unrealized depreciation is as follows: |
Gross unrealized appreciation | $ | 19,436,313 | ||
Gross unrealized depreciation | (23,977,465 | ) | ||
Net unrealized depreciation | $ | (4,541,152 | ) | |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks (b)(c) | $ | 41,175,000 | $ | 204,019,269 | $ | 1,547,113 | $ | 246,741,382 | ||||||||
Preferred Stocks | — | 2,869,255 | — | 2,869,255 | ||||||||||||
Short-Term Investment Repurchase Agreement | — | 14,170,290 | — | 14,170,290 | ||||||||||||
Total Investments in Securities | $ | 41,175,000 | $ | 221,058,814 | $ | 1,547,113 | $ | 263,780,927 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | Level 1 assets represents securities listed under Brazil and Canada, the following common stock securities whose primary exchange is the New York Stock Exchange: Ship Finance International, LTD., under Bermuda and Core Laboratories N.V., under Netherlands and the following common stock security whose primary exchange is the Toronto Stock Exchange: Centamin Egypt, Ltd. under Australia. |
(c) | The Level 3 securities valued at $1,547,113 are securities listed under Bermuda the Textiles, Apparel & Luxury Goods industry, Canada and Independent Power Producers & Energy Traders industry and Cayman Islands the Electronic Equipment and Instruments industry within the Common Stocks section of the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
During the year ended October 31, 2011, certain foreign equity securities with a market value of $104,847,207 held by the Fund at October 31, 2010, transferred from Level 1 to Level 2 due to these securities being fair valued at year end by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures. (See Note 2)
The notes to the financial statements are an integral part of,
14 MainStay Epoch International Small Cap Fund | and should be read in conjunction with, the financial statements. |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Change in | ||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||||||||||||||||||
(Depreciation) | ||||||||||||||||||||||||||||||||||||||||
from | ||||||||||||||||||||||||||||||||||||||||
Balance | Change in | Balance | Investments | |||||||||||||||||||||||||||||||||||||
as of | Accrued | Realized | Unrealized | Transfers | Transfers | as of | Still Held at | |||||||||||||||||||||||||||||||||
October 31, | Discounts | Gain | Appreciation | in to | out of | October 31, | October 31, | |||||||||||||||||||||||||||||||||
Investments in Securities | 2010 | (Premiums) | (Loss) | (Depreciation) | Purchases | Sales | Level 3 | Level 3 | 2011 | 2011 (a) | ||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||||
Bermuda | $ | 1,443 | $ | — | $ | — | $ | (3 | ) | $ | — | $ | — | $ | — | $ | — | $ | 1,440 | $ | (3 | ) | ||||||||||||||||||
Canada | — | — | — | 16,849 | 528,684 | — | — | — | 545,533 | 16,849 | ||||||||||||||||||||||||||||||
Cayman Islands | — | — | (5,219 | ) | (971,588 | ) | 2,073,824 | (96,877 | ) | — | — | 1,000,140 | (971,588 | ) | ||||||||||||||||||||||||||
Total | $ | 1,443 | $ | — | $ | (5,219 | ) | $ | (954,742 | ) | $ | 2,602,508 | $ | (96,877 | ) | $ | — | $ | — | $ | 1,547,113 | $ | (954,742 | ) | ||||||||||||||||
(a) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Portfolio of Investments October 31, 2011 (continued)
The table below sets forth the diversification of MainStay Epoch International Small Cap Fund investments by industry.
Industry Diversification (Unaudited)
Value | Percent † | |||||||
Aerospace & Defense | $ | 3,205,177 | 1.2 | % | ||||
Air Freight & Logistics | 2,801,583 | 1.1 | ||||||
Auto Components | 3,287,889 | 1.2 | ||||||
Beverages | 1,350,840 | 0.5 | ||||||
Biotechnology | 1,923,350 | 0.7 | ||||||
Capital Markets | 21,977,521 | 8.3 | ||||||
Chemicals | 8,273,803 | 3.1 | ||||||
Commercial Banks | 4,271,496 | 1.6 | ||||||
Commercial Services & Supplies | 12,708,576 | 4.8 | ||||||
Construction & Engineering | 13,139,674 | 4.9 | ||||||
Containers & Packaging | 2,489,909 | 0.9 | ||||||
Distributors | 449,644 | 0.2 | ||||||
Diversified Financial Services | 2,756,926 | 1.0 | ||||||
Diversified Telecommunication Services | 5,755,943 | 2.2 | ||||||
Electrical Equipment | 2,420,744 | 0.9 | ||||||
Electronic Equipment & Instruments | 4,557,919 | 1.7 | ||||||
Energy Equipment & Services | 16,376,699 | 6.2 | ||||||
Food & Staples Retailing | 3,554,543 | 1.3 | ||||||
Food Products | 2,958,508 | 1.1 | ||||||
Health Care Equipment & Supplies | 9,676,327 | 3.6 | ||||||
Health Care Providers & Services | 6,789,829 | 2.6 | ||||||
Hotels, Restaurants & Leisure | 14,383,926 | 5.4 | ||||||
Household Durables | 1,762,408 | 0.7 | ||||||
Independent Power Producers & Energy Traders | 2,562,674 | 1.0 | ||||||
Industrial Conglomerates | 1,190,770 | 0.4 | ||||||
Insurance | 9,167,284 | 3.5 | ||||||
Internet & Catalog Retail | 922,988 | 0.3 | ||||||
Internet Software & Services | 3,799,778 | 1.4 | ||||||
IT Services | 7,667,429 | 2.9 | ||||||
Life Sciences Tools & Services | 4,475,625 | 1.7 | ||||||
Machinery | 6,126,362 | 2.3 | ||||||
Marine | 494,968 | 0.2 | ||||||
Media | 10,014,355 | 3.8 | ||||||
Metals & Mining | 8,825,627 | 3.3 | ||||||
Multiline Retail | 689,625 | 0.3 | ||||||
Oil, Gas & Consumable Fuels | 14,096,824 | 5.3 | ||||||
Pharmaceuticals | 5,186,816 | 2.0 | ||||||
Professional Services | 7,735,396 | 2.9 | ||||||
Real Estate Management & Development | 1,377,470 | 0.5 | ||||||
Road & Rail | 7,503,136 | 2.8 | ||||||
Software | 5,232,061 | 2.0 | ||||||
Specialty Retail | 2,916,205 | 1.1 | ||||||
Textiles, Apparel & Luxury Goods | 7,176,789 | 2.7 | ||||||
Trading Companies & Distributors | 6,189,490 | 2.3 | ||||||
Transportation Infrastructure | 3,556,021 | 1.3 | ||||||
263,780,927 | 99.2 | |||||||
Other Assets, Less Liabilities | 2,090,925 | 0.8 | ||||||
Net Assets | $ | 265,871,852 | 100.0 | % | ||||
† | Percentages indicated are based on Fund net assets. |
The notes to the financial statements are an integral part of,
16 MainStay Epoch International Small Cap Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $265,781,722) | $ | 263,780,927 | ||
Cash denominated in foreign currencies (identified cost $3,427,432) | 3,496,651 | |||
Receivables: | ||||
Investment securities sold | 928,477 | |||
Dividends and interest | 504,312 | |||
Fund shares sold | 55,323 | |||
Other assets | 42,922 | |||
Total assets | 268,808,612 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 1,782,342 | |||
Investment securities purchased | 790,807 | |||
Manager (See Note 3) | 243,601 | |||
Transfer agent (See Note 3) | 66,915 | |||
Professional fees | 22,459 | |||
Shareholder communication | 21,418 | |||
Custodian | 4,052 | |||
NYLIFE Distributors (See Note 3) | 3,084 | |||
Trustees | 999 | |||
Accrued expenses | 1,083 | |||
Total liabilities | 2,936,760 | |||
Net assets | $ | 265,871,852 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 15,818 | ||
Additional paid-in capital | 353,982,505 | |||
353,998,323 | ||||
Distributions in excess of net investment income | (523,366 | ) | ||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (85,681,446 | ) | ||
Net unrealized appreciation (depreciation) on investments | (2,000,795 | ) | ||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | 79,136 | |||
Net assets | $ | 265,871,852 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 807,493 | ||
Shares of beneficial interest outstanding | 49,529 | |||
Net asset value per share outstanding | $ | 16.30 | ||
Maximum sales charge (5.50% of offering price) | 0.95 | |||
Maximum offering price per share outstanding | $ | 17.25 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 5,260,761 | ||
Shares of beneficial interest outstanding | 322,183 | |||
Net asset value per share outstanding | $ | 16.33 | ||
Maximum sales charge (5.50% of offering price) | 0.95 | |||
Maximum offering price per share outstanding | $ | 17.28 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 2,064,029 | ||
Shares of beneficial interest outstanding | 127,933 | |||
Net asset value and offering price per share outstanding | $ | 16.13 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 257,739,569 | ||
Shares of beneficial interest outstanding | 15,318,658 | |||
Net asset value and offering price per share outstanding | $ | 16.83 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 4,785,446 | ||
Interest | 1,680 | |||
Total income | 4,787,126 | |||
Expenses | ||||
Manager (See Note 3) | 2,464,551 | |||
Transfer agent (See Note 3) | 407,693 | |||
Custodian | 127,071 | |||
Professional fees | 73,841 | |||
Registration | 72,197 | |||
Shareholder communication | 43,589 | |||
Distribution/Service—Investor Class (See Note 3) | 1,625 | |||
Distribution/Service—Class A (See Note 3) | 19,193 | |||
Distribution/Service—Class C (See Note 3) | 20,129 | |||
Trustees | 6,390 | |||
Miscellaneous | 28,990 | |||
Total expenses | 3,265,269 | |||
Net investment income (loss) | 1,521,857 | |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Security transactions | 25,668,601 | |||
Foreign currency transactions | (425,657 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 25,242,944 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (55,553,604 | ) | ||
Translation of other assets and liabilities in foreign currencies | 50,336 | |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (55,503,268 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (30,260,324 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (28,738,467 | ) | |
(a) | Dividends recorded net of foreign withholding taxes in the amount of $383,914. |
The notes to the financial statements are an integral part of,
18 MainStay Epoch International Small Cap Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the year ended October 31, 2011, the period January 1, 2010 through October 31, 2010 (a) and the year ended December 31, 2009
2011 | 2010 | 2009 | ||||||||||
Increase (Decrease) in Net Assets | ||||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | 1,521,857 | $ | 440,483 | $ | 1,009,249 | ||||||
Net realized gain (loss) on investments and foreign currency transactions | 25,242,944 | 7,190,724 | (57,165,310 | ) | ||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (55,503,268 | ) | 24,082,286 | 111,359,387 | ||||||||
Net increase (decrease) in net assets resulting from operations | (28,738,467 | ) | 31,713,493 | 55,203,326 | ||||||||
Dividends to shareholders: | ||||||||||||
From net investment income: | ||||||||||||
Investor Class | (10,628 | ) | — | — | ||||||||
Class A | (146,228 | ) | — | — | ||||||||
Class C | (33,623 | ) | — | — | ||||||||
Class I | (4,673,999 | ) | — | — | ||||||||
Total dividends to shareholders | (4,864,478 | ) | — | — | ||||||||
Capital share transactions: | ||||||||||||
Net proceeds from sale of shares | 183,028,323 | 38,685,793 | 79,648,838 | |||||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 4,590,954 | — | — | |||||||||
Cost of shares redeemed | (74,006,832 | ) | (54,910,830 | )(b) | (115,080,875 | )(b) | ||||||
Increase (decrease) in net assets derived from capital share transactions | 113,612,445 | (16,225,037 | ) | (35,432,037 | ) | |||||||
Net increase (decrease) in net assets | 80,009,500 | 15,488,456 | 19,771,289 | |||||||||
Net Assets | ||||||||||||
Beginning of period | 185,862,352 | 170,373,896 | 150,602,607 | |||||||||
End of period | $ | 265,871,852 | $ | 185,862,352 | $ | 170,373,896 | ||||||
Net investment income (loss) at end of period | $ | (523,366 | ) | $ | 1,706,276 | $ | 1,018,573 | |||||
(a) | The Fund changed its fiscal year end from December 31 to October 31. |
(b) | Cost of shares redeemed net of redemption fees of $78 and $1 for the ten-month period ended October 31, 2010 and the year ended December 31, 2009, respectively. (See Note 2(K)) |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||
January 1, | November 16, | |||||||||||||
Year | 2010 | 2009** | ||||||||||||
ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 18.97 | $ | 15.81 | $ | 16.11 | ||||||||
Net investment income (loss) (a) | 0.10 | 0.04 | 0.00 | ‡ | ||||||||||
Net realized and unrealized gain (loss) on investments | (2.25 | ) | 3.13 | (0.30 | ) | |||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | (0.01 | ) | — | |||||||||
Total from investment operations | (2.18 | ) | 3.16 | (0.30 | ) | |||||||||
Less dividends: | ||||||||||||||
From net investment income | (0.49 | ) | — | — | ||||||||||
Redemption fee (b) | — | — | 0.00 | ‡ | ||||||||||
Net asset value at end of period | $ | 16.30 | $ | 18.97 | $ | 15.81 | ||||||||
Total investment return (c) | (11.89 | %) | 19.99 | % (d) | (1.86 | %)(d) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | 0.51 | % | 0.30 | %†† | 0.15 | % †† | ||||||||
Net expenses | 1.76 | % | 1.85 | %†† | 1.59 | % †† | ||||||||
Expenses (before waiver/reimbursement) | 1.76 | % | 1.88 | %†† | 1.59 | % †† | ||||||||
Portfolio turnover rate | 69 | % | 41 | % | 105 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 807 | $ | 303 | $ | 31 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
20 MainStay Epoch International Small Cap Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | |||||||||||||||||||||||||||
January 1, | August 2, | ||||||||||||||||||||||||||
Year | 2010 | 2006** | |||||||||||||||||||||||||
ended | through | through | |||||||||||||||||||||||||
October 31, | October 31, | Year ended December 31, | December 31, | ||||||||||||||||||||||||
2011 | 2010*** | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 18.95 | $ | 15.80 | $ | 10.98 | $ | 23.39 | $ | 23.49 | $ | 21.20 | |||||||||||||||
Net investment income (loss) | 0.10 | (a) | 0.02 | (a) | 0.06 | (a) | 0.03 | (a) | (0.04 | ) | (0.02 | ) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (2.24 | ) | 3.14 | 4.76 | (11.51 | ) | 3.39 | 3.63 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | (0.01 | ) | — | — | — | — | |||||||||||||||||||
Total from investment operations | (2.17 | ) | 3.15 | 4.82 | (11.48 | ) | 3.35 | 3.61 | |||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||
From net investment income | (0.45 | ) | — | — | — | (0.01 | ) | (0.00 | )‡ | ||||||||||||||||||
From net realized gain on investments | — | — | — | (0.94 | ) | (3.48 | ) | (1.32 | ) | ||||||||||||||||||
Total dividends and distributions | (0.45 | ) | — | — | (0.94 | ) | (3.49 | ) | (1.32 | ) | |||||||||||||||||
Redemption fee (b) | — | — | 0.00 | ‡ | 0.01 | 0.04 | — | ||||||||||||||||||||
Net asset value at end of period | $ | 16.33 | $ | 18.95 | $ | 15.80 | $ | 10.98 | $ | 23.39 | $ | 23.49 | |||||||||||||||
Total investment return (c) | (11.82 | %) | 19.94 | % (d) | 43.90 | % | (49.01 | %) | 14.54 | % | 17.10% | (d | ) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.53 | % | 0.12 | %†† | 0.42 | % | 0.17 | % | (0.10 | %) | (0.41 | %)†† | |||||||||||||||
Net expenses | 1.69 | % | 1.89 | %†† | 1.83 | % | 1.74 | % | 1.70 | % | 1.80 | % †† | |||||||||||||||
Expenses (before waiver/reimbursement) | 1.69 | % | 1.92 | %†† | 1.83 | % | 1.74 | % | 1.70 | % | 1.80 | % †† | |||||||||||||||
Portfolio turnover rate | 69 | % | 41 | % | 105 | % | 107 | % | 140 | % | 75 | % | |||||||||||||||
Net assets at end of period (in 000’s) | $ | 5,261 | $ | 5,175 | $ | 2,749 | $ | 1,098 | $ | 2,858 | $ | 268 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment 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. | mainstayinvestments.com 21 |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||
January 1, | November 16, | |||||||||||||
Year | 2010 | 2009** | ||||||||||||
ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 18.84 | $ | 15.79 | $ | 16.11 | ||||||||
Net investment income (loss) (a) | (0.05 | ) | (0.04 | ) | (0.01 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | (2.22 | ) | 3.10 | (0.31 | ) | |||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | (0.01 | ) | — | |||||||||
Total from investment operations | (2.30 | ) | 3.05 | (0.32 | ) | |||||||||
�� | ||||||||||||||
Less dividends: | ||||||||||||||
From net investment income | (0.41 | ) | — | — | ||||||||||
Redemption fee (b) | — | — | 0.00 | ‡ | ||||||||||
Net asset value at end of period | $ | 16.13 | $ | 18.84 | $ | 15.79 | ||||||||
Total investment return (c) | (12.57 | %) | 19.32 | % (d) | (1.99 | %)(d) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | (0.29 | %) | (0.28 | %)†† | (0.65 | %)†† | ||||||||
Net expenses | 2.51 | % | 2.60 | % †† | 2.34 | % †† | ||||||||
Expenses (before waiver/reimbursement) | 2.51 | % | 2.63 | % †† | 2.34 | % †† | ||||||||
Portfolio turnover rate | 69 | % | 41 | % | 105 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 2,064 | $ | 1,476 | $ | 25 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
22 MainStay Epoch International Small Cap Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | |||||||||||||||||||||||||||
January 1, | |||||||||||||||||||||||||||
Year | 2010 | ||||||||||||||||||||||||||
ended | through | ||||||||||||||||||||||||||
October 31, | October 31, | Year ended December 31, | |||||||||||||||||||||||||
2011 | 2010*** | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 19.51 | $ | 16.24 | $ | 11.16 | $ | 23.77 | $ | 23.91 | $ | 18.26 | |||||||||||||||
Net investment income (loss) | 0.13 | (a) | 0.04 | (a) | 0.09 | (a) | 0.06 | (a) | 0.04 | (0.01 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (2.29 | ) | 3.24 | 4.99 | (11.69 | ) | 3.31 | 7.00 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | (0.01 | ) | — | — | — | — | |||||||||||||||||||
Total from investment operations | (2.19 | ) | 3.27 | 5.08 | (11.63 | ) | 3.35 | 6.99 | |||||||||||||||||||
Less dividends and distributions: | |||||||||||||||||||||||||||
From net investment income | (0.49 | ) | — | — | (0.04 | ) | (0.01 | ) | (0.02 | ) | |||||||||||||||||
From net realized gain on investments | — | — | — | (0.94 | ) | (3.48 | ) | (1.32 | ) | ||||||||||||||||||
Total dividends and distributions | (0.49 | ) | — | — | (0.98 | ) | (3.49 | ) | (1.34 | ) | |||||||||||||||||
Redemption fee (b) | — | — | — | 0.00 | ‡ | — | — | ||||||||||||||||||||
Net asset value at end of period | $ | 16.83 | $ | 19.51 | $ | 16.24 | $ | 11.16 | $ | 23.77 | $ | 23.91 | |||||||||||||||
Total investment return (c) | (11.59 | %) | 20.14 | % (d) | 45.52 | % | (48.89 | %) | 14.12 | % | 38.40 | % | |||||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.69 | % | 0.31 | %†† | 0.67 | % | 0.30 | % | 0.15 | % | 0.11 | % | |||||||||||||||
Net expenses | 1.44 | % | 1.65 | %†† | 1.60 | % | 1.49 | % | 1.45 | % | 1.55 | % | |||||||||||||||
Expenses (before reimbursement/waiver) | 1.44 | % | 1.67 | %†† | 1.60 | % | 1.49 | % | 1.45 | % | 1.55 | % | |||||||||||||||
Portfolio turnover rate | 69 | % | 41 | % | 105 | % | 107 | % | 140 | % | 75 | % | |||||||||||||||
Net assets at end of period (in 000’s) | $ | 257,740 | $ | 178,909 | $ | 167,568 | $ | 149,505 | $ | 451,242 | $ | 286,841 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(d) | Total investment 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. | mainstayinvestments.com 23 |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Epoch International Small Cap Fund (the “Fund”), a diversified fund. The Fund is the successor to the Epoch International Small Cap Fund (the “Predecessor Fund”), which was a series of a different registered investment company for which Epoch Investment Partners, Inc. served as investment advisor. The financial statements of the Fund reflect the historical results of the Institutional Class and Class P shares of the Predecessor Fund prior to its reorganization on November 16, 2009. Upon the completion of the reorganization, the Class I and Class A shares of the Fund assumed the performance, financial and other information of the Institutional Class and Class P shares of the Predecessor Fund, respectively. All information and references to periods prior to the commencement of operations of the Fund refer to the Predecessor Fund.
The Fund currently offers four classes of shares. Investor Class and Class C shares commenced operations on November 16, 2009. Class A and Class I shares commenced operations (under former designations) on August 2, 2006 and January 25, 2005, respectively. Effective January 4, 2010, the Fund changed its fiscal year end from December 31 to October 31. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The four classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek long-term capital appreciation.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
24 MainStay Epoch International Small Cap Fund
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Options contracts are valued at the last posted settlement price on the market where such options are principally traded. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values determined on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund held securities with a value of $1,547,113 that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or Subadvisor conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. At October 31, 2011, certain foreign equity securities held by the Fund were fair valued in such a manner.
Generally, a security is considered illiquid if it cannot be sold or disposed of in the ordinary course of business at approximately the price at which it is valued. Its illiquidity might prevent the sale of such security at a time when the Manager or Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of a Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in determining value, which could vary from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or Subadvisor determines the liquidity of the Fund’s investments; in doing so, the Manager or Subadvisor may consider various factors, including (i) the frequency of trades and quotations, (ii) the number of dealers and prospective purchasers, (iii) dealer undertakings to make a market, and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities generally will be valued in such manner as the Board in good faith deems appropriate to reflect their fair market value.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required. Investment income received by the Fund from foreign sources may be subject to foreign income taxes. These foreign income taxes are generally withheld at the source.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of
mainstayinvestments.com 25
Notes to Financial Statements (continued)
limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Foreign Currency Transactions. The books and records of the Fund are kept in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling exchange rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date, and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(I) Rights and Warrants. A right is a certificate that permits the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. A warrant is an instrument that entitles the holder to buy an equity security at a specific price for a specific period of time. The Fund generally enters into rights and warrants when securities are acquired through a corporate action. With respect to warrants in international markets, the securities are only purchased when the underlying security cannot be purchased due to the many restrictions an industry and/or country might place on foreign investors. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The Fund could also lose the entire value of its investment in warrants if the warrant is not exercised by the date of its expiration. The securities are sold as soon as the opportunity becomes available. The Fund is exposed to risk until each sale is completed. At October 31, 2011, the Fund did not hold any rights or warrants.
(J) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market
26 MainStay Epoch International Small Cap Fund
value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(K) Redemption Fee. Prior to April 1, 2010, the Fund imposed a 2.00% redemption fee on redemptions (including exchanges) of Fund shares made within 60 days of their date of purchase for any class. The redemption fee was designed to offset brokerage commissions and other costs associated with short-term trading and was not assessed on shares acquired through the reinvestment of dividends or distributions paid by the Fund. The redemption fees are included in the Statement of Changes in Net Assets’ shares redeemed amount and were retained by the Fund for the period ended October 31, 2010 and year ended December 31, 2009.
(L) Concentration of Risk. The Fund invests in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.
(M) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(N) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. These derivatives are not accounted for as hedging instruments.
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2011:
Realized Gain (Loss)
Statement of | Equity | |||||||||
Operations | Contracts | |||||||||
Location | Risk | Total | ||||||||
Rights | Net realized gain (loss) on security transactions | $ | 140,751 | $ | 140,751 | |||||
Total Net Realized Gain (Loss) | $ | 140,751 | $ | 140,751 | ||||||
Number of Contracts, Notional Amounts or Shares/Units (1)
Equity | ||||||||
Contracts | ||||||||
Risk | Total | |||||||
Rights (2) | 15,250 | 15,250 | ||||||
(1) | Amount disclosed represents the weighted average held during the year ended October 31, 2011. |
(2) | Amount(s) represent(s) number of contracts or number of shares/units. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. Epoch Investment Partners, Inc. (”Epoch” or “Subadvisor”), a registered investment adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and Epoch, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of 1.10% of the Fund’s average daily net assets.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for Class A and Class I shares do not exceed the following percentages of average daily net assets: Class A, 1.75% and Class I, 1.50%. New York Life Investments will apply an equivalent waiver or reimbursement, in an amount equal to the number of basis points waived for Class A shares,
mainstayinvestments.com 27
Notes to Financial Statements (continued)
to Investor Class and Class C shares of the Fund. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the period November 14, 2009 through February 28, 2011, New York Life Investments had agreed to reimburse Class A and Class I shares of the Fund so that total ordinary operating expenses for Class A and Class I shares did not exceed the following percentages of average daily net assets: Class A, 1.89% and Class I, 1.65%. New York Life Investments applied an equivalent waiver or reimbursement, in an amount equal to the number of basis points waived for Class A shares, to Investor Class and Class C shares of the Fund.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $2,464,551.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class C Plan, Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $2,084 and $4,176, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Class A and Class C shares of $275 and $1,020, respectively for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 1,639 | ||
Class A | 13,854 | |||
Class C | 5,019 | |||
Class I | 387,181 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Investor Class | $ | 25,933 | 3.2 | % | ||||
Class C | 25,556 | 1.2 | ||||||
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $2,743. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 511,714 | $ | (84,183,746 | ) | $ | — | $ | (4,454,439 | ) | $ | (88,126,471 | ) | ||||||
The difference between book-basis and tax basis unrealized appreciation (depreciation) is primarily due to wash sale deferrals, marking to market of foreign currency forward contracts and passive foreign investment company (“PFIC”) adjustments.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from
28 MainStay Epoch International Small Cap Fund
permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed | Net Realized | |||||||||
Net Investment | Gain (Loss) on | Additional | ||||||||
Income (Loss) | Investments | Paid-In Capital | ||||||||
$ | 1,112,979 | $ | (1,112,979 | ) | $ | — | ||||
The reclassifications for the Fund is primarily due to foreign currency gain (loss) and PFIC gain (loss).
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $84,183,746 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2016 | $ | 17,420 | ||||
2017 | 66,764 | |||||
Total | $ | 84,184 | ||||
The Fund utilized $23,674,514 of capital loss carryforwards during the year ended October 31, 2011.
The tax character of distributions paid during the year ended October 31, 2011, period ended October 31, 2010 and year ended December 31, 2009 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | 2009 | ||||||||||
Distributions paid from: | ||||||||||||
Ordinary Income | $ | 4,864,478 | $ | — | $ | — | ||||||
Note 5–Foreign Currency Transactions
As of October 31, 2011, the Fund held the following foreign currencies:
Currency | Cost | Value | ||||||||||
Australian Dollar | AUD | 1,676,599 | USD | 1,702,473 | USD | 1,766,968 | ||||||
Brazilian Real | BRL | 98,969 | 54,348 | 57,646 | ||||||||
Canadian Dollar | CAD | 48,047 | 47,817 | 48,203 | ||||||||
Euro | EUR | 42,493 | 59,269 | 58,797 | ||||||||
Hong Kong Dollar | HKD | 1,991,515 | 255,892 | 256,348 | ||||||||
Japanese Yen | JPY | 41,686,311 | 539,035 | 533,209 | ||||||||
New Taiwan Dollar | TWD | 4,942,332 | 162,432 | 165,196 | ||||||||
Pound Sterling | GBP | 368,285 | 588,870 | 592,166 | ||||||||
South Korean Won | KRW | 6,681 | 6 | 6 | ||||||||
Swedish Krona | SEK | 48 | 7 | 7 | ||||||||
Swiss Franc | CHF | 15,893 | 17,283 | 18,105 | ||||||||
Total | USD | 3,427,432 | USD | 3,496,651 | ||||||||
Note 6–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an
mainstayinvestments.com 29
Notes to Financial Statements (continued)
additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $243,876 and $149,081, respectively.
Note 9–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 34,675 | $ | 676,235 | |||||
Shares issued to shareholders in reinvestment of dividends | 548 | 10,564 | ||||||
Shares redeemed | (12,114 | ) | (219,880 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 23,109 | 466,919 | ||||||
Shares converted into Investor Class (See Note 1) | 13,809 | 218,085 | ||||||
Shares converted from Investor Class (See Note 1) | (3,371 | ) | (64,863 | ) | ||||
Net increase (decrease) | 33,547 | $ | 620,141 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 13,339 | $ | 215,984 | |||||
Shares redeemed | (468 | ) | (7,323 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 12,871 | 208,661 | ||||||
Shares converted into Investor Class (See Note 1) | 2,046 | 34,741 | ||||||
Shares converted from Investor Class (See Note 1) | (927 | ) | (16,242 | ) | ||||
Net increase (decrease) | 13,990 | $ | 227,160 | |||||
Period ended December 31, 2009 (a): | ||||||||
Shares sold | 2,315 | $ | 36,932 | |||||
Shares redeemed | (323 | ) | (5,029 | ) | ||||
Net increase (decrease) | 1,992 | $ | 31,903 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 341,855 | $ | 6,674,113 | |||||
Shares issued to shareholders in reinvestment of dividends | 6,720 | 129,495 | ||||||
Shares redeemed | (288,979 | ) | (5,196,906 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 59,596 | 1,606,702 | ||||||
Shares converted into Class A (See Note 1) | 3,367 | 64,863 | ||||||
Shares converted from Class A (See Note 1) | (13,791 | ) | (218,085 | ) | ||||
Net increase (decrease) | 49,172 | $ | 1,453,480 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 161,069 | $ | 2,637,725 | |||||
Shares redeemed | (60,905 | ) | (981,161 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 100,164 | 1,656,564 | ||||||
Shares converted into Class A (See Note 1) | 928 | 16,242 | ||||||
Shares converted from Class A (See Note 1) | (2,047 | ) | (34,741 | ) | ||||
Net increase (decrease) | 99,045 | $ | 1,638,065 | |||||
Year ended December 31, 2009: | ||||||||
Shares sold | 96,215 | $ | 1,346,882 | |||||
Shares redeemed | (22,168 | ) | (300,828 | ) | ||||
Net increase (decrease) | 74,047 | $ | 1,046,054 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 59,715 | $ | 1,166,991 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,687 | 32,362 | ||||||
Shares redeemed | (11,797 | ) | (205,160 | ) | ||||
Net increase (decrease) | 49,605 | $ | 994,193 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 76,775 | $ | 1,234,848 | |||||
Net increase (decrease) | 76,775 | $ | 1,234,848 | |||||
Period ended December 31, 2009 (a): | ||||||||
Shares sold | 1,553 | $ | 25,019 | |||||
Net increase (decrease) | 1,553 | $ | 25,019 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 9,428,072 | $ | 174,510,984 | |||||
Shares issued to shareholders in reinvestment of dividends | 222,933 | 4,418,533 | ||||||
Shares redeemed | (3,501,826 | ) | (68,384,886 | ) | ||||
Net increase (decrease) | 6,149,179 | $ | 110,544,631 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 2,105,632 | $ | 34,597,236 | |||||
Shares redeemed | (3,254,522 | ) | (53,922,346 | ) | ||||
Net increase (decrease) | (1,148,890 | ) | $ | (19,325,110 | ) | |||
Year ended December 31, 2009: | ||||||||
Shares sold | 6,676,243 | $ | 78,240,005 | |||||
Shares redeemed | (9,749,184 | ) | (114,775,018 | ) | ||||
Net increase (decrease) | (3,072,941 | ) | $ | (36,535,013 | ) | |||
(a) | Investor Class shares and Class C shares were first offered on November 16, 2009. |
30 MainStay Epoch International Small Cap Fund
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 31
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Epoch International Small Cap Fund (the “Fund”), one of the funds comprising MainStay Funds Trust, as of October 31, 2011 and the related statement of operations for the year then ended, the statements of changes in net assets for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009, and the financial highlights for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the years or periods presented through December 31, 2008 were audited by other auditors, whose report dated February 27, 2009 expressed an unqualified opinion thereon.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Epoch International Small Cap Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
32 MainStay Epoch International Small Cap Fund
Federal Income Tax Information (Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2011, the Fund designated approximately $3,993,285 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
In accordance with federal tax law, the Fund elects to provide each shareholder with their portion of the Fund’s foreign taxes paid and the income sourced from foreign countries. Accordingly, the Fund made the following designations regarding its fiscal year ended October 31, 2011:
• | the total amount of taxes paid to foreign countries was $372,951 |
• | the total amount of income sourced from foreign countries was $5,169,360 |
In February 2012, shareholders will receive an IRS From 1099-DIV or substitute From 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amount that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and
Procedures and Proxy Voting Record
Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; and (ii) on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the Fund’s website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 33
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
34 MainStay Epoch International Small Cap Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 35
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
36 MainStay Epoch International Small Cap Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 37
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
38 MainStay Epoch International Small Cap Fund
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-25007 MS284-11 | MSEISC11-12/11 NF4 |
MainStay Epoch U.S. All Cap Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 14 | |
Notes to Financial Statements | 20 | |
Report of Independent Registered Public Accounting Firm | 26 | |
Federal Income Tax Information | 27 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 27 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 27 | |
Board Members and Officers | 28 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||||
Expense | ||||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –1 | .22% | –1 | .35% | 1 | .36% | 1 | .69% | ||||||||||
Excluding sales charges | 4 | .53 | –0 | .23 | 1 | .93 | 1 | .69 | ||||||||||||
Class A Shares4 | Maximum 5.5% Initial Sales Charge | With sales charges | –0 | .81 | –1 | .06 | 1 | .51 | 1 | .19 | ||||||||||
Excluding sales charges | 4 | .96 | 0 | .06 | 2 | .08 | 1 | .19 | ||||||||||||
Class B Shares4 | Maximum 5% CDSC | With sales charges | –1 | .23 | –1 | .36 | 1 | .16 | 2 | .44 | ||||||||||
if Redeemed Within the First Six Years of Purchase | Excluding sales charges | 3 | .77 | –1 | .00 | 1 | .16 | 2 | .44 | |||||||||||
Class C Shares4 | Maximum 1% CDSC | With sales charges | 2 | .77 | –1 | .00 | 1 | .17 | 2 | .44 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 3 | .77 | –1 | .00 | 1 | .17 | 2 | .44 | |||||||||||
Class I Shares | No Sales Charge | 5 | .20 | 0 | .43 | 2 | .48 | 0 | .94 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Performance figures for Class A, B and C shares, first offered on January 2, 2004, include the historical performance of Class I shares through January 1, 2004, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class A, B and C shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
Russell 3000® Index5 | 7 | .90% | 0 | .55% | 4 | .37% | ||||||
Average Lipper Multi-Cap Core Fund6 | 4 | .77 | 0 | .14 | 4 | .50 | ||||||
5. | The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000® Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The average Lipper multi-cap core fund is representative of funds that, by portfolio practice, invest in a variety of market-capitalization ranges without concentrating 75% of their equity assets in any one market-capitalization range over an extended period of time. Multi-cap core funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Epoch U.S. All Cap Fund
Cost in Dollars of a $1,000 Investment in MainStay Epoch U.S. All Cap Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 886.30 | $ | 7.46 | $ | 1,017.30 | $ | 7.98 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 887.80 | $ | 5.47 | $ | 1,019.40 | $ | 5.85 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 882.60 | $ | 11.01 | $ | 1,013.50 | $ | 11.77 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 882.70 | $ | 11.01 | $ | 1,013.50 | $ | 11.77 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 888.90 | $ | 4.28 | $ | 1,020.70 | $ | 4.58 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.57% for Investor Class, 1.15% for Class A, 2.32% for Class B and Class C and 0.90% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Industry Composition as of October 31, 2011 (Unaudited)
Health Care Providers & Services | 7.7 | % | ||
Software | 7.3 | |||
Oil, Gas & Consumable Fuels | 7.0 | |||
Chemicals | 5.3 | |||
Capital Markets | 5.2 | |||
Energy Equipment & Services | 4.5 | |||
Machinery | 4.3 | |||
Pharmaceuticals | 4.1 | |||
Media | 3.8 | |||
IT Services | 3.7 | |||
Computers & Peripherals | 3.5 | |||
Specialty Retail | 3.5 | |||
Aerospace & Defense | 3.2 | |||
Semiconductors & Semiconductor Equipment | 2.8 | |||
Auto Components | 2.4 | |||
Distributors | 2.3 | |||
Insurance | 2.2 | |||
Multi-Utilities | 2.0 | |||
Food Products | 1.9 | |||
Diversified Financial Services | 1.8 | |||
Commercial Services & Supplies | 1.7 | |||
Life Sciences Tools & Services | 1.7 | |||
Consumer Finance | 1.6 | |||
Internet Software & Services | 1.6 | |||
Diversified Telecommunication Services | 1.5 | |||
Hotels, Restaurants & Leisure | 1.4 | |||
Electronic Equipment & Instruments | 1.3 | |||
Paper & Forest Products | 1.3 | |||
Building Products | 1.1 | |||
Road & Rail | 1.1 | |||
Real Estate Investment Trusts | 1.0 | |||
Commercial Banks | 0.9 | |||
Diversified Consumer Services | 0.5 | |||
Textiles, Apparel & Luxury Goods | 0.5 | |||
Short-Term Investment | 4.5 | |||
Other Assets, Less Liabilities | –0.2 | |||
100.0 | % | |||
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | Microsoft Corp. | |
2. | ExxonMobil Corp. | |
3. | Praxair, Inc. | |
4. | Visa, Inc. Class A | |
5. | Comcast Corp. Class A | |
6. | Laboratory Corp. of America Holdings | |
7. | Dana Holding Corp. | |
8. | Ameriprise Financial, Inc. | |
9. | Genuine Parts Co. | |
10. | Oracle Corp. |
8 MainStay Epoch U.S. All Cap Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers David Pearl, Michael Welhoelter, CFA, and William Priest, CFA, of Epoch Investment Partners, Inc., the Fund’s Subadvisor.
How did MainStay Epoch U.S. All Cap Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Epoch U.S. All Cap Fund returned 4.53% for Investor Class shares, 4.96% for Class A shares and 3.77% for both Class B and Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 5.20%. Class A and Class I shares outperformed—and all other share classes underperformed—the 4.77% return of the average Lipper1 multi-cap core fund for the same period. All share classes underperformed the 7.90% return of the Russell 3000® Index2 for the 12 months ended October 31, 2011. The Russell 3000® Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The U.S. stock market rose amid an environment of heightened volatility as investors assessed multiple threats to the global economy, including fallout from the European sovereign debt crisis. A number of economically sensitive stocks, particularly in the industrials sector, had substantially negative returns. In part, these losses were due to concerns about slowing economic growth. Favorable stock selection in the materials and utilities sectors partially offset the Fund’s losses among economically sensitive stocks.
During the reporting period, which sectors were the strongest contributors to the Fund’s relative perfor-mance and which sectors were particularly weak?
During the reporting period, the strongest sector contributions to the Fund’s performance relative to the Russell 3000® Index came from the materials, utilities and consumer discretionary sectors. (Contributions take weightings and total returns into account.) In all three cases, the contributions were primarily due to stock selection. During the reporting period, the sectors that hindered the Fund’s relative performance included industrials, health care and financials. The impact was primarily due to stock selection.
During the reporting period, which individual stocks made the strongest contributions to the Fund’s absolute performance and which stocks detracted the most?
On an absolute basis, the largest contributions to the Fund’s performance came from natural gas distributor ONEOK, household products company Tupperware Brands and integrated oil company ExxonMobil. ONEOK experienced earnings growth amid rising natural gas volumes as the company expanded its infrastructure. Tupperware Brands, which specializes in kitchen, home and beauty products, reported brisk sales in emerging markets. ExxonMobil benefited from higher oil prices and improved margins at refineries.
During the reporting period, industrial and commercial products company Ingersoll-Rand, semiconductor company MEMC Electronic Materials and office products company Staples made the weakest contributions to the Fund’s absolute performance. Shares of Ingersoll-Rand declined after the company lowered its earnings forecast as competitors took advantage of a temporary loophole to continue using a coolant in heating, ventilation and air conditioning (HVAC) units that has been found to be harmful to the earth’s ozone layer. Silicon wafer maker MEMC Electronic Materials saw its stock weighed down by concerns about reduced government subsidies for solar panels. Staples suffered from slow spending among small- to mid-size businesses in the United States, Europe and Australia.
Did the Fund make any significant purchases or sales during the reporting period?
Among the stocks that the Fund purchased during the reporting period was auto parts manufacturer Dana Holding. We believe that the company offers top-line exposure to a recovery in U.S. vehicle sales and to growth in commercial, agricultural and construction equipment at a price that is reasonable. Dana Holding presented a compelling opportunity as it had shed its U.S. other post-employment benefit (OPEB) costs and liabilities through bankruptcy, which the company exited in 2008, positioning the company with a competitive advantage over peers still carrying these burdens on their balance sheets. We purchased a position in Time Warner, a leading global media and entertainment company that owns such valuable brands as Warner Brothers Studio, HBO, CNN and People magazine. We believe that Time Warner has a good mix of businesses that enjoy high recurring revenue and low capital intensity. The company’s management has increased its focus on the continued improvement of return on invested capital.
We sold the Fund’s position in asset manager Franklin Resources as we believed investment flows into global bond funds would slow and that an extended period of low interest rates would provide additional difficulty. We used the proceeds to buy a position in asset manager BlackRock for its exposure to the growing exchange traded fund (ETF) market and its diversified business model. We also exited the Fund’s position in natural gas distributor ONEOK, which reached our valuation target after strong performance.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund’s weighting in the telecommunications services sector was increased, although it remained underweight relative to the Russell 3000® Index. The Fund’s weightings were also increased in the industrials and
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Russell 3000® Index.
mainstayinvestments.com 9
materials sectors. The Fund’s weighting in the financials sector was decreased from roughly in line with the Russell 3000® Index to significantly underweight. The Fund’s weighting in the energy sector was decreased from an overweight position to one that was roughly in line with the benchmark.
How was the Fund positioned at the end of October 2011?
As of October 31, 2011, the Fund’s most substantially overweight sectors relative to the Russell 3000® Index were consumer discretionary and materials. The Fund’s diversified exposure to the consumer discretionary sector included auto suppliers and select retail companies that, in our view, provide value to consumers. As of the same date, the Fund’s most substantially underweight sector relative to the Russell 3000® Index was consumer staples. The Fund remained underweight in this sector because we believe that some consumer products companies have high valuations and may struggle to pass along higher commodity prices. As of October 31, 2011, the Fund also had a significant underweight position relative to the benchmark in the financials sector.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Epoch U.S. All Cap Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 95.7%† | ||||||||
Aerospace & Defense 3.2% | ||||||||
Boeing Co. (The) | 170,200 | $ | 11,197,458 | |||||
Rockwell Collins, Inc. | 151,150 | 8,438,704 | ||||||
19,636,162 | ||||||||
Auto Components 2.4% | ||||||||
X Dana Holding Corp. (a) | 1,022,950 | 14,464,513 | ||||||
Building Products 1.1% | ||||||||
Masco Corp. | 702,800 | 6,746,880 | ||||||
Capital Markets 5.2% | ||||||||
X Ameriprise Financial, Inc. | 304,200 | 14,200,056 | ||||||
BlackRock, Inc. | 54,540 | 8,605,867 | ||||||
TD Ameritrade Holding Corp. | 540,050 | 9,062,039 | ||||||
31,867,962 | ||||||||
Chemicals 5.3% | ||||||||
E.I. du Pont de Nemours & Co. | 186,850 | 8,981,879 | ||||||
Nalco Holding Co. | 147,507 | 5,562,489 | ||||||
X Praxair, Inc. | 177,200 | 18,015,924 | ||||||
32,560,292 | ||||||||
Commercial Banks 0.9% | ||||||||
CIT Group, Inc. (a) | 151,600 | 5,283,260 | ||||||
Commercial Services & Supplies 1.7% | ||||||||
Waste Management, Inc. | 316,050 | 10,407,527 | ||||||
Computers & Peripherals 3.5% | ||||||||
Apple, Inc. (a) | 29,215 | 11,825,648 | ||||||
Dell, Inc. (a) | 613,950 | 9,706,549 | ||||||
21,532,197 | ||||||||
Consumer Finance 1.6% | ||||||||
American Express Co. | 191,450 | 9,691,199 | ||||||
Distributors 2.3% | ||||||||
X Genuine Parts Co. | 246,000 | 14,127,780 | ||||||
Diversified Consumer Services 0.5% | ||||||||
Service Corp. International | 322,326 | 3,223,260 | ||||||
Diversified Financial Services 1.8% | ||||||||
NYSE Euronext | 406,100 | 10,790,077 | ||||||
Diversified Telecommunication Services 1.5% | ||||||||
CenturyLink, Inc. | 262,850 | 9,268,091 | ||||||
Electronic Equipment & Instruments 1.3% | ||||||||
Corning, Inc. | 575,560 | 8,224,752 | ||||||
Energy Equipment & Services 4.5% | ||||||||
Cameron International Corp. (a) | 186,633 | 9,171,145 | ||||||
Dril-Quip, Inc. (a) | 98,247 | 6,395,880 | ||||||
National-Oilwell Varco, Inc. | 166,605 | 11,883,935 | ||||||
27,450,960 | ||||||||
Food Products 1.9% | ||||||||
Corn Products International, Inc. | 240,000 | 11,640,000 | ||||||
Health Care Providers & Services 7.7% | ||||||||
Aetna, Inc. | 285,600 | 11,355,456 | ||||||
DaVita, Inc. (a) | 135,900 | 9,513,000 | ||||||
X Laboratory Corp. of America Holdings (a) | 176,950 | 14,837,257 | ||||||
UnitedHealth Group, Inc. | 240,700 | 11,551,193 | ||||||
47,256,906 | ||||||||
Hotels, Restaurants & Leisure 1.4% | ||||||||
International Game Technology | 474,650 | 8,349,094 | ||||||
Insurance 2.2% | ||||||||
MetLife, Inc. | 388,466 | 13,658,465 | ||||||
Internet Software & Services 1.6% | ||||||||
Yahoo!, Inc. (a) | 621,650 | 9,722,606 | ||||||
IT Services 3.7% | ||||||||
Fiserv, Inc. (a) | 95,850 | 5,642,689 | ||||||
X Visa, Inc. Class A | 181,550 | 16,931,353 | ||||||
22,574,042 | ||||||||
Life Sciences Tools & Services 1.7% | ||||||||
Thermo Fisher Scientific, Inc. (a) | 211,950 | 10,654,727 | ||||||
Machinery 4.3% | ||||||||
Deere & Co. | 67,864 | 5,150,878 | ||||||
Ingersoll-Rand PLC | 295,250 | 9,191,132 | ||||||
Wabtec Corp. | 175,982 | 11,822,471 | ||||||
26,164,481 | ||||||||
Media 3.8% | ||||||||
X Comcast Corp. Class A | 666,000 | 15,318,000 | ||||||
Time Warner, Inc. | 232,750 | 8,143,922 | ||||||
23,461,922 | ||||||||
Multi-Utilities 2.0% | ||||||||
Wisconsin Energy Corp. | 366,950 | 11,900,189 | ||||||
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Oil, Gas & Consumable Fuels 7.0% | ||||||||
Devon Energy Corp. | 195,300 | $ | 12,684,735 | |||||
X ExxonMobil Corp. | 261,200 | 20,397,108 | ||||||
Occidental Petroleum Corp. | 103,557 | 9,624,588 | ||||||
42,706,431 | ||||||||
Paper & Forest Products 1.3% | ||||||||
International Paper Co. (a) | 279,950 | 7,754,615 | ||||||
Pharmaceuticals 4.1% | ||||||||
Abbott Laboratories | 223,550 | 12,042,639 | ||||||
Endo Pharmaceuticals Holdings, Inc. (a) | 400,750 | 12,948,232 | ||||||
24,990,871 | ||||||||
Real Estate Investment Trusts 1.0% | ||||||||
Ventas, Inc. | 114,200 | 6,350,662 | ||||||
Road & Rail 1.1% | ||||||||
Con-way, Inc. | 229,100 | 6,751,577 | ||||||
Semiconductors & Semiconductor Equipment 2.8% | ||||||||
Teradyne, Inc. (a) | 290,300 | 4,157,096 | ||||||
Texas Instruments, Inc. | 430,448 | 13,227,667 | ||||||
17,384,763 | ||||||||
Software 7.3% | ||||||||
Electronic Arts, Inc. (a) | 351,050 | 8,197,018 | ||||||
X Microsoft Corp. | 854,650 | 22,759,329 | ||||||
X Oracle Corp. | 417,650 | 13,686,390 | ||||||
44,642,737 | ||||||||
Specialty Retail 3.5% | ||||||||
Home Depot, Inc. (The) | 268,650 | 9,617,670 | ||||||
TJX Cos., Inc. | 204,750 | 12,065,917 | ||||||
21,683,587 | ||||||||
Textiles, Apparel & Luxury Goods 0.5% | ||||||||
Warnaco Group, Inc. (The) (a) | 64,446 | 3,164,299 | ||||||
Total Common Stocks (Cost $529,559,736) | 586,086,886 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 4.5% | ||||||||
Repurchase Agreement 4.5% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $27,227,792 (Collateralized by a Federal Home Loan Mortgage Corp. security with a rate of 0.90% and a maturity date of 9/12/14 with a Principal Amount of $27,720,000 and a Market Value of $27,775,856) | $ | 27,227,784 | $ | 27,227,784 | ||||
Total Short-Term Investment (Cost $27,227,784) | 27,227,784 | |||||||
Total Investments (Cost $556,787,520) (b) | 100.2 | % | 613,314,670 | |||||
Other Assets, Less Liabilities | (0.2 | ) | (1,027,876 | ) | ||||
Net Assets | 100.0 | % | $ | 612,286,794 | ||||
(a) | Non-income producing security. | |
(b) | At October 31, 2011, cost is $557,729,811 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 73,087,334 | ||
Gross unrealized depreciation | (17,502,475 | ) | ||
Net unrealized appreciation | $ | 55,584,859 | ||
The notes to the financial statements are an integral part of,
12 MainStay Epoch U.S. All Cap Fund Fund | and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 586,086,886 | $ | — | $ | — | $ | 586,086,886 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 27,227,784 | — | 27,227,784 | ||||||||||||
Total Investments in Securities | $ | 586,086,886 | $ | 27,227,784 | $ | — | $ | 613,314,670 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $556,787,520) | $ | 613,314,670 | ||
Receivables: | ||||
Investment securities sold | 2,090,901 | |||
Dividends and interest | 359,948 | |||
Fund shares sold | 50,991 | |||
Other assets | 27,491 | |||
Total assets | 615,844,001 | |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 2,341,411 | |||
Fund shares redeemed | 674,694 | |||
Manager (See Note 3) | 428,935 | |||
Professional fees | 37,814 | |||
Shareholder communication | 29,882 | |||
Transfer agent (See Note 3) | 22,381 | |||
NYLIFE Distributors (See Note 3) | 11,459 | |||
Trustees | 2,380 | |||
Custodian | 979 | |||
Accrued expenses | 7,272 | |||
Total liabilities | 3,557,207 | |||
Net assets | $ | 612,286,794 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 26,395 | ||
Additional paid-in capital | 531,365,852 | |||
531,392,247 | ||||
Undistributed net investment income | 2,104,618 | |||
Accumulated net realized gain (loss) on investments | 22,262,779 | |||
Net unrealized appreciation (depreciation) on investments | 56,527,150 | |||
Net assets | $ | 612,286,794 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 7,658,599 | ||
Shares of beneficial interest outstanding | 353,256 | |||
Net asset value per share outstanding | $ | 21.68 | ||
Maximum sales charge (5.50% of offering price) | 1.26 | |||
Maximum offering price per share outstanding | $ | 22.94 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 10,466,437 | ||
Shares of beneficial interest outstanding | 477,418 | |||
Net asset value per share outstanding | $ | 21.92 | ||
Maximum sales charge (5.50% of offering price) | 1.28 | |||
Maximum offering price per share outstanding | $ | 23.20 | ||
Class B | ||||
Net assets applicable to outstanding shares | $ | 5,978,085 | ||
Shares of beneficial interest outstanding | 293,478 | |||
Net asset value and offering price per share outstanding | $ | 20.37 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 3,497,675 | ||
Shares of beneficial interest outstanding | 171,570 | |||
Net asset value and offering price per share outstanding | $ | 20.39 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 584,685,998 | ||
Shares of beneficial interest outstanding | 25,099,377 | |||
Net asset value and offering price per share outstanding | $ | 23.29 | ||
The notes to the financial statements are an integral part of,
14 MainStay Epoch U.S. All Cap Fund Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends | $ | 9,306,861 | ||
Interest | 2,377 | |||
Total income | 9,309,238 | |||
Expenses | ||||
Manager (See Note 3) | 5,398,212 | |||
Distribution/Service—Investor Class (See Note 3) | 19,276 | |||
Distribution/Service—Class A (See Note 3) | 28,844 | |||
Distribution/Service—Class B (See Note 3) | 66,039 | |||
Distribution/Service—Class C (See Note 3) | 40,289 | |||
Transfer agent (See Note 3) | 128,439 | |||
Registration | 101,511 | |||
Professional fees | 91,327 | |||
Shareholder communication | 60,197 | |||
Trustees | 18,258 | |||
Custodian | 14,545 | |||
Miscellaneous | 30,769 | |||
Total expenses | 5,997,706 | |||
Net investment income (loss) | 3,311,532 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 27,132,719 | |||
Net change in unrealized appreciation (depreciation) on investments | (2,086,729 | ) | ||
Net realized and unrealized gain (loss) on investments | 25,045,990 | |||
Net increase (decrease) in net assets resulting from operations | $ | 28,357,522 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,311,532 | $ | 2,258,534 | ||||
Net realized gain (loss) on investments | 27,132,719 | 18,742,961 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (2,086,729 | ) | 40,617,929 | |||||
Net increase (decrease) in net assets resulting from operations | 28,357,522 | 61,619,424 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | — | (6,765 | ) | |||||
Class A | (23,610 | ) | (39,351 | ) | ||||
Class B | — | (7,024 | ) | |||||
Class C | — | (3,879 | ) | |||||
Class I | (2,706,237 | ) | (1,225,428 | ) | ||||
Total dividends to shareholders | (2,729,847 | ) | (1,282,447 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 189,784,981 | 321,911,388 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 2,664,958 | 1,247,383 | ||||||
Cost of shares redeemed | (143,361,528 | ) | (71,515,940 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 49,088,411 | 251,642,831 | ||||||
Net increase (decrease) in net assets | 74,716,086 | 311,979,808 | ||||||
Net Assets | ||||||||
Beginning of year | 537,570,708 | 225,590,900 | ||||||
End of year | $ | 612,286,794 | $ | 537,570,708 | ||||
Undistributed net investment income at end of year | $ | 2,104,618 | $ | 1,539,668 | ||||
The notes to the financial statements are an integral part of,
16 MainStay Epoch U.S. All Cap Fund Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 20.74 | $ | 17.66 | $ | 15.40 | $ | 23.34 | ||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.01 | ) | (0.05 | ) | (0.13 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.97 | 3.11 | 2.31 | (7.81 | ) | |||||||||||||
Total from investment operations | 0.94 | 3.10 | 2.26 | (7.94 | ) | |||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | — | (0.02 | ) | — | — | |||||||||||||
Net asset value at end of period | $ | 21.68 | $ | 20.74 | $ | 17.66 | $ | 15.40 | ||||||||||
Total investment return (b) | 4.53 | % | 17.56 | % | 14.68 | % (c) | (34.02 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | (0.12 | %) | (0.04 | %) | (0.29 | %) | (0.88 | %)†† | ||||||||||
Net expenses | 1.58 | % | 1.69 | % | 1.67 | % | 1.64 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.58 | % | 1.69 | % | 1.96 | % | 1.66 | % †† | ||||||||||
Portfolio turnover rate | 42 | % | 41 | % | 135 | % | 56 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 7,659 | $ | 7,238 | $ | 6,384 | $ | 5,460 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(d) | Total investment return is not annualized. |
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 20.93 | $ | 17.76 | $ | 15.42 | $ | 28.85 | $ | 23.86 | ||||||||||||
Net investment income (loss) (a) | 0.07 | 0.09 | 0.02 | (0.14 | ) | (0.21 | ) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.97 | 3.13 | 2.32 | (11.05 | ) | 5.20 | ||||||||||||||||
Total from investment operations | 1.04 | 3.22 | 2.34 | (11.19 | ) | 4.99 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.05 | ) | (0.05 | ) | — | — | — | |||||||||||||||
From net realized gain on investments | — | — | — | (2.24 | ) | — | ||||||||||||||||
Total dividends and distributions | (0.05 | ) | (0.05 | ) | — | (2.24 | ) | — | ||||||||||||||
Net asset value at end of year | $ | 21.92 | $ | 20.93 | $ | 17.76 | $ | 15.42 | $ | 28.85 | ||||||||||||
Total investment return (b) | 4.96 | % | 18.15 | % | 15.18 | % (c) | (41.88 | %) | 20.91 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.30 | % | 0.48 | % | 0.13 | % | (0.59 | %) | (0.79 | %) | ||||||||||||
Net expenses | 1.15 | % | 1.19 | % | 1.26 | % | 1.39 | % | 1.55 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.15 | % | 1.19 | % | 1.34 | % | 1.40 | % | 1.53 | % (d) | ||||||||||||
Portfolio turnover rate | 42 | % | 41 | % | 135 | % | 56 | % | 37 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 10,466 | $ | 9,749 | $ | 14,006 | $ | 12,771 | $ | 32,894 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(d) | Due to expense cap structure change, Class A, B and C were able to recoup expenses during year ended October 31, 2007. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Financial Highlights selected per share data and ratios
Class B | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 19.63 | $ | 16.84 | $ | 14.80 | $ | 28.03 | $ | 23.36 | ||||||||||||
Net investment income (loss) (a) | (0.18 | ) | (0.14 | ) | (0.15 | ) | (0.34 | ) | (0.39 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.92 | 2.95 | 2.19 | (10.65 | ) | 5.06 | ||||||||||||||||
Total from investment operations | 0.74 | 2.81 | 2.04 | (10.99 | ) | 4.67 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | — | (0.02 | ) | — | — | — | ||||||||||||||||
From net realized gain on investments | — | — | — | (2.24 | ) | — | ||||||||||||||||
Total dividends and distributions | — | (0.02 | ) | — | (2.24 | ) | — | |||||||||||||||
Net asset value at end of year | $ | 20.37 | $ | 19.63 | $ | 16.84 | $ | 14.80 | $ | 28.03 | ||||||||||||
Total investment return (b) | 3.77 | % | 16.69 | % | 13.78 | % (c) | (42.43 | %) | 19.99 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | (0.86 | %) | (0.77 | %) | (1.04 | %) | (1.55 | %) | (1.54 | %) | ||||||||||||
Net expenses | 2.33 | % | 2.44 | % | 2.42 | % | 2.34 | % | 2.30 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 2.33 | % | 2.44 | % | 2.71 | % | 2.35 | % | 2.28 | % (d) | ||||||||||||
Portfolio turnover rate | 42 | % | 41 | % | 135 | % | 56 | % | 37 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 5,978 | $ | 6,362 | $ | 6,383 | $ | 6,191 | $ | 11,925 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(d) | Due to expense cap structure change, Class A, B and C were able to recoup expenses during year ended October 31, 2007. |
Class C | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 19.65 | $ | 16.86 | $ | 14.82 | $ | 28.06 | $ | 23.38 | ||||||||||||
Net investment income (loss) (a) | (0.18 | ) | (0.14 | ) | (0.15 | ) | (0.34 | ) | (0.39 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.92 | 2.95 | 2.19 | (10.66 | ) | 5.07 | ||||||||||||||||
Total from investment operations | 0.74 | 2.81 | 2.04 | (11.00 | ) | 4.68 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | — | (0.02 | ) | — | — | — | ||||||||||||||||
From net realized gain on investments | — | — | — | (2.24 | ) | — | ||||||||||||||||
Total dividends and distributions | — | (0.02 | ) | — | (2.24 | ) | — | |||||||||||||||
Net asset value at end of year | $ | 20.39 | $ | 19.65 | $ | 16.86 | $ | 14.82 | $ | 28.06 | ||||||||||||
Total investment return (b) | 3.77 | % | 16.67 | % | 13.77 | % (c) | (42.42 | %) | 20.02 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | (0.86 | %) | (0.79 | %) | (1.03 | %) | (1.55 | %) | (1.55 | %) | ||||||||||||
Net expenses | 2.33 | % | 2.44 | % | 2.42 | % | 2.34 | % | 2.30 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 2.33 | % | 2.44 | % | 2.71 | % | 2.35 | % | 2.28 | % (d) | ||||||||||||
Portfolio turnover rate | 42 | % | 41 | % | 135 | % | 56 | % | 37 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 3,498 | $ | 3,959 | $ | 3,514 | $ | 4,004 | $ | 7,396 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(d) | Due to expense cap structure change, Class A, B and C were able to recoup expenses during year ended October 31, 2007. |
The notes to the financial statements are an integral part of,
18 MainStay Epoch U.S. All Cap Fund Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 22.24 | $ | 18.87 | $ | 16.33 | $ | 30.28 | $ | 24.90 | ||||||||||||
Net investment income (loss) (a) | 0.13 | 0.13 | 0.07 | (0.03 | ) | (0.05 | ) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.03 | 3.34 | 2.47 | (11.68 | ) | 5.43 | ||||||||||||||||
Total from investment operations | 1.16 | 3.47 | 2.54 | (11.71 | ) | 5.38 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.10 | ) | — | — | — | |||||||||||||||
From net realized gain on investments | — | — | — | (2.24 | ) | — | ||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.10 | ) | — | (2.24 | ) | — | ||||||||||||||
Net asset value at end of year | $ | 23.29 | $ | 22.24 | $ | 18.87 | $ | 16.33 | $ | 30.28 | ||||||||||||
Total investment return (b) | 5.20 | % | 18.42 | % | 15.55 | %(c) | (41.60 | %) | 21.61 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.55 | % | 0.62 | % | 0.42 | % | (0.14 | %) | (0.18 | %) | ||||||||||||
Net expenses | 0.90 | % | 0.94 | % | 0.95 | % | 0.93 | % | 0.93 | % | ||||||||||||
Expenses (before reimbursement/waiver) | 0.90 | % | 0.94 | % | 1.09 | % | 0.97 | % | 0.95 | % | ||||||||||||
Portfolio turnover rate | 42 | % | 41 | % | 135 | % | 56 | % | 37 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 584,686 | $ | 510,263 | $ | 195,303 | $ | 157,222 | $ | 297,744 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Epoch U.S. All Cap Fund (the “Fund”), a diversified fund. The Fund is the successor of the MainStay Epoch U.S. All Cap Fund, a series of Eclipse Funds Inc. (the “Predecessor Fund”). The reorganization of the Predecessor Fund with and into the Fund occurred on February 26, 2010. All information and references to periods prior to February 26, 2010 relate to the Predecessor Fund.
The Fund currently offers five classes of shares. Class I shares commenced operations on January 2, 1991. Class A, Class B and Class C shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class B and Class C shares are offered at NAV without an initial sales charge, although a declining CDSC may be imposed on redemptions made within six years of the date of purchase of Class B shares and a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Investor Class or Class A shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The five classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class B and Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek long-term capital appreciation.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
20 MainStay Epoch U.S. All Cap Fund
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Options contracts are valued at the last posted settlement price on the market where such options are principally traded. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund did not hold any securities that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or Subadvisor conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. As of October 31, 2011, the Fund did not hold any foreign equity securities.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased, other than Short-Term Investments, for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities or, in the case of a callable security, over the period to the first date of call. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution
mainstayinvestments.com 21
Notes to Financial Statements (continued)
plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(I) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. Epoch Investment Partners, Inc. (“Epoch” or “Subadvisor”), a registered investment adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and Epoch, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.85% up to $500 million; 0.825% from $500 million to $1 billion; and 0.80% in excess of $1 billion. The effective management fee rate was 0.84% for the year ended October 31, 2011.
Prior to March 1, 2011, the Manager contractually agreed to waive a portion of the management fee or reimburse expenses so that Total Annual Fund Operating Expenses of a class did not exceed the following percentages of average daily net assets: Investor Class, 1.85%; Class B, 2.60%; Class C, 2.60% and Class I, 1.00%. This agreement expired on February 28, 2011. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $5,398,212.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant
22 MainStay Epoch U.S. All Cap Fund
to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from the Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $5,496 and $7,218, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $51, $8,273 and $191, respectively, for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 33,381 | ||
Class A | 905 | |||
Class B | 28,596 | |||
Class C | 17,446 | |||
Class I | 48,111 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Class A | $ | 1,260 | 0.0 | %‡ | ||||
Class B | 1,170 | 0.0 | ‡ | |||||
Class C | 1,171 | 0.0 | ‡ | |||||
Class I | 133,130,592 | 22.8 | ||||||
‡ | Less than one-tenth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $8,627. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 2,104,618 | $ | 23,205,070 | $ | — | $ | 55,584,859 | $ | 80,894,547 | |||||||||
The difference between book-basis and tax basis unrealized depreciation is primarily due to wash sale deferrals.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed Net | Net Realized | |||||||||
Investment | Gain (Loss) on | Additional | ||||||||
Income (Loss) | Investments | Paid-In Capital | ||||||||
$ | (16,735 | ) | $ | 16,735 | $ | — | ||||
The reclassifications for the Fund are primarily due to return of capital distributions from real estate investment trusts (“REITs”).
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss
mainstayinvestments.com 23
Notes to Financial Statements (continued)
carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The Fund utilized $4,614,438 of capital loss carryforwards during the year ended October 31, 2011.
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 2,729,847 | $ | 1,282,447 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $300,042 and $257,392, respectively.
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 77,529 | $ | 1,767,535 | |||||
Shares redeemed | (88,573 | ) | (1,964,703 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (11,044 | ) | (197,168 | ) | ||||
Shares converted into Investor Class (See Note 1) | 40,104 | 839,089 | ||||||
Shares converted from Investor Class (See Note 1) | (24,813 | ) | (558,910 | ) | ||||
Net increase (decrease) | 4,247 | $ | 83,011 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 54,475 | $ | 1,063,958 | |||||
Shares issued to shareholders in reinvestment of dividends | 351 | 6,740 | ||||||
Shares redeemed | (58,790 | ) | (1,124,327 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (3,964 | ) | (53,629 | ) | ||||
Shares converted into Investor Class (See Note 1) | 15,772 | 301,797 | ||||||
Shares converted from Investor Class (See Note 1) | (24,325 | ) | (471,104 | ) | ||||
Net increase (decrease) | (12,517 | ) | $ | (222,936 | ) | |||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 173,291 | $ | 3,923,332 | |||||
Shares issued to shareholders in reinvestment of dividends | 960 | 21,054 | ||||||
Shares redeemed | (167,603 | ) | (3,744,483 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 6,648 | 199,903 | ||||||
Shares converted into Class A (See Note 1) | 31,244 | 707,923 | ||||||
Shares converted from Class A (See Note 1) | (26,287 | ) | (537,503 | ) | ||||
Net increase (decrease) | 11,605 | $ | 370,323 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 170,827 | $ | 3,314,377 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,939 | 37,075 | ||||||
Shares redeemed | (527,210 | ) | (10,464,446 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (354,444 | ) | (7,112,994 | ) | ||||
Shares converted into Class A (See Note 1) | 37,353 | 726,746 | ||||||
Shares converted from Class A (See Note 1) | (1,373 | ) | (27,300 | ) | ||||
Shares converted from Class A (a) | (4,282 | ) | (81,534 | ) | ||||
Net increase (decrease) | (322,746 | ) | $ | (6,495,082 | ) | |||
24 MainStay Epoch U.S. All Cap Fund
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 53,190 | $ | 1,138,594 | |||||
Shares redeemed | (62,313 | ) | (1,292,735 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (9,123 | ) | (154,141 | ) | ||||
Shares converted from Class B (See Note 1) | (21,433 | ) | (450,599 | ) | ||||
Net increase (decrease) | (30,556 | ) | $ | (604,740 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 41,262 | $ | 764,994 | |||||
Shares issued to shareholders in reinvestment of dividends | 369 | 6,742 | ||||||
Shares redeemed | (67,468 | ) | (1,233,145 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (25,837 | ) | (461,409 | ) | ||||
Shares converted from Class B (See Note 1) | (29,101 | ) | (530,139 | ) | ||||
Net increase (decrease) | (54,938 | ) | $ | (991,548 | ) | |||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 20,485 | $ | 435,067 | |||||
Shares redeemed | (50,406 | ) | (1,044,513 | ) | ||||
Net increase (decrease) | (29,921 | ) | $ | (609,446 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 16,979 | $ | 317,126 | |||||
Shares issued to shareholders in reinvestment of dividends | 189 | 3,463 | ||||||
Shares redeemed | (24,079 | ) | (437,381 | ) | ||||
Net increase (decrease) | (6,911 | ) | $ | (116,792 | ) | |||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 7,703,901 | $ | 182,520,453 | |||||
Shares issued to shareholders in reinvestment of dividends | 113,716 | 2,643,904 | ||||||
Shares redeemed | (5,663,162 | ) | (135,315,094 | ) | ||||
Net increase (decrease) | 2,154,455 | $ | 49,849,263 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 15,392,314 | $ | 316,450,933 | |||||
Shares issued to shareholders in reinvestment of dividends | 59,023 | 1,193,363 | ||||||
Shares redeemed | (2,861,310 | ) | (58,256,641 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 12,590,027 | 259,387,655 | ||||||
Shares converted into Class I (a) | 4,038 | 81,534 | ||||||
Net increase (decrease) | 12,594,065 | $ | 259,469,189 | |||||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class, Class A and Class B shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion; and | |
• | All Class B shares are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class, Class A and Class B shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, they may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 25
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Epoch U.S. All Cap Fund (“the Fund”), one of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Epoch U.S. All Cap Fund of MainStay Funds Trust, as of October 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
26 MainStay Epoch U.S. All Cap Fund
Federal Income Tax Information (Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2011, the Fund designated approximately $8,834,953 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2011, should be multiplied by 100.0% to arrive at the amount eligible for the corporate dividends received deduction.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the Fund’s website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 27
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
28 MainStay Epoch U.S. All Cap Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 29
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
30 MainStay Epoch U.S. All Cap Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 31
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
32 MainStay Epoch U.S. All Cap Fund
This page intentionally left blank
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-25017 MS284-11 | MSEUAC11-12/11 |
NA1
MainStay Epoch U.S. Equity Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 13 | |
Notes to Financial Statements | 20 | |
Report of Independent Registered Public Accounting Firm | 26 | |
Federal Income Tax Information | 27 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 27 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 27 | |
Board Members and Officers | 28 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | ||||||||||||||||
Inception | Gross | |||||||||||||||
of Class | Expense | |||||||||||||||
Class | Sales Charge | One Year | (12/3/08) | Ratio2 | ||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –1 | .67% | 13 | .22% | 1 | .43% | ||||||||
Excluding sales charges | 4 | .06 | 15 | .44 | 1 | .43 | ||||||||||
Since | ||||||||||||||||
Inception | Gross | |||||||||||||||
of Class | Expense | |||||||||||||||
Class | Sales Charge | One Year | (2/3/09) | Ratio2 | ||||||||||||
Class A Shares4 | Maximum 5.5% Initial Sales Charge | With sales charges | –1 | .55% | 13 | .15% | 1 | .37% | ||||||||
Excluding sales charges | 4 | .18 | 15 | .51 | 1 | .37 | ||||||||||
Since | ||||||||||||||||
Inception | Gross | |||||||||||||||
of Class | Expense | |||||||||||||||
Class | Sales Charge | One Year | (12/3/08) | Ratio2 | ||||||||||||
Class C Shares3 | Maximum 1% CDSC | With sales charges | 2 | .37% | 14 | .66% | 2 | .18% | ||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 3 | .30 | 14 | .66 | 2 | .18 | |||||||||
Since | ||||||||||||||||
Inception | Gross | |||||||||||||||
of Class | Expense | |||||||||||||||
Class | Sales Charge | One Year | (12/3/08) | Ratio2 | ||||||||||||
Class I Shares4 | No Sales Charge | 4 | .43% | 15 | .85% | 1 | .12% | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class and Class C shares, first offered on November 16, 2009, include the historical performance of Class I shares from December 3, 2008 through November 15, 2009 adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class and Class C Shares might have been lower. |
4. | Performance figures for Class I shares and Class A shares include the historical performance of the Institutional shares from December 3, 2008 and the Class P shares from February 3, 2009, respectively, of the Epoch U.S. Large Cap Equity Fund (the predecessor to the Fund), through November 15, 2009. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
Since | ||||||||
One | Inception | |||||||
Benchmark Performance | Year | of the Fund | ||||||
Russell 1000® Index5 | 8 | .01% | 16 | .90% | ||||
Russell 3000® Index6 | 7 | .90 | 17 | .14 | ||||
Average Lipper Large-Cap Core Fund7 | 5 | .37 | 16 | .07 | ||||
The Epoch U.S. Large Cap Equity Fund was subject to a different fee structure and was advised by Epoch Investment Partners, Inc. |
5. | The Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000® Index represents approximately 92% of the total market capitalization of the Russell 3000® Index. The Fund has selected the Russell 1000® Index as its broad-based securities market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000® Index is the Fund’s secondary benchmark. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | The average Lipper large-cap core fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper’s U.S. Diversified Equity large-cap floor. Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Epoch U.S. Equity Fund
Cost in Dollars of a $1,000 Investment in MainStay Epoch U.S. Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled ”Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 895.30 | $ | 6.69 | $ | 1,018.10 | $ | 7.12 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 896.10 | $ | 6.07 | $ | 1,018.80 | $ | 6.46 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 892.50 | $ | 10.16 | $ | 1,014.50 | $ | 10.82 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 897.30 | $ | 4.88 | $ | 1,020.10 | $ | 5.19 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.40% for Investor Class, 1.27% for Class A, 2.13% for Class C and 1.02% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Industry Composition as of October 31, 2011 (Unaudited)
Health Care Providers & Services | 8.1 | % | ||
Software | 7.7 | |||
Oil, Gas & Consumable Fuels | 7.1 | |||
Capital Markets | 6.1 | |||
Insurance | 4.7 | |||
Chemicals | 4.4 | |||
IT Services | 4.1 | |||
Specialty Retail | 3.8 | |||
Aerospace & Defense | 3.7 | |||
Media | 3.7 | |||
Multi-Utilities | 3.6 | |||
Computers & Peripherals | 3.5 | |||
Energy Equipment & Services | 3.5 | |||
Semiconductors & Semiconductor Equipment | 3.2 | |||
Real Estate Investment Trusts | 2.4 | |||
Machinery | 2.3 | |||
Industrial Conglomerates | 2.2 | |||
Life Sciences Tools & Services | 2.2 | |||
Pharmaceuticals | 2.2 | |||
Commercial Services & Supplies | 2.0 | |||
Consumer Finance | 1.6 | |||
Internet Software & Services | 1.6 | |||
Multiline Retail | 1.6 | |||
Diversified Telecommunication Services | 1.5 | |||
Diversified Financial Services | 1.4 | |||
Electronic Equipment & Instruments | 1.4 | |||
Distributors | 1.3 | |||
Hotels, Restaurants & Leisure | 1.3 | |||
Household Products | 1.2 | |||
Paper & Forest Products | 1.0 | |||
Commercial Banks | 0.8 | |||
Short-Term Investment | 4.5 | |||
Other Assets, Less Liabilities | 0.3 | |||
100.0 | % | |||
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | Microsoft Corp. | |
2. | ExxonMobil Corp. | |
3. | Praxair, Inc. | |
4. | Oracle Corp. | |
5. | Visa, Inc. Class A | |
6. | Comcast Corp. Class A | |
7. | Ventas, Inc. | |
8. | Boeing Co. (The) | |
9. | BlackRock, Inc. | |
10. | TJX Cos., Inc. |
8 MainStay Epoch U.S. Equity Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers David Pearl, Michael Welhoelter, CFA, and William Priest, CFA, of Epoch Investment Partners, Inc., the Fund’s Subadvisor.
How did MainStay Epoch U.S. Equity Fund perform relative to its peers and its benchmark for the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Epoch U.S. Equity Fund returned 4.06% for Investor Class shares, 4.18% for Class A shares and 3.30% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 4.43%. All share classes underperformed the 5.37% return of the average Lipper1 large-cap core fund and the 8.01% return of the Russell 1000® Index2 for the 12 months ended October 31, 2011. The Russell 1000® Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The U.S. stock market rose amid an environment of heightened volatility as investors assessed multiple threats to the global economy, including fallout from the European sovereign debt crisis. A number of economically sensitive stocks, particularly in the industrials sector, had substantially negative returns. In part, these losses were due to concerns about slowing economic growth. Strong returns from the Fund’s holdings in the energy sector and good stock selection in the materials sector partially offset the Fund’s losses among economically sensitive stocks.
During the reporting period, which sectors were the strongest contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the sectors that made the strongest contribution to the Fund’s relative performance were energy, materials and consumer discretionary. (Contributions take weightings and total returns into account.) In all three cases, the contributions were primarily due to stock selection. During the reporting period, the sectors that hindered the Fund’s relative performance included industrials, information technology and financials. The impact was primarily due to stock selection.
During the reporting period, which individual stocks made the strongest contributions to the Fund’s absolute performance and which stocks detracted the most?
On an absolute basis, computers & peripherals company Apple, integrated oil company ExxonMobil and discount retailer TJX were the strongest contributors to performance. Apple, which makes mobile devices and distributes entertainment, reported earnings that surpassed expectations. ExxonMobil benefited from higher oil prices and improved margins at refineries. TJX experienced strong same-store sales and provided an upbeat outlook for the holiday season.
During the reporting period, the weakest contributors to the Fund’s performance included office products company Staples, diversified bank PNC Financial Services and industrial and commercial products company Ingersoll-Rand. Staples suffered from slow business hiring. Loan growth at PNC Financial Services was hampered by a muted economic recovery, while the company’s margins declined with the dramatic fall in 10-year U.S. Treasury yields. Shares of Ingersoll-Rand declined after the company lowered its earnings forecast as competitors took advantage of a temporary loophole to continue using a coolant in heating, ventilation and air conditioning (HVAC) units that has been found to be harmful to the earth’s ozone layer.
Did the Fund make any significant purchases or sales during the reporting period?
Among the stocks that the Fund purchased during the reporting period was asset manager BlackRock for its exposure to the growing exchange traded fund (ETF) market and its diversified business model. The Fund initiated a position in value-oriented retailer Kohl’s on the expectation of increases in same-store sales and margins. We also believed that the company has sufficient cash flow to maintain a dividend and buy back shares.
We sold the Fund’s position in asset manager Franklin Resources, as we believed that investment flows into global bond funds would slow and that an extended period of low interest rates would present an additional difficulty. We sold the Fund’s position in global insurance and reinsurance underwriter Everest Re Group following the Japanese earthquake. With uncertainty surrounding the level of claims, we believed that there were better risk-reward opportunities elsewhere.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund’s exposure to the energy sector was decreased from an overweight position to an underweight position relative to the Russell 1000® Index. The Fund’s overweight positions in the financials and information technology sectors were also decreased relative to the benchmark. We increased the Fund’s consumer discretionary position, eliminating its underweight position relative to the Russell 1000® Index. The Fund’s weighting in the health care sector was also increased.
How was the Fund positioned at the end of October 2011?
As of October 31, 2011, the Fund’s most substantially overweight sector positions relative to the Russell 1000® Index were in financials and information technology. As of the same date, consumer staples continued to be the Fund’s most substantially
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Russell 1000® Index.
mainstayinvestments.com 9
underweight sector relative to the Russell 1000® Index. The Fund remained underweight in this sector because we believe that some consumer products companies have high valuations and may struggle to pass along higher commodity prices. As of October 31, 2011, the Fund also had an underweight position relative to the benchmark in the telecommunications services sector.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Epoch U.S. Equity Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 95.2%† | ||||||||
Aerospace & Defense 3.7% | ||||||||
X Boeing Co. (The) | 97,500 | $ | 6,414,525 | |||||
Rockwell Collins, Inc. | 63,750 | 3,559,162 | ||||||
9,973,687 | ||||||||
Capital Markets 6.1% | ||||||||
Ameriprise Financial, Inc. | 131,000 | 6,115,080 | ||||||
X BlackRock, Inc. | 39,640 | 6,254,796 | ||||||
TD Ameritrade Holding Corp. | 234,400 | 3,933,232 | ||||||
16,303,108 | ||||||||
Chemicals 4.4% | ||||||||
E.I. du Pont de Nemours & Co. | 80,050 | 3,848,004 | ||||||
X Praxair, Inc. | 78,250 | 7,955,677 | ||||||
11,803,681 | ||||||||
Commercial Banks 0.8% | ||||||||
CIT Group, Inc. (a) | 65,350 | 2,277,448 | ||||||
Commercial Services & Supplies 2.0% | ||||||||
Waste Management, Inc. | 163,450 | 5,382,408 | ||||||
Computers & Peripherals 3.5% | ||||||||
Apple, Inc. (a) | 12,810 | 5,185,232 | ||||||
Dell, Inc. (a) | 272,350 | 4,305,853 | ||||||
9,491,085 | ||||||||
Consumer Finance 1.6% | ||||||||
American Express Co. | 84,800 | 4,292,576 | ||||||
Distributors 1.3% | ||||||||
Genuine Parts Co. | 61,050 | 3,506,101 | ||||||
Diversified Financial Services 1.4% | ||||||||
NYSE Euronext | 145,950 | 3,877,891 | ||||||
Diversified Telecommunication Services 1.5% | ||||||||
CenturyLink, Inc. | 112,010 | 3,949,473 | ||||||
Electronic Equipment & Instruments 1.4% | ||||||||
Corning, Inc. | 259,052 | 3,701,853 | ||||||
Energy Equipment & Services 3.5% | ||||||||
Cameron International Corp. (a) | 83,020 | 4,079,603 | ||||||
National-Oilwell Varco, Inc. | 75,848 | 5,410,238 | ||||||
9,489,841 | ||||||||
Health Care Providers & Services 8.1% | ||||||||
Aetna, Inc. | 137,690 | 5,474,554 | ||||||
DaVita, Inc. (a) | 84,700 | 5,929,000 | ||||||
Laboratory Corp. of America Holdings (a) | 63,750 | 5,345,438 | ||||||
UnitedHealth Group, Inc. | 107,000 | 5,134,930 | ||||||
21,883,922 | ||||||||
Hotels, Restaurants & Leisure 1.3% | ||||||||
International Game Technology | 205,700 | 3,618,263 | ||||||
Household Products 1.2% | ||||||||
Colgate-Palmolive Co. | 35,350 | 3,194,580 | ||||||
Industrial Conglomerates 2.2% | ||||||||
Danaher Corp. | 124,100 | 6,000,235 | ||||||
Insurance 4.7% | ||||||||
MetLife, Inc. | 138,292 | 4,862,347 | ||||||
Prudential Financial, Inc. | 97,003 | 5,257,563 | ||||||
Travelers Cos., Inc. (The) | 45,675 | 2,665,136 | ||||||
12,785,046 | ||||||||
Internet Software & Services 1.6% | ||||||||
Yahoo!, Inc. (a) | 268,450 | 4,198,558 | ||||||
IT Services 4.1% | ||||||||
Fiserv, Inc. (a) | 62,000 | 3,649,940 | ||||||
X Visa, Inc. Class A | 78,850 | 7,353,551 | ||||||
11,003,491 | ||||||||
Life Sciences Tools & Services 2.2% | ||||||||
Thermo Fisher Scientific, Inc. (a) | 118,100 | 5,936,887 | ||||||
Machinery 2.3% | ||||||||
Deere & Co. | 29,873 | 2,267,361 | ||||||
Ingersoll-Rand PLC | 123,500 | 3,844,555 | ||||||
6,111,916 | ||||||||
Media 3.7% | ||||||||
X Comcast Corp. Class A | 285,395 | 6,564,085 | ||||||
Time Warner, Inc. | 99,607 | 3,485,249 | ||||||
10,049,334 | ||||||||
Multi-Utilities 3.6% | ||||||||
NSTAR | 82,600 | 3,724,434 | ||||||
Wisconsin Energy Corp. | 184,650 | 5,988,199 | ||||||
9,712,633 | ||||||||
Multiline Retail 1.6% | ||||||||
Kohl’s Corp. | 78,850 | 4,179,838 | ||||||
Oil, Gas & Consumable Fuels 7.1% | ||||||||
ConocoPhillips | 36,750 | 2,559,638 | ||||||
Devon Energy Corp. | 54,450 | 3,536,527 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||
X ExxonMobil Corp. | 114,100 | $ | 8,910,069 | |||||
Occidental Petroleum Corp. | 44,765 | 4,160,459 | ||||||
19,166,693 | ||||||||
Paper & Forest Products 1.0% | ||||||||
International Paper Co. | 99,900 | 2,767,230 | ||||||
Pharmaceuticals 2.2% | ||||||||
Abbott Laboratories | 108,300 | 5,834,121 | ||||||
Real Estate Investment Trusts 2.4% | ||||||||
X Ventas, Inc. | 116,100 | 6,456,321 | ||||||
Semiconductors & Semiconductor Equipment 3.2% | ||||||||
Applied Materials, Inc. | 221,600 | 2,730,112 | ||||||
Texas Instruments, Inc. | 189,600 | 5,826,408 | ||||||
8,556,520 | ||||||||
Software 7.7% | ||||||||
Electronic Arts, Inc. (a) | 170,350 | 3,977,673 | ||||||
X Microsoft Corp. | 354,650 | 9,444,329 | ||||||
X Oracle Corp. | 225,100 | 7,376,527 | ||||||
20,798,529 | ||||||||
Specialty Retail 3.8% | ||||||||
Home Depot, Inc. (The) | 113,800 | 4,074,040 | ||||||
X TJX Cos., Inc. | 104,114 | 6,135,438 | ||||||
10,209,478 | ||||||||
Total Common Stocks (Cost $229,859,013) | 256,512,747 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 4.5% | ||||||||
Repurchase Agreement 4.5% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $12,123,728 (Collateralized by a United States Treasury Bond with a rate of 4.625% and a maturity date of 2/15/40, with a Principal Amount of $9,800,000 and a Market Value of $12,458,152) | $ | 12,213,725 | $ | 12,213,725 | ||||
Total Short-Term Investment (Cost $12,213,725) | 12,213,725 | |||||||
Total Investments (Cost $242,072,738) (b) | 99.7 | % | 268,726,472 | |||||
Other Assets, Less Liabilities | 0.3 | 910,028 | ||||||
Net Assets | 100.0 | % | $ | 269,636,500 | ||||
(a) | Non-income producing security. | |
(b) | At October 31, 2011, cost is $243,456,395 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 29,340,626 | ||
Gross unrealized depreciation | (4,070,549 | ) | ||
Net unrealized appreciation | $ | 25,270,077 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 256,512,747 | $ | — | $ | — | $ | 256,512,747 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 12,213,725 | — | 12,213,725 | ||||||||||||
Total Investments in Securities | $ | 256,512,747 | $ | 12,213,725 | $ | — | $ | 268,726,472 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
12 MainStay Epoch U.S. Equity Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $242,072,738) | $ | 268,726,472 | ||
Receivables: | ||||
Fund shares sold | 1,123,322 | |||
Dividends and interest | 211,010 | |||
Other assets | 35,846 | |||
Total assets | 270,096,650 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 189,200 | |||
Manager (See Note 3) | 170,664 | |||
Transfer agent (See Note 3) | 51,660 | |||
Shareholder communication | 20,691 | |||
Professional fees | 20,210 | |||
Trustees | 964 | |||
Custodian | 491 | |||
NYLIFE Distributors (See Note 3) | 351 | |||
Accrued expenses | 5,919 | |||
Total liabilities | 460,150 | |||
Net assets | $ | 269,636,500 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 21,148 | ||
Additional paid-in capital | 229,534,588 | |||
229,555,736 | ||||
Undistributed net investment income | 874,224 | |||
Accumulated net realized gain (loss) on investments | 12,552,806 | |||
Net unrealized appreciation (depreciation) on investments | 26,653,734 | |||
Net assets | $ | 269,636,500 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 272,819 | ||
Shares of beneficial interest outstanding | 21,556 | |||
Net asset value per share outstanding | $ | 12.66 | ||
Maximum sales charge (5.50% of offering price) | 0.74 | |||
Maximum offering price per share outstanding | $ | 13.40 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 533,936 | ||
Shares of beneficial interest outstanding | 42,104 | |||
Net asset value per share outstanding | $ | 12.68 | ||
Maximum sales charge (5.50% of offering price) | 0.74 | |||
Maximum offering price per share outstanding | $ | 13.42 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 207,529 | ||
Shares of beneficial interest outstanding | 16,565 | |||
Net asset value and offering price per share outstanding | $ | 12.53 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 268,622,216 | ||
Shares of beneficial interest outstanding | 21,067,618 | |||
Net asset value and offering price per share outstanding | $ | 12.75 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends | $ | 3,886,382 | ||
Interest | 995 | |||
Total income | 3,887,377 | |||
Expenses | ||||
Manager (See Note 3) | 1,863,282 | |||
Transfer agent (See Note 3) | 256,412 | |||
Registration | 73,585 | |||
Professional fees | 54,353 | |||
Shareholder communication | 40,461 | |||
Custodian | 24,812 | |||
Trustees | 6,537 | |||
Distribution/Service—Investor Class (See Note 3) | 489 | |||
Distribution/Service—Class A (See Note 3) | 2,537 | |||
Distribution/Service—Class C (See Note 3) | 841 | |||
Miscellaneous | 16,094 | |||
�� | ||||
Total expenses | 2,339,403 | |||
Net investment income (loss) | 1,547,974 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 13,012,148 | |||
Net change in unrealized appreciation (depreciation) on investments | (2,612,820 | ) | ||
Net realized and unrealized gain (loss) on investments | 10,399,328 | |||
Net increase (decrease) in net assets resulting from operations | $ | 11,947,302 | ||
The notes to the financial statements are an integral part of,
14 MainStay Epoch U.S. Equity Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the year ended October 31, 2011, the period January 1, 2010 through October 31, 2010 (a)
and the year ended December 31, 2009
and the year ended December 31, 2009
2011 | 2010 | 2009 | ||||||||||
Increase (Decrease) in Net Assets | ||||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | 1,547,974 | $ | 623,267 | $ | 1,437,455 | ||||||
Net realized gain (loss) on investments | 13,012,148 | 19,033,812 | 13,607,151 | |||||||||
Net change in unrealized appreciation (depreciation) on investments | (2,612,820 | ) | (3,429,280 | ) | 25,404,187 | |||||||
Net increase (decrease) in net assets resulting from operations | 11,947,302 | 16,227,799 | 40,448,793 | |||||||||
Dividends and distributions to shareholders: | ||||||||||||
From net investment income: | ||||||||||||
Investor Class | (812 | ) | — | (66 | ) | |||||||
Class A | (3,699 | ) | — | (310 | ) | |||||||
Class C | — | — | (42 | ) | ||||||||
Class I | (1,279,771 | ) | — | (1,464,922 | ) | |||||||
(1,284,282 | ) | — | (1,465,340 | ) | ||||||||
From net realized gain on investments: | ||||||||||||
Investor Class | (9,674 | ) | — | — | ||||||||
Class A | (94,019 | ) | — | (2,232 | ) | |||||||
Class C | (3,339 | ) | — | — | ||||||||
Class I | (22,599,949 | ) | — | (10,499,362 | ) | |||||||
(22,706,981 | ) | — | (10,501,594 | ) | ||||||||
Total dividends and distributions to shareholders | (23,991,263 | ) | — | (11,966,934 | ) | |||||||
Capital share transactions: | ||||||||||||
Net proceeds from sale of shares | 173,387,132 | 148,726,720 | 91,138,718 | |||||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 3,161,160 | — | 374,971 | |||||||||
Cost of shares redeemed | (125,655,310 | ) | (89,578,723 | ) | (63,361,768 | ) | ||||||
Increase (decrease) in net assets derived from capital share transactions | 50,892,982 | 59,147,997 | 28,151,921 | |||||||||
Net increase (decrease) in net assets | 38,849,021 | 75,375,796 | 56,633,780 | |||||||||
Net Assets | ||||||||||||
Beginning of period | 230,787,479 | 155,411,683 | 98,777,903 | |||||||||
End of period | $ | 269,636,500 | $ | 230,787,479 | $ | 155,411,683 | ||||||
Undistributed net investment income at end of period | $ | 874,224 | $ | 623,267 | $ | — | ||||||
(a) | The Fund changed its fiscal year end from December 31 to October 31. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||
January 1, | November 16, | |||||||||||||
2010 | 2009** | |||||||||||||
Year ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 13.51 | $ | 12.67 | $ | 12.38 | ||||||||
Net investment income (loss) (a) | 0.04 | 0.03 | 0.02 | |||||||||||
Net realized and unrealized gain (loss) on investments | 0.51 | 0.81 | 0.30 | |||||||||||
Total from investment operations | 0.55 | 0.84 | 0.32 | |||||||||||
Less dividends and distributions: | ||||||||||||||
From net investment income | (0.05 | ) | — | (0.03 | ) | |||||||||
From net realized gain on investments | (1.35 | ) | — | — | ||||||||||
Total dividends and distributions | (1.40 | ) | — | (0.03 | ) | |||||||||
Net asset value at end of period | $ | 12.66 | $ | 13.51 | $ | 12.67 | ||||||||
Total investment return (b) | 4.06 | % | 6.63 | % (c) | 2.60 | % (c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | 0.27 | % | 0.25 | %†† | 1.11 | %†† | ||||||||
Net expenses | 1.36 | % | 1.40 | %†† | 1.19 | %†† | ||||||||
Expenses (before waiver/reimbursement) | 1.36 | % | 1.43 | %†† | 1.19 | %†† | ||||||||
Portfolio turnover rate | 54 | % | 54 | % | 54 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 273 | $ | 74 | $ | 28 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
16 MainStay Epoch U.S. Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||
January 1, | February 3, | |||||||||||||
2010 | 2009** | |||||||||||||
Year ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 13.52 | $ | 12.67 | $ | 10.24 | ||||||||
Net investment income (loss) (a) | 0.05 | 0.02 | 0.08 | |||||||||||
Net realized and unrealized gain (loss) on investments | 0.51 | 0.83 | 3.33 | |||||||||||
Total from investment operations | 0.56 | 0.85 | 3.41 | |||||||||||
Less dividends and distributions: | ||||||||||||||
From net investment income | (0.05 | ) | — | (0.10 | ) | |||||||||
From net realized gain on investments | (1.35 | ) | — | (0.88 | ) | |||||||||
Total dividends and distributions | (1.40 | ) | — | (0.98 | ) | |||||||||
Net asset value at end of period | $ | 12.68 | $ | 13.52 | $ | 12.67 | ||||||||
Total investment return (b) | 4.18 | % | 6.71 | % (c) | 33.59 | % (c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | 0.41 | % | 0.19 | %†† | 0.76 | %†† | ||||||||
Net expenses | 1.25 | % | 1.34 | %†† | 1.35 | %†† | ||||||||
Expenses (before waiver/reimbursement) | 1.25 | % | 1.37 | %†† | 1.44 | %†† | ||||||||
Portfolio turnover rate | 54 | % | 54 | % | 54 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 534 | $ | 850 | $ | 127 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 17 |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||
January 1, | November 16, | |||||||||||||
2010 | 2009** | |||||||||||||
Year ended | through | through | ||||||||||||
October 31, | October 31, | December 31, | ||||||||||||
2011 | 2010*** | 2009 | ||||||||||||
Net asset value at beginning of period | $ | 13.42 | $ | 12.67 | $ | 12.38 | ||||||||
Net investment income (loss) (a) | (0.05 | ) | (0.07 | ) | 0.01 | |||||||||
Net realized and unrealized gain (loss) on investments | 0.51 | 0.82 | 0.30 | |||||||||||
Total from investment operations | 0.46 | 0.75 | 0.31 | |||||||||||
Less dividends and distributions: | ||||||||||||||
From net investment income | — | — | (0.02 | ) | ||||||||||
From net realized gain on investments | (1.35 | ) | — | — | ||||||||||
Total dividends and distributions | (1.35 | ) | — | (0.02 | ) | |||||||||
Net asset value at end of period | $ | 12.53 | $ | 13.42 | $ | 12.67 | ||||||||
Total investment return (b) | 3.30 | % | 5.92 | % (c)(d) | 2.51 | % (c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | (0.42 | %) | (0.63 | %)†† | 0.37 | %†† | ||||||||
Net expenses | 2.10 | % | 2.15 | % †† | 1.94 | %†† | ||||||||
Expenses (before waiver/reimbursement) | 2.10 | % | 2.18 | % †† | 1.94 | %†† | ||||||||
Portfolio turnover rate | 54 | % | 54 | % | 54 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 208 | $ | 33 | $ | 26 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. |
The notes to the financial statements are an integral part of,
18 MainStay Epoch U.S. Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||
January 1, | December 3, | |||||||||||||||||
2010 | 2008** | |||||||||||||||||
Year ended | through | Year ended | through | |||||||||||||||
October 31, | October 31, | December 31, | December 31, | |||||||||||||||
2011 | 2010*** | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 13.58 | $ | 12.70 | $ | 10.85 | $ | 10.00 | ||||||||||
Net investment income (loss) | 0.09 | (a) | 0.04 | (a) | 0.11 | (a) | 0.01 | |||||||||||
Net realized and unrealized gain (loss) on investments | 0.51 | 0.84 | 2.74 | 0.85 | ||||||||||||||
Total from investment operations | 0.60 | 0.88 | 2.85 | 0.86 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.08 | ) | — | (0.12 | ) | (0.01 | ) | |||||||||||
From net realized gain on investments | (1.35 | ) | — | (0.88 | ) | — | ||||||||||||
Total dividends and distributions | (1.43 | ) | — | (1.00 | ) | (0.01 | ) | |||||||||||
Net asset value at end of period | $ | 12.75 | $ | 13.58 | $ | 12.70 | $ | 10.85 | ||||||||||
Total investment return (b) | 4.43 | % | 6.93 | % (c) | 26.53 | % | 8.59 | % (c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 0.67 | % | 0.40 | %†† | 0.98 | % | 1.28 | %†† | ||||||||||
Net expenses | 1.00 | % | 1.09 | %†† | 1.09 | % | 1.09 | %†† | ||||||||||
Expenses (before reimbursement/waiver) | 1.00 | % | 1.12 | %†† | 1.19 | % | 1.16 | %†† | ||||||||||
Portfolio turnover rate | 54 | % | 54 | % | 54 | % | 1 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 268,622 | $ | 229,830 | $ | 155,231 | $ | 98,778 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment 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. | mainstayinvestments.com 19 |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Epoch U.S. Equity Fund (the “Fund”), a diversified Fund. The Fund is the successor to the Epoch U.S. Large Cap Equity Fund (the “Predecessor Fund”), which was a series of a different registered investment company for which Epoch Investment Partners, Inc. served as investment advisor. The financial statements of the Fund reflect the historical results of the Institutional Class and Class P shares of the Predecessor Fund prior to its reorganization. Upon the completion of the reorganization, the Class I and Class A shares of the Fund assumed the performance, financial and other information of the Institutional Class and Class P shares of the Predecessor Fund, respectively. All information and references to periods prior to the commencement of operations of the Fund refer to the Predecessor Fund.
The Fund currently offers four classes of shares. Investor Class and Class C shares commenced operations on November 16, 2009. Class A and Class I shares commenced operations (under former designations) on February 3, 2009 and December 3, 2008, respectively. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The four classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
Effective January 4, 2010, the Fund changed its fiscal year end from December 31 to October 31.
The Fund’s investment objective is to seek long-term capital appreciation.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
20 MainStay Epoch U.S. Equity Fund
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Options contracts are valued at the last posted settlement price on the market where such options are principally traded. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund did not hold any securities that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or Subadvisor conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. As of October 31, 2011, the Fund did not hold any foreign equity securities.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required. Investment income received by the Fund from foreign sources may be subject to foreign income taxes. These foreign income taxes are generally withheld at the source.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution
mainstayinvestments.com 21
Notes to Financial Statements (continued)
plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(I) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. Epoch Investment Partners, Inc. (“Epoch” or “Subadvisor”), a registered investment adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and Epoch, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of 0.80% of the Fund’s average daily net assets.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for Class A and Class I shares do not exceed the following percentages of average daily net assets: Class A, 1.34% and Class I, 1.09%. New York Life Investments will apply an equivalent waiver or reimbursement, in an amount equal to the number of basis points waived for Class A shares, to Investor Class and Class C shares of the Fund. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $1,863,282.
22 MainStay Epoch U.S. Equity Fund
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution and service plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class C Plan, Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $884 and $1,764, respectively, for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 421 | ||
Class A | 1,104 | |||
Class C | 181 | |||
Class I | 254,706 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Investor Class | $ | 28,465 | 10.4 | % | ||||
Class C | 28,065 | 13.5 | ||||||
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $3,014. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 2,806,463 | $ | 12,004,224 | $ | — | $ | 25,270,077 | $ | 40,080,764 | |||||||||
The difference between book-basis and tax basis unrealized appreciation (depreciation) is primarily due to wash sale deferrals.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed | Net Realized | |||||||||
Net Investment | Gain (Loss) on | Additional | ||||||||
Income (Loss) | Investments | Paid-In Capital | ||||||||
$ | (12,735 | ) | $ | 12,735 | $ | — | ||||
The reclassifications for the Fund are primarily due to capital gain distributions from real estate investment trusts (“REITs”).
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
mainstayinvestments.com 23
Notes to Financial Statements (continued)
The tax character of distributions paid during the year ended October 31, 2011 and the period January 1, 2010 through October 31, 2010, and the year ended December 31, 2009 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | 2009 | ||||||||||
Distributions paid from: | ||||||||||||
Ordinary Income | $ | 4,868,488 | $ | — | $ | 11,966,934 | ||||||
Long-Term Capital Gain | 19,122,775 | — | — | |||||||||
Total | $ | 23,991,263 | $ | — | $ | 11,966,934 | ||||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $150,358 and $123,500, respectively.
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 19,704 | $ | 260,110 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 829 | 10,486 | ||||||
Shares redeemed | (5,845 | ) | (72,203 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 14,688 | 198,393 | ||||||
Shares converted into Investor Class (See Note 1) | 2,145 | 27,197 | ||||||
Shares converted from Investor Class (See Note 1) | (756 | ) | (9,811 | ) | ||||
Net increase (decrease) | 16,077 | $ | 215,779 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 13,843 | $ | 184,509 | |||||
Shares redeemed | (542 | ) | (7,151 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 13,301 | 177,358 | ||||||
Shares converted from Investor Class (See Note 1) | (10,045 | ) | (123,949 | ) | ||||
Net increase (decrease) | 3,256 | $ | 53,409 | |||||
Period ended December 31, 2009 (a): | ||||||||
Shares sold | 2,218 | $ | 27,541 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5 | 66 | ||||||
Net increase (decrease) | 2,223 | $ | 27,607 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 76,610 | $ | 1,018,006 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 7,418 | 93,909 | ||||||
Shares redeemed | (103,386 | ) | (1,360,555 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (19,358 | ) | (248,640 | ) | ||||
Shares converted into Class A (See Note 1) | 755 | 9,811 | ||||||
Shares converted from Class A (See Note 1) | (2,142 | ) | (27,197 | ) | ||||
Net increase (decrease) | (20,745 | ) | $ | (266,026 | ) | |||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 60,381 | $ | 780,351 | |||||
Shares redeemed | (17,575 | ) | (215,229 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 42,806 | 565,122 | ||||||
Shares converted into Class A (See Note 1) | 10,044 | 123,949 | ||||||
Net increase (decrease) | 52,850 | $ | 689,071 | |||||
Period ended December 31, 2009 (b): | ||||||||
Shares sold | 9,794 | $ | 122,216 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 205 | 127 | ||||||
Net increase (decrease) | 9,999 | $ | 122,343 | |||||
24 MainStay Epoch U.S. Equity Fund
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 13,962 | $ | 174,211 | |||||
Shares issued to shareholders in reinvestment of distributions | 265 | 3,339 | ||||||
Shares redeemed | (136 | ) | (1,853 | ) | ||||
Net increase (decrease) | 14,091 | $ | 175,697 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 451 | $ | 5,796 | |||||
Net increase (decrease) | 451 | $ | 5,796 | |||||
Period ended December 31, 2009 (a): | ||||||||
Shares sold | 2,020 | $ | 25,000 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3 | 42 | ||||||
Net increase (decrease) | 2,023 | $ | 25,042 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 13,226,956 | $ | 171,934,805 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 240,427 | 3,053,426 | ||||||
Shares redeemed | (9,324,418 | ) | (124,220,699 | ) | ||||
Net increase (decrease) | 4,142,965 | $ | 50,767,532 | |||||
Ten-month period ended October 31, 2010: | ||||||||
Shares sold | 11,488,021 | $ | 147,756,064 | |||||
Shares redeemed | (6,788,013 | ) | (89,356,343 | ) | ||||
Net increase (decrease) | 4,700,008 | $ | 58,399,721 | |||||
Year ended December 31, 2009: | ||||||||
Shares sold | 8,316,820 | $ | 90,963,961 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 30,085 | 374,736 | ||||||
Shares redeemed | (5,228,135 | ) | (63,361,768 | ) | ||||
Net increase (decrease) | 3,118,770 | $ | 27,976,929 | |||||
(a) | Investor Class shares and Class C shares were first offered on November 16, 2009. |
(b) | Class A shares were first offered on February 3, 2009. |
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 25
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Epoch U.S. Equity Fund (the “Fund”), one of the funds comprising MainStay Funds Trust, as of October 31, 2011 and the related statement of operations for the year then ended, the statements of changes in net assets for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009, and the financial highlights for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the years or periods presented through December 31, 2008 were audited by other auditors, whose report dated February 27, 2009 expressed an unqualified opinion thereon.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Epoch U.S. Equity Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended October 31, 2011, the ten-month period ended October 31, 2010, and the year ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
26 MainStay Epoch U.S. Equity Fund
Federal Income Tax Information (Unaudited)
The Fund is required (under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years. Accordingly, the Fund paid $19,122,775 as long term capital distribution.
For the fiscal year ended October 31, 2011, the Fund designated approximately $3,619,563 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2011, should be multiplied by 100.0% to arrive at the amount eligible for the corporate dividends received deduction.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; and (ii) on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the Fund’s website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 27
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
28 MainStay Epoch U.S. Equity Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 29
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
30 MainStay Epoch U.S. Equity Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 31
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
32 MainStay Epoch U.S. Equity Fund
This page intentionally left blank
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-25016 MS284-11 | MSEUE11-12/11 |
NF1
MainStay Floating Rate Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 10 | |
Financial Statements | 21 | |
Notes to Financial Statements | 27 | |
Report of Independent Registered Public Accounting Firm | 34 | |
Federal Income Tax Information | 35 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 35 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 35 | |
Board Members and Officers | 36 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Year | (5/3/04) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 3% Initial Sales Charge | With sales charges | –0 | .62% | 2 | .62% | 3 | .19% | 1 | .10% | ||||||||||
Excluding sales charges | 2 | .45 | 3 | .25 | 3 | .61 | 1 | .10 | ||||||||||||
Class A Shares | Maximum 3% Initial Sales Charge | With sales charges | –0 | .55 | 2 | .70 | 3 | .24 | 1 | .00 | ||||||||||
Excluding sales charges | 2 | .53 | 3 | .33 | 3 | .66 | 1 | .00 | ||||||||||||
Class B Shares | Maximum 3% CDSC if Redeemed | With sales charges | –1 | .37 | 2 | .46 | 2 | .84 | 1 | .85 | ||||||||||
Within the First Four Years of Purchase | Excluding sales charges | 1 | .59 | 2 | .46 | 2 | .84 | 1 | .85 | |||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed | With sales charges | 0 | .61 | 2 | .46 | 2 | .84 | 1 | .85 | ||||||||||
Within One Year of Purchase | Excluding sales charges | 1 | .59 | 2 | .46 | 2 | .84 | 1 | .85 | |||||||||||
Class I Shares | No Sales Charge | 2 | .67 | 3 | .59 | 3 | .94 | 0 | .75 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain contractual fees and expenses. Unadjusted, the performance shown for Investor Class shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Since | ||||||||||
Benchmark Performance | Year | Years | Inception | |||||||||
Credit Suisse Leveraged Loan Index4 | 3 | .54% | 3 | .57% | 4 | .36% | ||||||
Average Lipper Loan Participation Fund5 | 2 | .58 | 2 | .16 | 3 | .01 | ||||||
4. | The Credit Suisse Leveraged Loan Index represents tradable, senior-secured, U.S. dollar-denominated non-investment-grade loans. Results assume reinvestment of all income and capital gains. The Credit Suisse Leveraged Loan Index is the Fund’s broad-based securities market index for comparison purposes. An investment cannot be made directly in an index. |
5. | The average Lipper loan participation fund is representative of funds that invest primarily in participation interests in collateralized senior corporate loans that have floating or variable rates. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Floating Rate Fund
Cost in Dollars of a $1,000 Investment in MainStay Floating Rate Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 994.30 | $ | 5.33 | $ | 1,019.90 | $ | 5.40 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 994.70 | $ | 4.93 | $ | 1,020.30 | $ | 4.99 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 990.50 | $ | 9.08 | $ | 1,016.10 | $ | 9.20 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 990.50 | $ | 9.08 | $ | 1,016.10 | $ | 9.20 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 995.90 | $ | 3.67 | $ | 1,021.50 | $ | 3.72 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.06% for Investor Class, 0.98% for Class A, 1.81% for Class B and Class C and 0.73% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Portfolio Composition as of October 31, 2011 (Unaudited)
Floating Rate | ||||
Loans | 80.2 | |||
Corporate Bonds | 7.50 | |||
Short-Term Investments | 5.70 | |||
Foreign Floating Rate Loans | 2.90 | |||
Other Assets, Less Liabilities | 2.60 | |||
Yankee Bonds | 1.00 | |||
Common Stocks | 0.10 |
See Portfolio of Investments beginning on page 10 for specific holdings within these categories.
Top Ten Holdings or Issuers Held as of October 31, 2011 (excluding short-term investments)
1. | TransDigm, Inc., 4.00%–7.75%, due 2/14/17–12/15/18 | |
2. | Cedar Fair, L.P., 4.00%, due 12/15/17 | |
3. | CB Richard Ellis Services, Inc., 3.742%–6.625%, due 9/4/19–10/15/20 | |
4. | Hertz Corp. (The), 3.75%, due 3/9/18 | |
5. | Grifols, Inc., 6.00%, due 6/1/17 | |
6. | Intelsat Jackson Holdings, Ltd., 5.25%, due 4/2/18 | |
7. | DaVita, Inc., 4.50%, due 10/20/16 | |
8. | Univar, Inc., 5.00%, due 6/30/17 | |
9. | NRG Energy, Inc., 4.00%, due 7/2/18 | |
10. | Aramark Corp., 2.244%–3.619%, due 1/27/14–7/26/16 |
8 MainStay Floating Rate Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio manager Robert H. Dial of New York Life Investments,1 the Fund’s Manager.
How did MainStay Floating Rate Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Floating Rate Fund returned 2.45% for Investor Class shares, 2.53% for Class A shares and 1.59% for both Class B and Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 2.67%. Class I shares outperformed—and all other share classes underperformed—the 2.58% return of the average Lipper2 loan participation fund. All share classes underperformed the 3.54% return of the Credit Suisse Leveraged Loan Index3 for the 12 months ended October 31, 2011. The Credit Suisse Leveraged Loan Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund underperformed the Credit Suisse Leveraged Loan Index for the 12 months ended October 31, 2011, largely because of an overweight position relative to the benchmark in credits rated BB4 and a substantially underweight position in unrated credits and loans rated CCC5 and lower.
Significant net inflows into the floating-rate loan asset class from December 2010 through February 2011 helped the riski-est credits outperform their higher-rated counterparts during the fourth quarter of 2010 and the first quarter of 2011. However, higher-rated credits (loans rated BB) performed better than loans rated CCC and below during the second and third quarters of 2011. During that time, concerns about European sovereign debt and the U.S. government ratings downgrade prompted investors to reduce exposure to riskier asset classes (including floating-rate loans) in favor of U.S. Treasury securities. This caused loan prices to decline—especially during the third quarter of 2011—and riskier credits experienced greater price declines than higher quality credits.
Overall, floating-rate defaults remained low during the reporting period.
What was the Fund’s duration6 strategy during the reporting period?
The Fund invested in floating-rate loans that had a weighted average effective duration of less than three months. Floating-rate loans mature, on average, in five to seven years, but loan maturity can be as long as nine years. The underlying interest-rate contracts of the Fund’s loans, which are typically pegged to LIBOR,7 reset every 30, 60, 90 or 180 days. The Fund’s weighted average days-to-reset figure at October 31, 2011, was 42 days. Since actual reset dates may vary for different loans in the Fund, the actual period between a shift in interest rates and the time when the Fund would “catch up” may differ.
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
Although the default environment for leveraged loans remained relatively benign during the reporting period, the Fund maintained an underweight position relative to the Credit Suisse Leveraged Loan Index in unrated credits and loans rated CCC and below. Instead, we sought to invest in higher-rated credits that we believed would perform well in a variety of economic environments. During the first half of the reporting period, we increased the Fund’s exposure to fixed-rate bonds to 10.8% of net assets on the basis of attractive relative-value opportunities available in the market. This bond exposure provided incremental yield and enhanced liquidity. During the second half of the reporting period, we continued to underweight unrated credits and loans rated CCC and below in light of a cautious global perspective. We also reduced the Fund’s bond exposure to 8.7%.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2011, the Fund was overweight relative to the Credit Suisse Leveraged Loan Index in credits rated BB (54.0% in the Fund; 43.5% in the Index). As of the same date, the Fund was significantly underweight in unrated credits and loans rated CCC or lower (1.6% in the Fund; 18.1% in the Index).
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the Credit Suisse Leveraged Loan Index.
4. An obligation rated ‘BB’ by Standard & Poor’s (“S&P”) is deemed by S&P to be less vulnerable to nonpayment than other speculative issues. In the opinion of S&P, however, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund.
5. An obligation rated ‘CCC’ by Standard & Poor’s (“S&P”) is deemed by S&P to be currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. It is the opinion of S&P that in the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. London InterBank Offered Rate (LIBOR) is an interest rate that is widely used as a reference rate in bank, corporate and government lending agreements.
The opinions expressed are those of the portfolio manager as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
The opinions expressed are those of the portfolio manager as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
Portfolio of Investments October 31, 2011
Principal | ||||||||
Amount | Value | |||||||
Long-Term Bonds 91.6%† Corporate Bonds 7.5% | ||||||||
Aerospace & Defense 0.9% | ||||||||
Oshkosh Corp. 8.25%, due 3/1/17 | $ | 3,400,000 | $ | 3,493,500 | ||||
Spirit Aerosystems, Inc. 7.50%, due 10/1/17 | 865,000 | 929,875 | ||||||
X TransDigm, Inc. 7.75%, due 12/15/18 | 5,000,000 | 5,425,000 | ||||||
9,848,375 | ||||||||
Automobile 0.1% | ||||||||
Dana Holding Corp. 6.50%, due 2/15/19 | 800,000 | 806,000 | ||||||
Beverage, Food & Tobacco 0.3% | ||||||||
Dole Food Co., Inc. 8.00%, due 10/1/16 (a) | 2,500,000 | 2,637,500 | ||||||
Broadcasting & Entertainment 0.5% | ||||||||
Sinclair Television Group, Inc. 8.375%, due 10/15/18 | 5,000,000 | 5,150,000 | ||||||
Buildings & Real Estate 0.8% | ||||||||
Building Materials Corp. of America 6.75%, due 5/1/21 (a) | 1,700,000 | 1,763,750 | ||||||
6.875%, due 8/15/18 (a) | 2,400,000 | 2,496,000 | ||||||
X CB Richard Ellis Services, Inc. 6.625%, due 10/15/20 | 3,800,000 | 3,857,000 | ||||||
8,116,750 | ||||||||
Chemicals, Plastics & Rubber 1.2% | ||||||||
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance ULC 8.875%, due 2/1/18 | 4,500,000 | 4,443,750 | ||||||
Huntsman International LLC 5.50%, due 6/30/16 | 5,000,000 | 4,950,000 | ||||||
KRATON Polymers LLC/KRATON Polymers Capital Corp. 6.75%, due 3/1/19 | 500,000 | 482,500 | ||||||
Nexeo Solutions LLC/Nexeo Solutions Finance Corp. 8.375%, due 3/1/18 (a) | 3,000,000 | 3,000,000 | ||||||
12,876,250 | ||||||||
Containers, Packaging & Glass 0.8% | ||||||||
Berry Plastics Corp. 4.222%, due 9/15/14 (b) | 1,500,000 | 1,402,500 | ||||||
5.153%, due 2/15/15 (b) | 3,000,000 | 2,962,500 | ||||||
9.50%, due 5/15/18 | 3,000,000 | 3,030,000 | ||||||
Greif, Inc. 7.75%, due 8/1/19 | 1,350,000 | 1,451,250 | ||||||
8,846,250 | ||||||||
Diversified Natural Resources, Precious Metals & Minerals 0.1% | ||||||||
Boise Paper Holdings LLC/Boise Co-Issuer Co. 8.00%, due 4/1/20 | 1,300,000 | 1,368,250 | ||||||
Diversified/Conglomerate Service 0.3% | ||||||||
Fidelity National Information Services, Inc. 7.625%, due 7/15/17 | 900,000 | 978,750 | ||||||
Geo Group, Inc. (The) 7.75%, due 10/15/17 | 2,000,000 | 2,100,000 | ||||||
3,078,750 | ||||||||
Healthcare, Education & Childcare 0.1% | ||||||||
Giant Funding Corp. 8.25%, due 2/1/18 (a) | 1,385,000 | 1,457,713 | ||||||
Hotels, Motels, Inns & Gaming 0.2% | ||||||||
Scientific Games International, Inc. 7.875%, due 6/15/16 (a) | 2,500,000 | 2,543,750 | ||||||
Leisure, Amusement, Motion Pictures & Entertainment 0.1% | ||||||||
Cinemark USA, Inc. 8.625%, due 6/15/19 | 600,000 | 651,000 | ||||||
Machinery 0.6% | ||||||||
SPX Corp. 6.875%, due 9/1/17 | 6,000,000 | 6,390,000 | ||||||
Machinery (Non-Agriculture, Non-Construct & Non-Electronic) 0.1% | ||||||||
CPM Holdings, Inc. 10.625%, due 9/1/14 | 1,475,000 | 1,570,875 | ||||||
Oil & Gas 0.4% | ||||||||
Energy Transfer Equity, L.P. 7.50%, due 10/15/20 | 1,462,000 | 1,578,960 | ||||||
Forest Oil Corp. 7.25%, due 6/15/19 | 3,000,000 | 3,075,000 | ||||||
4,653,960 | ||||||||
Telecommunications 0.6% | ||||||||
GCI, Inc. 6.75%, due 6/1/21 | 1,750,000 | 1,710,625 | ||||||
MetroPCS Wireless, Inc. 6.625%, due 11/15/20 | 5,000,000 | 4,700,000 | ||||||
6,410,625 | ||||||||
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings or issuers held, as of October 31, 2011, excluding short-term investments. May be subject to change daily. |
The notes to the financial statements are an integral part of,
10 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Utilities 0.4% | ||||||||
Texas Competitive Electric Holdings Co. LLC/TCEH Finance, Inc. 11.50%, due 10/1/20 (a) | $ | 4,370,000 | $ | 3,758,200 | ||||
Total Corporate Bonds (Cost $79,400,161) | 80,164,248 | |||||||
Floating Rate Loans 80.2% (c) | ||||||||
Aerospace & Defense 2.8% | ||||||||
Aeroflex, Inc. Term Loan B 4.25%, due 5/9/18 | 6,783,000 | 6,647,340 | ||||||
Pelican Products, Inc. New Term Loan B 5.00%, due 3/7/17 | 3,970,000 | 3,910,450 | ||||||
SI Organization, Inc. (The) New Term Loan B 4.50%, due 11/22/16 | 7,592,625 | 7,137,066 | ||||||
Spirit Aerosystems, Inc. Term Loan B2 3.493%, due 9/30/16 | 3,438,129 | 3,415,207 | ||||||
X TransDigm, Inc. New Term Loan B 4.00%, due 2/14/17 | 6,338,551 | 6,304,215 | ||||||
Wesco Aircraft Hardware Corp. New Term Loan B 4.25%, due 4/7/17 | 2,111,132 | 2,111,132 | ||||||
29,525,410 | ||||||||
Automobile 6.7% | ||||||||
Allison Transmission, Inc. Term Loan B 2.75%, due 8/7/14 | 9,843,621 | 9,507,294 | ||||||
Autoparts Holdings, Ltd. | ||||||||
1st Lien Term Loan 6.50%, due 7/28/17 | 800,000 | 798,000 | ||||||
2nd Lien Term Loan 10.50%, due 1/29/18 | 2,100,000 | 2,037,000 | ||||||
Capital Automotive L.P. New Term Loan B 5.00%, due 3/10/17 | 7,810,051 | 7,673,375 | ||||||
Chrysler Group LLC Term Loan 6.00%, due 5/24/17 | 7,975,000 | 7,519,763 | ||||||
Federal-Mogul Corp. | ||||||||
Term Loan B 2.178%, due 12/29/14 | 4,243,113 | 4,002,668 | ||||||
Term Loan C 2.178%, due 12/28/15 | 4,620,211 | 4,358,397 | ||||||
Goodyear Tire & Rubber Co. (The) 2nd Lien Term Loan 1.93%, due 4/30/14 | 5,250,000 | 5,118,750 | ||||||
KAR Auction Services, Inc. Term Loan B 5.00%, due 5/19/17 | 5,206,551 | 5,187,026 | ||||||
Key Safety Systems, Inc. 1st Lien Term Loan 2.496%, due 3/8/14 | 3,574,289 | 3,279,411 | ||||||
Metaldyne Co. LLC New Term Loan B 5.25%, due 5/18/17 | 6,965,000 | 6,869,231 | ||||||
Tenneco, Inc. Tranche B Term Loan 4.746%, due 6/3/16 (d) | 790,000 | 790,000 | ||||||
Tranche B1 Funded LOC 5.24%, due 3/17/14 (d) | 2,361,559 | 2,267,097 | ||||||
Tomkins LLC New Term Loan B 4.25%, due 9/21/16 | 8,598,757 | 8,573,675 | ||||||
UCI International, Inc. New Term Loan B 5.50%, due 7/26/17 (d) | 3,176,000 | 3,176,000 | ||||||
71,157,687 | ||||||||
Beverage, Food & Tobacco 3.9% | ||||||||
American Seafoods Group LLC New Term Loan B 4.25%, due 3/8/18 (d) | 2,658,510 | 2,592,047 | ||||||
Dean Foods Co. Extended Term Loan B2 3.518%, due 4/2/17 | 8,500,145 | 8,308,892 | ||||||
Del Monte Foods Co. Term Loan 4.50%, due 3/8/18 | 7,174,500 | 6,995,137 | ||||||
Dole Food Co., Inc. Tranche B2 5.045%, due 7/6/18 | 2,515,835 | 2,516,884 | ||||||
Michael Foods Group, Inc. Term Loan 4.25%, due 2/23/18 | 9,123,653 | 9,032,416 | ||||||
Solvest, Ltd. Tranche C2 5.032%, due 7/6/18 | 4,672,264 | 4,674,212 | ||||||
Wm. Bolthouse Farms, Inc. New 1st Lien Term Loan 5.50%, due 2/11/16 | 7,638,330 | 7,561,947 | ||||||
41,681,535 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Floating Rate Loans (continued) | ||||||||
Broadcasting & Entertainment 6.9% | ||||||||
Atlantic Broadband Finance LLC New Term Loan B 4.00%, due 3/8/16 | $ | 6,912,426 | $ | 6,774,177 | ||||
BBHI Acquisition LLC Term Loan B 4.50%, due 12/14/17 | 7,940,000 | 7,860,600 | ||||||
Charter Communications Operating LLC Replacement Term Loan 2.25%, due 3/6/14 | 54,422 | 53,945 | ||||||
Extended Term Loan 3.62%, due 9/6/16 | 543,416 | 538,661 | ||||||
New Term Loan 7.25%, due 3/6/14 | 162,182 | 162,588 | ||||||
CSC Holdings, Inc. Extended Term Loan B3 1.995%, due 3/29/16 | 985,000 | 972,687 | ||||||
Incremental B2 Term Loan 1.995%, due 3/29/16 | 7,628,902 | 7,533,541 | ||||||
Cumulus Media, Inc. Term Loan 5.75%, due 9/17/18 | 6,666,700 | 6,566,700 | ||||||
Emmis Operating Co. Term Loan B 4.363%, due 11/1/13 | 158,892 | 141,414 | ||||||
Gray Television, Inc. Term Loan B 3.74%, due 12/31/14 | 7,264,689 | 7,086,704 | ||||||
Hubbard Radio LLC Term Loan B 5.25%, due 4/28/17 | 1,596,000 | 1,576,050 | ||||||
2nd Lien Term Loan 8.75%, due 4/30/18 | 1,400,000 | 1,372,000 | ||||||
Insight Midwest Holdings LLC Initial Term Loan 1.99%, due 4/7/14 | 3,429,883 | 3,387,010 | ||||||
Knology, Inc. New Term Loan B 4.00%, due 8/18/17 | 9,875,375 | 9,677,868 | ||||||
LodgeNet Entertainment Corp. Term Loan 6.50%, due 4/4/14 | 612,362 | 528,162 | ||||||
MCC Iowa LLC Tranche D1 Term Loan 1.95%, due 1/30/15 | 1,837,899 | 1,736,815 | ||||||
Mediacom Broadband LLC Tranche F Term Loan 4.50%, due 10/23/17 | 1,935,500 | 1,894,371 | ||||||
Univision Communications, Inc. Extended Term Loan 4.496%, due 3/31/17 | 8,545,785 | 7,726,817 | ||||||
Weather Channel (The) New Term Loan B 4.25%, due 2/13/17 | 7,939,366 | 7,939,366 | ||||||
73,529,476 | ||||||||
Buildings & Real Estate 2.9% | ||||||||
Armstrong World Industries, Inc. New Term Loan B 4.00%, due 3/9/18 | 8,741,786 | 8,632,513 | ||||||
Brickman Group Holdings, Inc. New Term Loan B 7.25%, due 10/14/16 | 6,947,500 | 6,912,763 | ||||||
X CB Richard Ellis Services, Inc. New Term Loan D 3.742%, due 9/4/19 | 7,773,000 | 7,559,242 | ||||||
Central Parking Corp. | ||||||||
Letter of Credit Term Loan 2.563%, due 5/22/14 | 568,966 | 486,466 | ||||||
Term Loan 2.625%, due 5/22/14 | 1,542,569 | 1,318,897 | ||||||
CPG International, Inc. New Term Loan B 6.00%, due 2/18/17 | 3,870,750 | 3,657,859 | ||||||
Realogy Corp. | ||||||||
Letter of Credit 3.186%, due 10/10/13 | 321,839 | 299,578 | ||||||
Term Loan 3.272%, due 10/10/13 | 2,715,787 | 2,527,944 | ||||||
31,395,262 | ||||||||
Chemicals, Plastics & Rubber 5.6% | ||||||||
Ashland, Inc. Term Loan B 3.75%, due 8/23/18 | 6,000,000 | 6,018,750 | ||||||
Celanese U.S. Holdings LLC Extended Term Loan C 3.122%, due 10/31/16 | 59,228 | 59,330 | ||||||
General Chemical Corp. New Term Loan 5.002%, due 10/6/15 | 6,336,866 | 6,260,298 | ||||||
Huntsman International LLC | ||||||||
New Term Loan 1.832%, due 4/21/14 | 871,333 | 850,857 | ||||||
Extended Term Loan B 2.80%, due 4/19/17 | 375,732 | 361,877 | ||||||
INEOS U.S. Finance LLC Term Loan B2 7.501%, due 12/16/13 | 3,777,251 | 3,871,682 |
The notes to the financial statements are an integral part of,
12 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Floating Rate Loans (continued) | ||||||||
Chemicals, Plastics & Rubber (continued) | ||||||||
INEOS U.S. Finance LLC (continued) | ||||||||
Term Loan C2 8.001%, due 12/16/14 | $ | 4,094,467 | $ | 4,196,828 | ||||
Momentive Specialty Chemicals, Inc. Extended Term Loan C7 4.125%, due 5/5/15 | 3,979,221 | 3,740,468 | ||||||
Nalco Co. Term Loan B1 4.50%, due 10/5/17 | 8,929,887 | 8,918,725 | ||||||
Rockwood Specialties Group, Inc. New Term Loan B 3.50%, due 2/9/18 | 3,753,587 | 3,762,971 | ||||||
Solutia, Inc. New Term Loan B 3.50%, due 8/1/17 | 4,375,597 | 4,375,597 | ||||||
Styron S.A.R.L. LLC New Term Loan B 6.00%, due 8/2/17 | 7,557,838 | 6,901,250 | ||||||
X Univar, Inc. Term Loan B 5.00%, due 6/30/17 | 10,496,706 | 10,218,543 | ||||||
59,537,176 | ||||||||
Containers, Packaging & Glass 2.5% | ||||||||
BWAY Corp. New Term Loan B 4.50%, due 2/23/18 | 8,989,717 | 8,877,346 | ||||||
Graphic Packaging International, Inc. Term Loan C 3.136%, due 5/16/14 | 6,783,798 | 6,773,622 | ||||||
Reynolds Group Holdings, Inc. Tranche B Term Loan 6.50%, due 2/9/18 | 7,952,519 | 7,927,667 | ||||||
Tranche C Term Loan 6.50%, due 8/9/18 | 1,714,400 | 1,705,828 | ||||||
Sealed Air Corp. Term Loan B 4.75%, due 10/3/18 | 1,117,200 | 1,127,441 | ||||||
26,411,904 | ||||||||
Diversified/Conglomerate Manufacturing 0.4% | ||||||||
Sensus USA, Inc. | ||||||||
1st Lien Term Loan 4.75%, due 5/9/17 | 2,089,500 | 2,047,710 | ||||||
2nd Lien Term Loan 8.50%, due 5/9/18 | 800,000 | 768,000 | ||||||
Terex Corp. Term Loan B 5.50%, due 4/28/17 | 1,200,000 | 1,199,250 | ||||||
4,014,960 | ||||||||
Diversified/Conglomerate Service 7.3% | ||||||||
Acosta, Inc. Term Loan 4.75%, due 3/1/18 | 6,801,522 | 6,699,499 | ||||||
Advantage Sales & Marketing, Inc. Term Loan B 5.25%, due 12/18/17 | 6,932,500 | 6,802,516 | ||||||
2nd Lien Term Loan 9.25%, due 6/18/18 | 1,800,000 | 1,716,750 | ||||||
Brock Holdings III, Inc. New Term Loan B 6.00%, due 3/16/17 | 5,472,500 | 5,198,875 | ||||||
New 2nd Lien Term Loan 10.00%, due 3/16/18 | 1,350,000 | 1,242,000 | ||||||
Dealer Computer Services, Inc. New Term Loan B 3.75%, due 4/20/18 | 8,279,250 | 8,231,644 | ||||||
Fidelity National Information Solutions, Inc. Term Loan B 5.25%, due 7/18/16 | 7,862,349 | 7,901,660 | ||||||
Fifth Third Processing Solutions LLC Term Loan B1 4.50%, due 11/3/16 | 8,142,446 | 8,086,466 | ||||||
First Data Corp. | ||||||||
Term Loan B1 2.995%, due 9/24/14 | 8,905,686 | 8,197,684 | ||||||
Term Loan B2 2.995%, due 9/24/14 | 874,576 | 806,250 | ||||||
Term Loan B3 2.995%, due 9/24/14 | 890,154 | 820,610 | ||||||
ServiceMaster Co. | ||||||||
Delayed Draw Term Loan 2.75%, due 7/24/14 | 665,779 | 634,987 | ||||||
Term Loan 2.76%, due 7/24/14 | 6,685,532 | 6,376,326 | ||||||
SunGard Data Systems, Inc. Tranche A 1.993%, due 2/28/14 | 4,650,784 | 4,572,303 | ||||||
Tranche B 3.903%, due 2/26/16 | 3,779,376 | 3,727,409 | ||||||
VeriFone, Inc. Term Loan B 3.00%, due 10/31/13 | 1,297,500 | 1,291,013 | ||||||
Verint Systems, Inc. Term Loan 4.50%, due 10/27/17 | 5,308,795 | 5,249,071 | ||||||
77,555,063 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Floating Rate Loans (continued) | ||||||||
Ecological 0.2% | ||||||||
Big Dumpster Merger Sub, Inc. Delayed Draw Term Loan B 4.50%, due 2/5/13 (d) | $ | 331,011 | $ | 264,809 | ||||
Term Loan B 4.50%, due 2/5/13 (d) | 786,152 | 628,922 | ||||||
Synagro Technologies, Inc. Term Loan B 2.25%, due 4/2/14 | 861,450 | 736,539 | ||||||
2nd Lien Term Loan 5.00%, due 10/2/14 | 750,000 | 600,000 | ||||||
2,230,270 | ||||||||
Electronics 2.3% | ||||||||
AVG Technologies, Inc. Term Loan 7.50%, due 3/11/16 | 10,000,000 | 9,350,000 | ||||||
Eagle Parent, Inc. New Term Loan 5.00%, due 5/16/18 | 3,000,000 | 2,928,750 | ||||||
NDS Finance, Ltd. New Term Loan B 4.00%, due 3/12/18 | 4,875,500 | 4,765,801 | ||||||
Rovi Solutions Corp. Tranche B Term Loan 4.00%, due 2/7/18 | 4,669,915 | 4,681,590 | ||||||
Sensata Technologies Finance Co. LLC Term Loan 4.00%, due 5/11/18 | 2,660,033 | 2,641,192 | ||||||
24,367,333 | ||||||||
Finance 2.2% | ||||||||
Brand Energy & Infrastructure Services, Inc. New Term Loan 2.625%, due 2/7/14 | 2,274,981 | 1,823,777 | ||||||
Harbourvest Partners LLC Term Loan B 6.25%, due 12/14/16 | 3,859,482 | 3,849,833 | ||||||
X Hertz Corp. (The) | ||||||||
New Synthetic Letter of Credit 3.75%, due 3/9/18 | 8,000,000 | 7,400,000 | ||||||
Term Loan B 3.75%, due 3/9/18 | 3,975,013 | 3,935,262 | ||||||
Istar Financial, Inc. Term Loan A2 7.00%, due 6/30/14 | 6,083,300 | 5,894,462 | ||||||
22,903,334 | ||||||||
Grocery 0.6% | ||||||||
Roundy’s Supermarkets, Inc. Extended Term Loan 7.00%, due 11/3/13 | 3,423,372 | 3,334,936 | ||||||
SUPERVALU, Inc. Extended Term Loan B2 3.496%, due 10/5/15 | 2,736,628 | 2,631,441 | ||||||
5,966,377 | ||||||||
Healthcare, Education & Childcare 12.6% | ||||||||
Bausch & Lomb, Inc. Delayed Draw Term Loan 3.496%, due 4/24/15 | 1,906,643 | 1,889,960 | ||||||
Term Loan 3.592%, due 4/24/15 | 7,822,993 | 7,754,542 | ||||||
Biomet, Inc. Term Loan B 3.317%, due 3/25/15 | 9,906,386 | 9,745,407 | ||||||
Community Health Systems, Inc. Non-Extended Delayed Draw 2.569%, due 7/25/14 | 468,030 | 453,404 | ||||||
Non-Extended Term Loan 2.569%, due 7/25/14 | 9,108,829 | 8,824,178 | ||||||
Extended Term Loan B 3.819%, due 1/25/17 | 561,240 | 543,000 | ||||||
X DaVita, Inc. New Term Loan B 4.50%, due 10/20/16 | 10,386,338 | 10,334,406 | ||||||
Emergency Medical Services Corp. Term Loan 5.25%, due 5/25/18 | 9,741,000 | 9,507,216 | ||||||
Gentiva Health Services, Inc. New Term Loan B 4.75%, due 8/17/16 | 8,855,903 | 7,881,754 | ||||||
X Grifols, Inc. Term Loan B 6.00%, due 6/1/17 | 10,933,207 | 10,940,040 | ||||||
HCA, Inc. Extended Term Loan B2 3.619%, due 3/31/17 | 654,681 | 634,222 | ||||||
Extended Term Loan B3 3.619%, due 5/1/18 | 7,566,658 | 7,287,637 | ||||||
Health Management Associates, Inc. Term Loan B 2.119%, due 2/28/14 | 5,709,418 | 5,585,033 | ||||||
IASIS Healthcare LLC Term Loan 5.00%, due 5/3/18 | 4,776,000 | 4,662,570 | ||||||
Kinetic Concepts, Inc. Term Loan B 7.00%, due 11/2/18 | 2,000,000 | 2,004,062 | ||||||
Quintiles Transnational Corp. New Term Loan B 5.00%, due 6/8/18 | 8,067,980 | 7,957,045 |
The notes to the financial statements are an integral part of,
14 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Floating Rate Loans (continued) | ||||||||
Healthcare, Education & Childcare (continued) | ||||||||
RPI Finance Trust | ||||||||
Term Loan Tranche 2 4.00%, due 5/9/18 | $ | 9,426,375 | $ | 9,349,786 | ||||
Rural/Metro Corp. Term Loan 5.75%, due 6/29/18 (d) | 4,788,000 | 4,644,360 | ||||||
Select Medical Corp. New Term Loan B 5.50%, due 5/25/18 | 4,488,750 | 4,152,094 | ||||||
Sunrise Medical Holdings B.V. Term Loan B1 7.50%, due 5/13/14 (d)(e) | 1,276,476 | 1,148,828 | ||||||
Universal Health Services, Inc. New Term Loan B 4.00%, due 11/15/16 | 7,692,375 | 7,610,643 | ||||||
Vanguard Health Holding Co. II LLC Term Loan B 5.00%, due 1/29/16 | 6,403,107 | 6,344,410 | ||||||
Warner Chilcott Co. LLC New Term Loan B2 4.25%, due 3/15/18 | 1,283,379 | 1,271,081 | ||||||
Warner Chilcott Corp. New Term Loan B1 4.25%, due 3/15/18 | 2,566,759 | 2,542,162 | ||||||
WC Luxco S.A.R.L. New Term Loan B3 4.25%, due 3/15/18 | 1,764,647 | 1,747,736 | ||||||
134,815,576 | ||||||||
Home and Office Furnishings, Housewares & Durable Consumer Products 0.2% | ||||||||
National Bedding Co. LLC Extended 1st Lien Term Loan 3.875%, due 11/28/13 | 2,314,751 | 2,285,817 | ||||||
Hotels, Motels, Inns & Gaming 1.1% | ||||||||
Ameristar Casinos, Inc. Term Loan B 4.00%, due 4/13/18 | 4,328,250 | 4,317,429 | ||||||
Las Vegas Sands LLC Extended Delayed Draw Term Loan 2.84%, due 11/23/16 (f) | 1,471,915 | 1,416,718 | ||||||
Extended Term Loan B 2.84%, due 11/23/16 (f) | 5,821,898 | 5,607,216 | ||||||
Penn National Gaming, Inc. New Term Loan B 3.75%, due 7/16/18 | 299,250 | 299,531 | ||||||
11,640,894 | ||||||||
Insurance 1.7% | ||||||||
Asurion Corp. | ||||||||
New 1st Lien Term Loan 5.50%, due 5/24/18 | 5,583,409 | 5,504,309 | ||||||
New 2nd Lien Term Loan 9.00%, due 5/24/19 | 2,135,000 | 2,094,968 | ||||||
Hub International Holdings, Inc. Delayed Draw Term Loan 2.869%, due 6/13/14 | 173,417 | 168,503 | ||||||
Initial Term Loan 2.869%, due 6/13/14 | 771,462 | 749,604 | ||||||
Add On Term Loan B 6.75%, due 6/13/14 | 1,974,811 | 1,968,229 | ||||||
Multiplan, Inc. New Term Loan B 4.75%, due 8/26/17 | 7,707,814 | 7,431,620 | ||||||
17,917,233 | ||||||||
Leisure, Amusement, Motion Pictures & Entertainment 2.3% | ||||||||
X Cedar Fair, L.P. New Term Loan B 4.00%, due 12/15/17 | 11,652,252 | 11,652,252 | ||||||
Regal Cinemas, Inc. Term Loan B 3.369%, due 8/23/17 | 6,892,912 | 6,791,241 | ||||||
Six Flags Theme Parks, Inc. Add On Term Loan B 5.25%, due 6/30/16 | 6,563,312 | 6,559,210 | ||||||
25,002,703 | ||||||||
Machinery (Non-Agriculture, Non-Construct & Non-Electronic) 1.5% | ||||||||
Alliance Laundry Systems LLC Term Loan B 6.25%, due 9/30/16 | 4,678,948 | 4,667,251 | ||||||
Goodman Global Holdings, Inc. First Lien Term Loan 5.75%, due 10/28/16 | 2,908,854 | 2,899,505 | ||||||
2nd Lien Term Loan 9.00%, due 10/30/17 | 300,000 | 300,563 | ||||||
Manitowoc Co., Inc. (The) New Term Loan B 4.25%, due 11/13/17 | 1,296,750 | 1,268,653 | ||||||
Rexnord Corp. Term Loan B 2.872%, due 7/19/13 | 7,412,851 | 7,301,658 | ||||||
16,437,630 | ||||||||
Mining, Steel, Iron & Non-Precious Metals 1.8% | ||||||||
JMC Steel Group, Inc. Term Loan 4.75%, due 4/3/17 | 3,358,125 | 3,324,544 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Floating Rate Loans (continued) | ||||||||
Mining, Steel, Iron & Non-Precious Metals (continued) | ||||||||
Novelis, Inc. Term Loan 3.75%, due 3/10/17 | $ | 8,432,481 | $ | 8,371,877 | ||||
SunCoke Energy, Inc. Term Loan B 4.005%, due 7/26/18 | 798,000 | 794,010 | ||||||
Walter Energy, Inc. Term Loan B 4.00%, due 4/2/18 | 7,010,134 | 6,983,846 | ||||||
19,474,277 | ||||||||
Oil & Gas 0.6% | ||||||||
Frac Tech International LLC Term Loan B 6.25%, due 5/6/16 | 6,968,403 | 6,906,183 | ||||||
Personal & Nondurable Consumer Products (Manufacturing Only) 1.6% | ||||||||
Spectrum Brands, Inc. New Term Loan B 5.001%, due 6/17/16 | 2,162,739 | 2,154,628 | ||||||
SRAM LLC New Term Loan B 4.764%, due 6/7/18 | 4,102,810 | 4,061,782 | ||||||
2nd Lien Term Loan 8.50%, due 12/7/18 | 1,400,000 | 1,400,000 | ||||||
Visant Holding Corp. Term Loan B 5.25%, due 12/22/16 | 9,895,038 | 9,350,811 | ||||||
16,967,221 | ||||||||
Personal Transportation 0.2% | ||||||||
United Airlines, Inc. Term Loan B 2.25%, due 2/3/14 | 2,688,572 | 2,592,792 | ||||||
Personal, Food & Miscellaneous Services 0.9% | ||||||||
X Aramark Corp. | ||||||||
Term Loan 2.244%, due 1/27/14 | 1,436,420 | 1,412,822 | ||||||
Synthetic Letter of Credit 2.264%, due 1/27/14 | 182,265 | 179,270 | ||||||
Extended Letter of Credit 3.489%, due 7/26/16 | 522,853 | 516,317 | ||||||
Extended Term Loan B 3.619%, due 7/26/16 | 7,935,336 | 7,836,145 | ||||||
9,944,554 | ||||||||
Printing & Publishing 3.1% | ||||||||
Dex Media East LLC New Term Loan 2.88%, due 10/24/14 | 1,354,914 | 700,039 | ||||||
Getty Images, Inc. New Term Loan 5.25%, due 11/7/16 | 8,328,851 | 8,335,789 | ||||||
Lamar Media Corp. Term Loan B 4.00%, due 12/30/16 | 6,080,155 | 6,059,890 | ||||||
MediaNews Group New Term Loan 8.50%, due 3/19/14 | 286,343 | 273,458 | ||||||
Merrill Communications LLC Term Loan 7.50%, due 12/24/12 | 3,511,279 | 3,362,050 | ||||||
Nielsen Finance LLC Class A Term Loan 2.242%, due 8/9/13 | 197,643 | 196,161 | ||||||
Class C Term Loan 3.492%, due 5/2/16 | 9,369,503 | 9,275,808 | ||||||
Penton Media, Inc. New Term Loan B 5.00%, due 8/1/14 (d)(f) | 5,339,710 | 3,644,352 | ||||||
R.H. Donnelley, Inc. New Term Loan 9.00%, due 10/24/14 | 2,160,438 | 883,980 | ||||||
SuperMedia, Inc. Exit Term Loan 11.00%, due 12/31/15 | 743,911 | 331,837 | ||||||
33,063,364 | ||||||||
Retail Store 4.6% | ||||||||
Academy, Ltd. Term Loan 6.00%, due 8/3/18 | 7,000,000 | 6,935,831 | ||||||
Michaels Stores, Inc. Term Loan B1 2.662%, due 10/31/13 | 3,493,569 | 3,418,705 | ||||||
Term Loan B2 4.912%, due 7/31/16 | 6,048,554 | 5,893,559 | ||||||
NBTY, Inc. New Term Loan B 4.25%, due 10/2/17 | 4,367,000 | 4,350,624 | ||||||
Neiman Marcus Group, Inc. (The) New Term Loan 4.75%, due 5/16/18 | 8,722,181 | 8,458,954 | ||||||
Pantry, Inc. (The) | ||||||||
Delayed Draw Term Loan B 2.00%, due 5/15/14 | 604,341 | 580,167 | ||||||
Term Loan B 2.00%, due 5/15/14 | 2,098,754 | 2,014,804 |
The notes to the financial statements are an integral part of,
16 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Floating Rate Loans (continued) | ||||||||
Retail Store (continued) | ||||||||
Petco Animal Supplies, Inc. New Term Loan 4.50%, due 11/24/17 | $ | 9,991,650 | $ | 9,879,244 | ||||
Pilot Travel Centers LLC New Term Loan B 4.25%, due 3/30/18 | 4,008,034 | 4,003,024 | ||||||
Yankee Candle Co., Inc. (The) Term Loan B 2.25%, due 2/6/14 | 3,668,416 | 3,578,236 | ||||||
49,113,148 | ||||||||
Telecommunications 1.0% | ||||||||
MetroPCS Wireless, Inc. Tranche B2 4.071%, due 11/4/16 | 3,025,151 | 2,991,118 | ||||||
Syniverse Technologies, Inc. Term Loan B 5.25%, due 12/21/17 | 7,245,250 | 7,245,250 | ||||||
10,236,368 | ||||||||
Utilities 2.7% | ||||||||
AES Corp. New Term Loan 4.25%, due 6/1/18 | 4,470,422 | 4,459,245 | ||||||
BRSP LLC Term Loan B 7.50%, due 6/4/14 | 1,442,639 | 1,435,426 | ||||||
Calpine Corp. Term Loan B2 4.50%, due 4/2/18 | 3,990,000 | 3,947,108 | ||||||
Equipower Resources Holdings LLC Term Loan B 5.75%, due 1/26/18 | 2,312,774 | 2,301,210 | ||||||
X NRG Energy, Inc. New Term Loan B 4.00%, due 7/2/18 | 10,216,900 | 10,210,514 | ||||||
Texas Competitive Electric Holdings Co. LLC Extended Term Loan 4.757%, due 10/10/17 | 5,571,479 | 3,785,820 | ||||||
TPF Generation Holdings LLC Synthetic Revolver 2.369%, due 12/15/11 | 8,196 | 7,811 | ||||||
Synthetic Letter of Credit 2.369%, due 12/13/13 | 26,144 | 24,919 | ||||||
Term Loan B 2.369%, due 12/13/13 | 42,516 | 40,523 | ||||||
2nd Lien Term Loan C 4.619%, due 12/15/14 | 1,600,000 | 1,480,000 | ||||||
TPF II LC LLC Term Loan B 3.119%, due 10/15/14 (d) | 959,447 | 906,678 | ||||||
28,599,254 | ||||||||
Total Floating Rate Loans (Cost $876,205,922) | 855,272,801 | |||||||
Foreign Floating Rate Loans 2.9% (c) | ||||||||
Broadcasting & Entertainment 0.4% | ||||||||
UPC Financing Partnership | ||||||||
Term Loan X 3.739%, due 12/29/17 | 3,241,439 | 3,119,885 | ||||||
Term Loan T 3.872%, due 12/30/16 | 1,762,638 | 1,703,149 | ||||||
4,823,034 | ||||||||
Containers, Packaging & Glass 0.1% | ||||||||
BWAY Corp. Canadian Term Loan C 4.50%, due 2/23/18 | 798,135 | 788,159 | ||||||
Electronics 0.5% | ||||||||
Flextronics International, Ltd. | ||||||||
Term Loan A 2.49%, due 10/1/14 | 3,824,176 | 3,760,668 | ||||||
Delayed Draw A1-A Term Loan 2.496%, due 10/1/14 | 1,098,901 | 1,085,851 | ||||||
4,846,519 | ||||||||
Leisure, Amusement, Motion Pictures & Entertainment 0.1% | ||||||||
Bombardier Recreational Products, Inc. Term Loan 2.899%, due 6/28/13 (d) | 1,292,986 | 1,250,964 | ||||||
Printing & Publishing 0.1% | ||||||||
Yell Group PLC New Term Loan B1 3.996%, due 7/31/14 | 2,747,374 | 765,339 | ||||||
Telecommunications 1.7% | ||||||||
X Intelsat Jackson Holdings, Ltd. Tranche B Term Loan 5.25%, due 4/2/18 | 10,930,038 | 10,848,062 | ||||||
Telesat Canada | ||||||||
U.S. Term I Loan 3.25%, due 10/31/14 | 7,144,721 | 7,010,758 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Foreign Floating Rate Loans (continued) | ||||||||
Telecommunications (continued) | ||||||||
Telesat Canada (continued) | ||||||||
U.S. Term II Loan 3.25%, due 10/31/14 | $ | 613,731 | $ | 602,223 | ||||
18,461,043 | ||||||||
Total Foreign Floating Rate Loans (Cost $33,202,775) | 30,935,058 | |||||||
Yankee Bonds 1.0% (g) | ||||||||
Leisure, Amusement, Motion Pictures & Entertainment 0.6% | ||||||||
Royal Caribbean Cruises, Ltd. 7.25%, due 3/15/18 | 6,000,000 | 6,240,000 | ||||||
Mining, Steel, Iron & Non-Precious Metals 0.4% | ||||||||
FMG Resources August 2006 Pty, Ltd. 6.375%, due 2/1/16 (a) | 4,000,000 | 3,880,000 | ||||||
Total Yankee Bonds (Cost $10,425,759) | 10,120,000 | |||||||
Total Long-Term Bonds (Cost $999,234,617) | 976,492,107 | |||||||
Shares | ||||||||
Common Stocks 0.1% | ||||||||
Beverage, Food & Tobacco 0.0%‡ | ||||||||
Nellson Nutraceutical, Inc. (d)(e) | 379 | 276,147 | ||||||
Leisure, Amusement, Motion Pictures & Entertainment 0.1% | ||||||||
MGM Studios, Inc. (d)(e) | 53,236 | 1,064,720 | ||||||
Total Common Stocks (Cost $1,796,087) | 1,340,867 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investments 5.7% | ||||||||
Repurchase Agreement 0.1% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $792,152 (Collateralized by a United States Treasury Bond with a rate of 4.625% and a maturity date of 2/15/40, with a Principal Amount of $640,000 and a Market Value of $813,594) | $ | 792,152 | 792,152 | |||||
Total Repurchase Agreement (Cost $792,152) | 792,152 | |||||||
U.S. Government 5.6% | ||||||||
United States Treasury Bills 0.002%, due 12/15/11 (h) | 7,563,000 | 7,562,981 | ||||||
0.004%, due 11/17/11 (h) | 7,453,000 | 7,452,992 | ||||||
0.007%, due 12/1/11 (h) | 1,465,000 | 1,464,992 | ||||||
0.008%, due 12/22/11 (h) | 18,871,000 | 18,870,808 | ||||||
0.011%, due 11/10/11 (h) | 22,567,000 | 22,566,938 | ||||||
0.013%, due 12/8/11 (h) | 1,591,000 | 1,590,978 | ||||||
Total U.S. Government (Cost $59,509,689) | 59,509,689 | |||||||
Total Short-Term Investments (Cost $60,301,841) | 60,301,841 | |||||||
Total Investments (Cost $1,061,332,545) (i) | 97.4 | % | 1,038,134,815 | |||||
Other Assets, Less Liabilities | 2.6 | 27,927,167 | ||||||
Net Assets | 100.0 | % | $ | 1,066,061,982 | ||||
‡ | Less than one-tenth of a percent. | |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(2) of the Securities Act of 1933, as amended. | |
(b) | Floating rate—Rate shown is the rate in effect at October 31, 2011. | |
(c) | Floating Rate Loan—generally pays interest at rates which are periodically re-determined at a margin above the London InterBank Offered Rate or other short-term rates. The rate shown is the rate(s) in effect at October 31, 2011. Floating Rate Loans are generally considered restrictive in that the Fund is ordinarily contractually obligated to receive consent from the Agent Bank and/or borrower prior to disposition of a Floating Rate Loan. | |
(d) | Illiquid security—The total market value of these securities at October 31, 2011 is $19,478,924, which represents 1.8% of the Fund’s net assets. | |
(e) | Fair valued security. The total market value of these securities at October 31, 2011 is $2,489,695, which represents 0.2% of the Fund’s net assets. | |
(f) | PIK (“Payment in Kind”)—interest or dividend payment is made with additional securities. |
The notes to the financial statements are an integral part of,
18 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
(g) | Yankee Bond—dollar-denominated bond issued in the United States by a foreign bank or corporation. | |
(h) | Interest rate presented is yield to maturity. | |
(i) | At October 31, 2011, cost is $1,061,259,144 for federal income tax purposes and net unrealized depreciation is as follows: |
Gross unrealized appreciation | $ | 2,936,244 | ||
Gross unrealized depreciation | (26,060,573 | ) | ||
Net unrealized depreciation | $ | (23,124,329 | ) | |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Corporate Bonds | $ | — | $ | 80,164,248 | $ | — | $ | 80,164,248 | ||||||||
Floating Rate Loans (b) | — | 803,128,938 | 52,143,863 | (c) | 855,272,801 | |||||||||||
Foreign Floating Rate Loans | — | 30,935,058 | — | 30,935,058 | ||||||||||||
Yankee Bonds | — | 10,120,000 | — | 10,120,000 | ||||||||||||
Total Long-Term Bonds | — | 924,348,244 | 52,143,863 | 976,492,107 | ||||||||||||
Common Stocks (d) | — | — | 1,340,867 | 1,340,867 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Repurchase Agreement | — | 792,152 | — | 792,152 | ||||||||||||
U.S. Government | — | 59,509,689 | — | 59,509,689 | ||||||||||||
Total Short-Term Investments | — | 60,301,841 | — | 60,301,841 | ||||||||||||
Total Investments in Securities | $ | — | $ | 984,650,085 | $ | 53,484,730 | $ | 1,038,134,815 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $1,148,828 is held in Healthcare, Education & Childcare within the Floating Rate Loans section of the Portfolio of Investments. |
(c) | Includes $50,995,035 of Level 3 securities which represent floating rate loans whose value was obtained from an independent pricing service which utilized a single broker quote to determine such value with significant unobservable inputs. |
(d) | The Level 3 securities valued at $276,147 and $1,064,720 are held in Beverage, Food & Tobacco and Leisure, Amusement, Motion Pictures & Entertainment within the Common Stocks section of the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
During the year ended October 31, 2011, securities with a total value of $9,809,375 transferred from Level 2 to Level 3. The transfer occurred as a result of the value for certain floating rate loans obtained from the independent pricing service which utilized a single broker quote with significant unobservable inputs. (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Portfolio of Investments October 31, 2011 (continued)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Change in | ||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||||||||||||||||||
(Depreciation) | ||||||||||||||||||||||||||||||||||||||||
from | ||||||||||||||||||||||||||||||||||||||||
Balance | Change in | Balance | Investments | |||||||||||||||||||||||||||||||||||||
as of | Accrued | Realized | Unrealized | Transfers | Transfers | as of | Still Held at | |||||||||||||||||||||||||||||||||
October 31, | Discounts | Gain | Appreciation | in to | out of | October 31, | October 31, | |||||||||||||||||||||||||||||||||
Investments in Securities | 2010 | (Premiums) | (Loss) | (Depreciation) | Purchases (b) | Sales (c) | Level 3 | Level 3 | 2011 | 2011 (a) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Floating Rate Loans | ||||||||||||||||||||||||||||||||||||||||
Aerospace & Defense | $ | — | $ | (3,595 | ) | $ | (162 | ) | $ | (546,857 | ) | $ | 11,680,505 | $ | (82,375 | ) | $ | — | $ | — | $ | 11,047,516 | $ | (546,857 | ) | |||||||||||||||
Automobile | — | 468 | 68 | (106,846 | ) | — | (8,000 | ) | 3,171,407 | — | 3,057,097 | (106,885 | ) | |||||||||||||||||||||||||||
Buildings & Real Estate | — | 3,155 | (135,734 | ) | (177,179 | ) | 10,746,000 | (2,877,000 | ) | — | — | 7,559,242 | (177,179 | ) | ||||||||||||||||||||||||||
Diversified/Conglomerate Manufacturing | — | 1,300 | 51 | (56,641 | ) | 2,881,500 | (10,500 | ) | — | — | 2,815,710 | (56,641 | ) | |||||||||||||||||||||||||||
Diversified/Conglomerate Services | — | — | — | 6,788 | — | (30,000 | ) | 1,314,225 | — | 1,291,013 | 6,788 | |||||||||||||||||||||||||||||
Electronics | — | 21,282 | (206 | ) | (502,602 | ) | 14,536,583 | (23,467 | ) | — | — | 14,031,590 | (502,602 | ) | ||||||||||||||||||||||||||
Healthcare, Education & Childcare | — | (753 | ) | (489 | ) | 30,129 | — | (288,868 | ) | 1,408,809 | — | 1,148,828 | 753 | |||||||||||||||||||||||||||
Mining, Steel, Iron & Non-Precious Metals | — | 117 | 10 | (117 | ) | 796,000 | (2,000 | ) | — | — | 794,010 | (117 | ) | |||||||||||||||||||||||||||
Personal & Nondurable Consumer Products (Manufacturing Only) | — | 1,839 | 465 | (8,332 | ) | 5,565,000 | (97,190 | ) | — | — | 5,461,782 | (8,332 | ) | |||||||||||||||||||||||||||
Printing & Publishing | 2,642,500 | — | (851,571 | ) | — | 105,063 | (1,895,992 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Retail Store | — | — | — | 15,998 | — | (55,171 | ) | 2,634,144 | — | 2,594,971 | 13,515 | |||||||||||||||||||||||||||||
Utilities | — | 13,600 | 1,571 | (29,592 | ) | — | (333,074 | ) | 2,689,599 | — | 2,342,104 | (43,827 | ) | |||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Beverage, Food & Tobacco | 265,475 | — | — | 10,672 | — | — | — | — | 276,147 | 10,672 | ||||||||||||||||||||||||||||||
Leisure, Amusement, Motion Pictures & Entertainment | — | — | — | (199,635 | ) | 1,264,355 | (d) | — | — | — | 1,064,720 | (199,635 | ) | |||||||||||||||||||||||||||
Printing & Publishing | 409,280 | — | (353,167 | ) | 493,527 | — | (549,640 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Total | $ | 3,317,255 | $ | 37,413 | $ | (1,339,164 | ) | $ | (1,070,687 | ) | $ | 47,575,006 | $ | (6,253,277 | ) | $ | 11,218,184 | $ | — | $ | 53,484,730 | $ | (1,610,347 | ) | ||||||||||||||||
(a) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
(b) | Purchases may include paid-in-kind interest. |
(c) | Sales may include principal reductions. |
(d) | Purchases include securities received from a restructure. |
The notes to the financial statements are an integral part of,
20 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $1,061,332,545) | $ | 1,038,134,815 | ||
Cash | 295,386 | |||
Receivables: | ||||
Investment securities sold | 26,873,196 | |||
Interest | 4,523,303 | |||
Fund shares sold | 4,390,522 | |||
Other assets | 74,991 | |||
Total assets | 1,074,292,213 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 3,268,322 | |||
Investment securities purchased | 3,007,500 | |||
Manager (See Note 3) | 550,028 | |||
NYLIFE Distributors (See Note 3) | 278,549 | |||
Transfer agent (See Note 3) | 200,295 | |||
Professional fees | 64,069 | |||
Shareholder communication | 61,007 | |||
Trustees | 4,538 | |||
Custodian | 2,067 | |||
Accrued expenses | 6,726 | |||
Dividend payable | 787,130 | |||
Total liabilities | 8,230,231 | |||
Net assets | $ | 1,066,061,982 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 114,510 | ||
Additional paid-in capital | 1,152,437,422 | |||
1,152,551,932 | ||||
Distributions in excess of net investment income | (337,496 | ) | ||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (62,954,724 | ) | ||
Net unrealized appreciation (depreciation) on investments | (23,197,730 | ) | ||
Net assets | $ | 1,066,061,982 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 26,067,730 | ||
Shares of beneficial interest outstanding | 2,800,353 | |||
Net asset value per share outstanding | $ | 9.31 | ||
Maximum sales charge (3.00% of offering price) | 0.29 | |||
Maximum offering price per share outstanding | $ | 9.60 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 453,282,004 | ||
Shares of beneficial interest outstanding | 48,696,422 | |||
Net asset value per share outstanding | $ | 9.31 | ||
Maximum sales charge (3.00% of offering price) | 0.29 | |||
Maximum offering price per share outstanding | $ | 9.60 | ||
Class B | ||||
Net assets applicable to outstanding shares | $ | 14,508,323 | ||
Shares of beneficial interest outstanding | 1,557,470 | |||
Net asset value and offering price per share outstanding | $ | 9.32 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 197,230,473 | ||
Shares of beneficial interest outstanding | 21,181,329 | |||
Net asset value and offering price per share outstanding | $ | 9.31 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 374,973,452 | ||
Shares of beneficial interest outstanding | 40,274,876 | |||
Net asset value and offering price per share outstanding | $ | 9.31 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 21 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 56,963,115 | ||
Expenses | ||||
Manager (See Note 3) | 7,260,622 | |||
Distribution/Service—Investor Class (See Note 3) | 60,726 | |||
Distribution/Service—Class A (See Note 3) | 1,257,620 | |||
Distribution/Service—Class B (See Note 3) | 164,911 | |||
Distribution/Service—Class C (See Note 3) | 2,024,348 | |||
Transfer agent (See Note 3) | 1,217,012 | |||
Registration | 170,034 | |||
Professional fees | 160,855 | |||
Shareholder communication | 158,756 | |||
Trustees | 33,326 | |||
Custodian | 29,064 | |||
Miscellaneous | 66,372 | |||
Total expenses | 12,603,646 | |||
Net investment income (loss) | 44,359,469 | |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Security transactions | (2,353,848 | ) | ||
Foreign currency transactions | 16,046 | |||
Net realized gain (loss) on investments and foreign currency transactions | (2,337,802 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (21,789,725 | ) | ||
Translation of other assets and liabilities in foreign currencies | (7,759 | ) | ||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (21,797,484 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (24,135,286 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | 20,224,183 | ||
The notes to the financial statements are an integral part of,
22 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 44,359,469 | $ | 30,234,168 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (2,337,802 | ) | (1,039,386 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments, unfunded commitments and foreign currency transactions | (21,797,484 | ) | 41,832,777 | |||||
Net increase (decrease) in net assets resulting from operations | 20,224,183 | 71,027,559 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (876,126 | ) | (763,120 | ) | ||||
Class A | (18,556,633 | ) | (13,876,325 | ) | ||||
Class B | (470,671 | ) | (515,764 | ) | ||||
Class C | (5,816,212 | ) | (4,254,049 | ) | ||||
Class I | (18,642,162 | ) | (10,816,347 | ) | ||||
Total dividends to shareholders | (44,361,804 | ) | (30,225,605 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 763,804,390 | 428,461,625 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 33,439,655 | 22,548,577 | ||||||
Cost of shares redeemed | (692,388,113 | ) | (229,660,828 | )(a) | ||||
Increase (decrease) in net assets derived from capital share transactions | 104,855,932 | 221,349,374 | ||||||
Net increase (decrease) in net assets | 80,718,311 | 262,151,328 | ||||||
Net Assets | ||||||||
Beginning of year | 985,343,671 | 723,192,343 | ||||||
End of year | $ | 1,066,061,982 | $ | 985,343,671 | ||||
Distributions in excess of net investment income at end of year | $ | (337,496 | ) | $ | (150,044 | ) | ||
(a) | Cost of shares redeemed net of redemption fee of $17,341 for the year ended October 31, 2010. (See Note 2(J)). |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 23 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 9.42 | $ | 8.97 | $ | 7.61 | $ | 8.94 | ||||||||||
Net investment income (loss) | 0.34 | 0.32 | 0.29 | 0.28 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | 0.45 | 1.36 | (1.33 | ) | ||||||||||||
Total from investment operations | 0.23 | 0.77 | 1.65 | (1.05 | ) | |||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.34 | ) | (0.32 | ) | (0.29 | ) | (0.28 | ) | ||||||||||
Redemption fee (a) | — | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net asset value at end of period | $ | 9.31 | $ | 9.42 | $ | 8.97 | $ | 7.61 | ||||||||||
Total investment return (b) | 2.45 | % | 8.76 | % | 22.32 | % | (12.19 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 3.61 | % | 3.52 | % | 3.63 | % | 4.43 | % †† | ||||||||||
Net expenses | 1.06 | % | 1.10 | % | 1.19 | % | 1.05 | % †† | ||||||||||
Portfolio turnover rate | 38 | % | 10 | % | 17 | % | 10 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 26,068 | $ | 23,245 | $ | 20,191 | $ | 14,586 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | The redemption fee was discontinued as of April 1, 2010. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
Class A | ||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Net asset value at beginning of year | $ | 9.42 | $ | 8.97 | $ | 7.61 | $ | 9.65 | $ | 9.93 | ||||||||||
Net investment income (loss) | 0.35 | 0.33 | 0.31 | 0.46 | 0.62 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | 0.45 | 1.36 | (2.03 | ) | (0.28 | ) | ||||||||||||
Total from investment operations | 0.24 | 0.78 | 1.67 | (1.57 | ) | 0.34 | ||||||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.35 | ) | (0.33 | ) | (0.31 | ) | (0.47 | ) | (0.62 | ) | ||||||||||
Redemption fee (a) | — | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net asset value at end of year | $ | 9.31 | $ | 9.42 | $ | 8.97 | $ | 7.61 | $ | 9.65 | ||||||||||
Total investment return (b) | 2.53 | % | 8.87 | % | 22.53 | % | (16.91 | %) | 3.65 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 3.69 | % | 3.62 | % | 3.80 | % | 5.36 | % | 6.34 | % | ||||||||||
Net expenses | 0.98 | % | 1.00 | % | 1.01 | % | 1.00 | % | 1.01 | % | ||||||||||
Portfolio turnover rate | 38 | % | 10 | % | 17 | % | 10 | % | 29 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 453,282 | $ | 429,262 | $ | 338,350 | $ | 245,193 | $ | 631,749 |
‡ | Less than one cent per share. | |
(a) | The redemption fee was discontinued as of April 1, 2010. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. |
The notes to the financial statements are an integral part of,
24 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class B | ||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Net asset value at beginning of year | $ | 9.43 | $ | 8.97 | $ | 7.61 | $ | 9.65 | $ | 9.93 | ||||||||||
Net investment income (loss) | 0.27 | 0.25 | 0.23 | 0.39 | 0.55 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | 0.46 | 1.36 | (2.03 | ) | (0.28 | ) | ||||||||||||
Total from investment operations | 0.16 | 0.71 | 1.59 | (1.64 | ) | 0.27 | ||||||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.27 | ) | (0.25 | ) | (0.23 | ) | (0.40 | ) | (0.55 | ) | ||||||||||
Redemption fee (a) | — | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net asset value at end of year | $ | 9.32 | $ | 9.43 | $ | 8.97 | $ | 7.61 | $ | 9.65 | ||||||||||
Total investment return (b) | 1.59 | % | 8.06 | % | 21.41 | % | (17.66 | %) | 2.88 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.86 | % | 2.76 | % | 2.95 | % | 4.51 | % | 5.59 | % | ||||||||||
Net expenses | 1.82 | % | 1.85 | % | 1.94 | % | 1.79 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 38 | % | 10 | % | 17 | % | 10 | % | 29 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 14,508 | $ | 17,665 | $ | 20,289 | $ | 20,703 | $ | 47,141 |
‡ | Less than one cent per share. | |
(a) | The redemption fee was discontinued as of April 1, 2010. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. |
Class C | ||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Net asset value at beginning of year | $ | 9.43 | $ | 8.97 | $ | 7.61 | $ | 9.65 | $ | 9.93 | ||||||||||
Net investment income (loss) | 0.27 | 0.25 | 0.24 | 0.39 | 0.55 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.46 | 1.35 | (2.03 | ) | (0.28 | ) | ||||||||||||
Total from investment operations | 0.15 | 0.71 | 1.59 | (1.64 | ) | 0.27 | ||||||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.27 | ) | (0.25 | ) | (0.23 | ) | (0.40 | ) | (0.55 | ) | ||||||||||
Redemption fee (a) | — | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net asset value at end of year | $ | 9.31 | $ | 9.43 | $ | 8.97 | $ | 7.61 | $ | 9.65 | ||||||||||
Total investment return (b) | 1.59 | % | 8.06 | % | 21.41 | % | (17.66 | %) | 2.88 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.87 | % | 2.76 | % | 2.89 | % | 4.52 | % | 5.59 | % | ||||||||||
Net expenses | 1.81 | % | 1.85 | % | 1.94 | % | 1.79 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 38 | % | 10 | % | 17 | % | 10 | % | 29 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 197,230 | $ | 173,005 | $ | 132,105 | $ | 104,048 | $ | 232,130 |
‡ | Less than one cent per share. | |
(a) | The redemption fee was discontinued as of April 1, 2010. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 25 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Net asset value at beginning of year | $ | 9.43 | $ | 8.97 | $ | 7.61 | $ | 9.65 | $ | 9.93 | ||||||||||
Net investment income (loss) | 0.37 | 0.36 | 0.33 | 0.50 | 0.66 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.46 | 1.36 | (2.04 | ) | (0.28 | ) | ||||||||||||
Total from investment operations | 0.25 | 0.82 | 1.69 | (1.54 | ) | 0.38 | ||||||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.37 | ) | (0.36 | ) | (0.33 | ) | (0.50 | ) | (0.66 | ) | ||||||||||
Redemption fee (a) | — | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net asset value at end of year | $ | 9.31 | $ | 9.43 | $ | 8.97 | $ | 7.61 | $ | 9.65 | ||||||||||
Total investment return (b) | 2.67 | % | 9.26 | % | 22.84 | % | (16.67 | %) | 3.89 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 3.94 | % | 3.87 | % | 3.97 | % | 5.33 | % | 6.68 | % | ||||||||||
Net expenses | 0.73 | % | 0.75 | % | 0.77 | % | 0.71 | % | 0.67 | % | ||||||||||
Portfolio turnover rate | 38 | % | 10 | % | 17 | % | 10 | % | 29 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 374,973 | $ | 342,167 | $ | 212,257 | $ | 103,930 | $ | 61,992 |
‡ | Less than one cent per share. | |
(a) | The redemption fee was discontinued as of April 1, 2010. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. |
The notes to the financial statements are an integral part of,
26 MainStay Floating Rate Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Floating Rate Fund (the “Fund”), a diversified fund. The Fund is the successor of the MainStay Floating Rate Fund, a series of Eclipse Funds Inc. (the “Predecessor Fund”). The reorganization of the Predecessor Fund with and into the Fund occurred on February 26, 2010. All information and references to periods prior to February 26, 2010 relate to the Predecessor Fund.
The Fund currently offers five classes of shares. Class A, Class B, Class C and Class I shares commenced operations on May 3, 2004. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $500,000 or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class B and Class C shares are offered at NAV without an initial sales charge, although a declining CDSC may be imposed on redemptions made within four years of the date of purchase of Class B shares and a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to Investor Class or Class A shares at the end of the calendar quarter four years after the date they were purchased. Additionally, depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The five classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class B and Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek to provide high current income.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange
mainstayinvestments.com 27
Notes to Financial Statements (continued)
on each 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. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities are valued at the evaluated bid prices supplied by a pricing agent or brokers selected by the Fund’s Manager (as defined in Note 3(A)) whose prices reflect broker/dealer supplied valuations and electronic data processing techniques, if such prices are deemed by the Fund’s Manager to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, Yankee bonds, convertible bonds, asset-backed securities, and mortgage-backed securities, are generally categorized as Level 2 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from the engaged independent pricing service and are generally categorized as Level 2 in the hierarchy. Certain loan assignments, participations and commitments may be valued by single broker quotes obtained from the engaged independent pricing service with significant unobservable inputs and are generally categorized as Level 3 in the hierarchy. For these loan assignments, participations and commitments the Manager may consider additional factors such as liquidity of the Fund’s investments. At October 31, 2011, the Fund held securities with a value of $50,995,035 that were valued by single broker quotes and/or deemed to be illiquid.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund held securities with a value of $2,489,695 that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. As of October 31, 2011, the Fund did not hold any foreign equity securities.
Generally, a security is considered illiquid if it cannot be sold or disposed of in the ordinary course of business at approximately the price at which it is valued. Its illiquidity might prevent the sale of such security at a time when the Manager might wish to sell, and these securities could have the effect of decreasing the overall level of a Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in determining value, which could vary from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager determines the liquidity of the Fund’s investments; in doing so, the Manager may consider various factors, including (i) the frequency of trades and quotations, (ii) the number of dealers and prospective purchasers, (iii) dealer undertakings to make a market, and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities generally will be valued in such manner as the Board in good faith deems appropriate to reflect their fair market value.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for
28 MainStay Floating Rate Fund
federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund declares dividends of net investment income daily and pays them monthly and declares and pays distribution of net realized capital gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Foreign Currency Transactions. The books and records of the Fund are kept in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling exchange rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date, and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(I) Loan Assignments, Participations and Commitments. The Fund invests in loan assignments and loan participations. Loan assignments and participations (“loans”) are agreements to make money available (a “commitment”) to a borrower in a specified amount, at a specified rate and within a specified time. Such loans are typically senior, secured and collateralized in nature. The Fund records an investment when the borrower withdraws money and records interest as earned. These loans pay interest at rates that are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate.
The loans in which the Fund invests are generally readily marketable, but may be subject to some restrictions on resale. For example, the Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments.
The Fund assumes the credit risk of the borrower, the selling participant and any other persons interpositioned between the Fund and the borrower (“intermediate participants”). In the event that the borrower, selling participant or intermediate participants become insolvent or enters into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the borrower. At any point in time, up to the maturity date of the issue, the borrower may demand the unfunded portion. These
mainstayinvestments.com 29
Notes to Financial Statements (continued)
unfunded amounts are marked to market and recorded in the Statement of Assets and Liabilities. At October 31, 2011, the Fund did not hold any unfunded commitments.
(J) Redemption Fee. Prior to April 1, 2010, the Fund imposed a 2.00% redemption fee on redemptions (including exchanges) of Fund shares made within 60 days of their date of purchase for any class. The redemption fee was designed to offset brokerage commissions and other costs associated with short-term trading and was not assessed on shares acquired through the reinvestment of dividends or distributions paid by the Fund. The redemption fees are included in the Statement of Changes in Net Assets’ shares redeemed amount and were retained by the Fund for the fiscal year ended October 31, 2010.
(K) Rights and Warrants. A right is a certificate that permits the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. A warrant is an instrument that entitles the holder to buy an equity security at a specific price for a specific period of time. The Fund generally enters into rights and warrants when securities are acquired through a corporate action. With respect to warrants in international markets, the securities are only purchased when the underlying security cannot be purchased due to the many restrictions an industry and/or country might place on foreign investors. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The Fund could also lose the entire value of its investment in warrants if the warrant is not exercised by the date of its expiration. The securities are sold as soon as the opportunity becomes available. The Fund is exposed to risk until each sale is completed. At October 31, 2011, the Fund did not hold any rights or warrants.
(L) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(M) Concentration of Risk. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.
The Fund invests in floating rate loans. The floating rate loans in which the Fund principally invests are usually rated below investment grade and are generally considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These securities pay investors a higher interest rate because of the increased risk of loss. Although certain floating rate loans are collateralized, there is no guarantee that the value of the collateral will be sufficient to repay the loan. In a recession or serious credit event, the Fund’s NAV could go down and you could lose money.
(N) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. New York Life Investments is responsible for the day-to-day portfolio management of the Fund.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $1 billion and 0.575% in excess of $1 billion. The effective management fee rate was 0.60% for the year ended October 31, 2011.
30 MainStay Floating Rate Fund
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $7,260,622.
State Street Bank and Trust Company (“State Street”), 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from the Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $9,383 and $74,973, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Investor Class, Class A, Class B and Class C shares of $92, $43,510, $15,075 and $71,419, respectively, for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 40,639 | ||
Class A | 417,793 | |||
Class B | 27,544 | |||
Class C | 338,088 | |||
Class I | 392,948 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Class A | $ | 13,720,557 | 3.0 | % | ||||
Class C | 1,222 | 0.0 | ‡ | |||||
Class I | 1,318 | 0.0 | ‡ | |||||
‡ | Less than one-tenth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $16,590. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 449,635 | $ | (63,028,125 | ) | $ | (787,131 | ) | $ | (23,124,329 | ) | $ | (86,489,950 | ) | |||||
The difference between book-basis and tax basis unrealized depreciation is primarily due to partnership basis adjustments. The other temporary differences are primarily due to dividends payable.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized gain (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed | Net Realized | Additional | ||||||||
Net Investment | Gain (Loss) on | Paid-In | ||||||||
Income (Loss) | Investments | Capital | ||||||||
$ | (185,117 | ) | $ | (1,414,009 | ) | $ | 1,599,126 | |||
The reclassifications for the Fund are primarily due to foreign currency gain (loss), reclassification of consent fees, modified debt instrument adjustments, interest income on defaulted securities and partnership basis adjustments.
mainstayinvestments.com 31
Notes to Financial Statements (continued)
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $63,028,125 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2012 | $ | 229 | ||||
2013 | 3,166 | |||||
2014 | 1,436 | |||||
2015 | 14,042 | |||||
2016 | 30,853 | |||||
2017 | 7,484 | |||||
2018 | 2,022 | |||||
2019 | 3,796 | |||||
Total | $ | 63,028 | ||||
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets, was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 44,361,804 | $ | 30,225,605 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $921,336 and $399,202, respectively.
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 755,577 | $ | 7,127,043 | |||||
Shares issued to shareholders in reinvestment of dividends | 89,026 | 837,014 | ||||||
Shares redeemed | (589,639 | ) | (5,545,892 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 254,964 | 2,418,165 | ||||||
Shares converted into Investor Class (See Note 1) | 371,104 | 3,461,637 | ||||||
Shares converted from Investor Class (See Note 1) | (292,368 | ) | (2,757,039 | ) | ||||
Net increase (decrease) | 333,700 | $ | 3,122,763 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 569,826 | $ | 5,248,834 | |||||
Shares issued to shareholders in reinvestment of dividends | 79,154 | 729,782 | ||||||
Shares redeemed | (524,154 | ) | (4,822,726 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 124,826 | 1,155,890 | ||||||
Shares converted into Investor Class (See Note 1) | 342,777 | 3,155,746 | ||||||
Shares converted from Investor Class (See Note 1) | (252,310 | ) | (2,320,056 | ) | ||||
Net increase (decrease) | 215,293 | $ | 1,991,580 | |||||
32 MainStay Floating Rate Fund
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 30,607,899 | $ | 289,831,810 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,474,578 | 13,878,656 | ||||||
Shares redeemed | (29,407,295 | ) | (275,135,054 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 2,675,182 | 28,575,412 | ||||||
Shares converted into Class A (See Note 1) | 646,571 | 6,088,832 | ||||||
Shares converted from Class A (See Note 1) | (178,133 | ) | (1,646,387 | ) | ||||
Net increase (decrease) | 3,143,620 | $ | 33,017,857 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 23,860,957 | $ | 220,068,241 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,064,051 | 9,818,280 | ||||||
Shares redeemed | (14,879,869 | ) | (136,858,227 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 10,045,139 | 93,028,294 | ||||||
Shares converted into Class A (See Note 1) | 548,278 | 5,031,435 | ||||||
Shares converted from Class A (See Note 1) | (117,042 | ) | (1,089,324 | ) | ||||
Shares converted from Class A (a) | (2,653,153 | ) | (24,329,410 | ) | ||||
Net increase (decrease) | 7,823,222 | $ | 72,640,995 | |||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 623,409 | $ | 5,892,617 | |||||
Shares issued to shareholders in reinvestment of dividends | 38,587 | 363,469 | ||||||
Shares redeemed | (431,130 | ) | (4,044,658 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 230,866 | 2,211,428 | ||||||
Shares converted from Class B (See Note 1) | (546,718 | ) | (5,147,043 | ) | ||||
Net increase (decrease) | (315,852 | ) | $ | (2,935,615 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 554,068 | $ | 5,113,381 | |||||
Shares issued to shareholders in reinvestment of dividends | 45,872 | 422,904 | ||||||
Shares redeemed | (466,149 | ) | (4,286,913 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 133,791 | 1,249,372 | ||||||
Shares converted from Class B (See Note 1) | (521,387 | ) | (4,777,801 | ) | ||||
Net increase (decrease) | (387,596 | ) | $ | (3,528,429 | ) | |||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 9,084,726 | $ | 86,081,533 | |||||
Shares issued to shareholders in reinvestment of dividends | 413,399 | 3,887,513 | ||||||
Shares redeemed | (6,669,995 | ) | (62,102,724 | ) | ||||
Net increase (decrease) | 2,828,130 | $ | 27,866,322 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 7,950,008 | $ | 73,253,954 | |||||
Shares issued to shareholders in reinvestment of dividends | 296,201 | 2,733,048 | ||||||
Shares redeemed | (4,619,304 | ) | (42,462,801 | ) | ||||
Net increase (decrease) | 3,626,905 | $ | 33,524,201 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 39,689,683 | $ | 374,871,387 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,537,769 | 14,473,003 | ||||||
Shares redeemed | (37,253,085 | ) | (345,559,785 | ) | ||||
Net increase (decrease) | 3,974,367 | $ | 43,784,605 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 13,483,091 | $ | 124,777,215 | |||||
Shares issued to shareholders in reinvestment of dividends | 958,859 | 8,844,563 | ||||||
Shares redeemed | (4,456,479 | ) | (41,230,161 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 9,985,471 | 92,391,617 | ||||||
Shares converted into Class I (a) | 2,653,153 | 24,329,410 | ||||||
Net increase (decrease) | 12,638,624 | $ | 116,721,027 | |||||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class, Class A and Class B shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion; and | |
• | All Class B shares are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class, Class A and Class B shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, they may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 33
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Floating Rate Fund (“the Fund”), one of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Floating Rate Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
34 MainStay Floating Rate Fund
Federal Income Tax Information (Unaudited)
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; or (ii) on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request (i) by calling 800-MAINSTAY (624-6782); (ii) by visiting the Fund’s website at mainstayinvestments.com; or (iii) on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling (1-800-SEC-0330).
mainstayinvestments.com 35
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
36 MainStay Floating Rate Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 37
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
38 MainStay Floating Rate Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 39
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
40 MainStay Floating Rate Fund
This page intentionally left blank
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-25018 MS284-11 | MSFR11-12/11 |
NA4
MainStay Growth Equity Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 10 | |
Financial Statements | 13 | |
Notes to Financial Statements | 19 | |
Report of Independent Registered Public Accounting Firm | 26 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 27 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 27 | |
Board Members and Officers | 28 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||||||
Inception | Expense | |||||||||||||||||||
Class | Sales Charge | One Year | Five Years | (11/4/05) | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | 0 | .94% | –0 | .58% | 1 | .14% | 1 | .53% | ||||||||||
Excluding sales charges | 6 | .81 | 0 | .55 | 2 | .10 | 1 | .53 | ||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | 1 | .20 | –0 | .44 | 1 | .26 | 1 | .24 | ||||||||||
Excluding sales charges | 7 | .09 | 0 | .70 | 2 | .22 | 1 | .24 | ||||||||||||
Class B Shares | Maximum 5% CDSC | With sales charges | 1 | .05 | –0 | .60 | 1 | .17 | 2 | .28 | ||||||||||
if Redeemed Within the First Six Years of Purchase | Excluding sales charges | 6 | .05 | –0 | .20 | 1 | .32 | 2 | .28 | |||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | 5 | .05 | –0 | .22 | 1 | .32 | 2 | .28 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 6 | .05 | –0 | .22 | 1 | .32 | 2 | .28 | |||||||||||
Class I Shares | No Sales Charge | 7 | .33 | 1 | .00 | 2 | .51 | 0 | .99 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount being shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares from inception through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Since | ||||||||||
Benchmark Performance | Year | Years | Inception | |||||||||
Russell 1000® Growth Index4 | 9 | .92% | 3 | .04% | 4 | .06% | ||||||
Average Lipper Large-Cap Growth Fund5 | 6 | .92 | 1 | .99 | 2 | .57 | ||||||
4. | The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000® companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000® Growth Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The average Lipper large-cap growth fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper’s U.S. Diversified Equity large-cap floor. Large-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500® Index. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page is an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Growth Equity Fund
Cost in Dollars of a $1,000 Investment in MainStay Growth Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled ”Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 927.50 | $ | 7.04 | $ | 1,017.90 | $ | 7.38 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 929.30 | $ | 5.79 | $ | 1,019.20 | $ | 6.06 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 924.70 | $ | 10.67 | $ | 1,014.10 | $ | 11.17 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 923.90 | $ | 10.67 | $ | 1,014.10 | $ | 11.17 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 929.90 | $ | 4.57 | $ | 1,020.50 | $ | 4.79 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.45% for Investor Class, 1.19% for Class A, 2.20% for Class B and Class C and 0.94% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Industry Composition as of October 31, 2011 (Unaudited)
IT Services | 9.7 | % | ||
Software | 8.5 | |||
Computers & Peripherals | 7.9 | |||
Energy Equipment & Services | 5.8 | |||
Hotels, Restaurants & Leisure | 5.0 | |||
Oil, Gas & Consumable Fuels | 4.7 | |||
Aerospace & Defense | 4.4 | |||
Industrial Conglomerates | 3.7 | |||
Internet & Catalog Retail | 3.3 | |||
Food Products | 3.1 | |||
Chemicals | 3.0 | |||
Media | 2.9 | |||
Communications Equipment | 2.8 | |||
Pharmaceuticals | 2.8 | |||
Internet Software & Services | 2.6 | |||
Beverages | 2.5 | |||
Health Care Equipment & Supplies | 2.5 | |||
Biotechnology | 2.3 | |||
Wireless Telecommunication Services | 2.1 | |||
Textiles, Apparel & Luxury Goods | 2.0 | |||
Road & Rail | 1.8 | |||
Food & Staples Retailing | 1.7 | |||
Multiline Retail | 1.7 | |||
Specialty Retail | 1.6 | |||
Consumer Finance | 1.4 | |||
Health Care Providers & Services | 1.2 | |||
Machinery | 1.1 | |||
Personal Products | 1.1 | |||
Health Care Technology | 1.0 | |||
Metals & Mining | 1.0 | |||
Semiconductors & Semiconductor Equipment | 1.0 | |||
Diversified Financial Services | 0.9 | |||
Capital Markets | 0.8 | |||
Professional Services | 0.7 | |||
Short-Term Investments | 1.5 | |||
Other Assets, Less Liabilities | −0.1 | |||
100.0 | % | |||
See Portfolio of Investments beginning on page 10 for specific holdings within these categories.
Top Ten Holdings as of October 31, 2011 (excluding short-term investments)
1. | Apple, Inc. | |
2. | Oracle Corp. | |
3. | QUALCOMM, Inc. | |
4. | Google, Inc. Class A | |
5. | PepsiCo., Inc. | |
6. | MasterCard, Inc. Class A | |
7. | International Business Machines Corp. | |
8. | Occidental Petroleum Corp. | |
9. | McDonald’s Corp. | |
10. | Schlumberger, Ltd. |
8 MainStay Growth Equity Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Harish Kumar, PhD, CFA, and Martin J. Mickus, CFA, of Madison Square Investors LLC, the Fund’s Subadvisor.
How did MainStay Growth Equity Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Growth Equity Fund returned 6.81% for Investor Class shares, 7.09% for Class A shares and 6.05% for both Class B and Class C shares for the 12 months ended October 31, 2011. Over the same period, the Fund’s Class I shares returned 7.33%. Class A and Class I shares outperformed—and all other share classes underperformed—the 6.92% return of the average Lipper1 large-cap growth fund for the 12 months ended October 31, 2011. All share classes underperformed the 9.92% return of the Russell 1000® Growth Index2 over the same period. The Russell 1000® Growth Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s underperformance relative to the Russell 1000® Growth Index came primarily from stock selection in the energy and consumer staples sectors.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, industrials, materials and information technology made the strongest sector contributions to the Fund’s performance relative to the Russell 1000® Growth Index. (Contributions take weightings and total returns into account.) Energy, consumer staples and health care were the three weakest-contributing sectors relative to the benchmark.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The strongest contributions to the Fund’s absolute performance came from computers & peripherals company Apple, oil, gas & consumable fuels company ExxonMobil and biopharmaceutical company Alexion Pharmaceuticals. Major detractors from the Fund’s absolute performance included energy equipment & services company Nabors Industries, biotechnology company Dendreon, and energy equipment & services company Baker Hughes.
Did the Fund make any significant purchases or sales during the reporting period?
During the reporting period the Fund initiated new positions in high-end accessory and gift manufacturer and retailer Coach and aerospace & technology company United Technologies. Significant sales included pharmaceutical company Abbott Laboratories and food & staples retailer Wal-Mart Stores.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund’s weightings relative to Russell 1000® Growth Index increased in the consumer discretionary and information technology sectors. Over the same period, the Fund’s weightings relative to the benchmark decreased in health care and industrials.
How was the Fund positioned at the end of October 2011?
As of October 31, 2011, the Fund was overweight relative to the Russell 1000® Growth Index in the information technology, consumer discretionary and telecommunication services sectors. As of the same date, the Fund was underweight relative to the benchmark in consumer staples, materials and industrials.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Russell 1000® Growth Index.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
Portfolio of Investments††† October 31, 2011
Shares | Value | |||||||
Common Stocks 98.6%† | ||||||||
Aerospace & Defense 4.4% | ||||||||
Precision Castparts Corp. | 55,779 | $ | 9,100,344 | |||||
TransDigm Group, Inc. (a) | 38,752 | 3,639,588 | ||||||
United Technologies Corp. | 136,562 | 10,649,104 | ||||||
23,389,036 | ||||||||
Beverages 2.5% | ||||||||
X PepsiCo., Inc. | 214,100 | 13,477,595 | ||||||
Biotechnology 2.3% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 102,859 | 6,944,011 | ||||||
Gilead Sciences, Inc. (a) | 128,850 | 5,367,891 | ||||||
12,311,902 | ||||||||
Capital Markets 0.8% | ||||||||
TD Ameritrade Holding Corp. | 268,997 | 4,513,770 | ||||||
Chemicals 3.0% | ||||||||
Monsanto Co. | 129,914 | 9,451,243 | ||||||
Praxair, Inc. | 63,803 | 6,486,851 | ||||||
15,938,094 | ||||||||
Communications Equipment 2.8% | ||||||||
X QUALCOMM, Inc. | 291,805 | 15,057,138 | ||||||
Computers & Peripherals 7.9% | ||||||||
X Apple, Inc. (a) | 85,281 | 34,520,043 | ||||||
EMC Corp. (a) | 323,617 | 7,931,853 | ||||||
42,451,896 | ||||||||
Consumer Finance 1.4% | ||||||||
American Express Co. | 148,226 | 7,503,200 | ||||||
Diversified Financial Services 0.9% | ||||||||
Citigroup, Inc. | 56,084 | 1,771,694 | ||||||
IntercontinentalExchange, Inc. (a) | 23,815 | 3,093,092 | ||||||
4,864,786 | ||||||||
Energy Equipment & Services 5.8% | ||||||||
Baker Hughes, Inc. | 129,335 | 7,500,137 | ||||||
FMC Technologies, Inc. (a) | 182,770 | 8,191,751 | ||||||
Nabors Industries, Ltd. (a) | 230,823 | 4,230,985 | ||||||
X Schlumberger, Ltd. | 150,308 | 11,043,129 | ||||||
30,966,002 | ||||||||
Food & Staples Retailing 1.7% | ||||||||
Costco Wholesale Corp. | 108,662 | 9,046,111 | ||||||
Food Products 3.1% | ||||||||
Green Mountain Coffee Roasters, Inc. (a) | 46,656 | 3,033,573 | ||||||
Mead Johnson Nutrition Co. | 113,727 | 8,171,285 | ||||||
Sara Lee Corp. | 298,577 | 5,314,671 | ||||||
16,519,529 | ||||||||
Health Care Equipment & Supplies 2.5% | ||||||||
Cooper Cos., Inc. (The) | 61,974 | 4,294,798 | ||||||
Covidien PLC | 195,000 | 9,172,800 | ||||||
13,467,598 | ||||||||
Health Care Providers & Services 1.2% | ||||||||
Express Scripts, Inc. (a) | 9,113 | 416,737 | ||||||
Humana, Inc. | 69,211 | 5,875,322 | ||||||
6,292,059 | ||||||||
Health Care Technology 1.0% | ||||||||
Cerner Corp. (a) | 81,928 | 5,196,693 | ||||||
Hotels, Restaurants & Leisure 5.0% | ||||||||
Las Vegas Sands Corp. (a) | 132,980 | 6,243,411 | ||||||
X McDonald’s Corp. | 130,335 | 12,101,605 | ||||||
Starbucks Corp. | 197,290 | 8,353,258 | ||||||
26,698,274 | ||||||||
Industrial Conglomerates 3.7% | ||||||||
Danaher Corp. | 192,582 | 9,311,340 | ||||||
General Electric Co. | 249,708 | 4,172,621 | ||||||
Tyco International, Ltd. | 132,633 | 6,041,433 | ||||||
19,525,394 | ||||||||
Internet & Catalog Retail 3.3% | ||||||||
Amazon.com, Inc. (a) | 51,622 | 11,021,813 | ||||||
Priceline.com, Inc. (a) | 13,323 | 6,764,354 | ||||||
17,786,167 | ||||||||
Internet Software & Services 2.6% | ||||||||
X Google, Inc. Class A (a) | 23,083 | 13,679,909 | ||||||
IT Services 9.7% | ||||||||
Accenture PLC Class A | 89,882 | 5,416,289 | ||||||
Cognizant Technology Solutions Corp. Class A (a) | 133,962 | 9,745,735 | ||||||
Genpact, Ltd. (a) | 351,920 | 5,683,508 | ||||||
X International Business Machines Corp. | 67,055 | 12,380,365 | ||||||
X MasterCard, Inc. Class A | 37,092 | 12,879,826 | ||||||
Teradata Corp. (a) | 92,971 | 5,546,650 | ||||||
51,652,373 | ||||||||
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investments. May be subject to change daily. |
The notes to the financial statements are an integral part of,
10 MainStay Growth Equity Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Machinery 1.1% | ||||||||
Caterpillar, Inc. | 62,696 | $ | 5,922,264 | |||||
Media 2.9% | ||||||||
DIRECTV Class A (a) | 140,937 | 6,406,996 | ||||||
Viacom, Inc. Class B | 204,738 | 8,977,761 | ||||||
15,384,757 | ||||||||
Metals & Mining 1.0% | ||||||||
Freeport-McMoRan Copper & Gold, Inc. | 138,464 | 5,574,561 | ||||||
Multiline Retail 1.7% | ||||||||
Dollar Tree, Inc. (a) | 42,205 | 3,374,712 | ||||||
Macy’s, Inc. | 194,736 | 5,945,290 | ||||||
9,320,002 | ||||||||
Oil, Gas & Consumable Fuels 4.7% | ||||||||
Marathon Petroleum Corp. | 99,885 | 3,585,872 | ||||||
X Occidental Petroleum Corp. | 132,029 | 12,270,775 | ||||||
Pioneer Natural Resources Co. | 58,020 | 4,867,878 | ||||||
Southwestern Energy Co. (a) | 103,444 | 4,348,786 | ||||||
25,073,311 | ||||||||
Personal Products 1.1% | ||||||||
Estee Lauder Cos., Inc. (The) Class A | 61,573 | 6,061,862 | ||||||
Pharmaceuticals 2.8% | ||||||||
Perrigo Co. | 50,591 | 4,567,355 | ||||||
Sanofi, Sponsored ADR (b) | 140,802 | 5,033,672 | ||||||
Shire PLC, Sponsored ADR (b) | 57,929 | 5,462,705 | ||||||
15,063,732 | ||||||||
Professional Services 0.7% | ||||||||
Verisk Analytics, Inc. Class A (a) | 102,190 | 3,591,978 | ||||||
Road & Rail 1.8% | ||||||||
Union Pacific Corp. | 96,928 | 9,651,121 | ||||||
Semiconductors & Semiconductor Equipment 1.0% | ||||||||
Texas Instruments, Inc. | 174,220 | 5,353,781 | ||||||
Software 8.5% | ||||||||
Check Point Software Technologies, Ltd. (a) | 114,020 | 6,570,972 | ||||||
Citrix Systems, Inc. (a) | 87,471 | 6,370,513 | ||||||
Microsoft Corp. | 302,771 | 8,062,792 | ||||||
X Oracle Corp. | 616,797 | 20,212,438 | ||||||
Salesforce.com, Inc. (a) | 33,512 | 4,462,793 | ||||||
45,679,508 | ||||||||
Specialty Retail 1.6% | ||||||||
Home Depot, Inc. (The) | 243,000 | 8,699,400 | ||||||
Textiles, Apparel & Luxury Goods 2.0% | ||||||||
Coach, Inc. | 166,351 | 10,824,460 | ||||||
Wireless Telecommunication Services 2.1% | ||||||||
American Tower Corp. Class A (a) | 150,878 | 8,313,378 | ||||||
Vodafone Group PLC, Sponsored ADR (b) | 99,006 | 2,756,327 | ||||||
11,069,705 | ||||||||
Total Common Stocks (Cost $458,426,127) | 527,607,968 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investments 1.5% | ||||||||
Repurchase Agreement 0.0%‡ | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $59,957 (Collateralized by a Federal Home Loan Mortgage Corp. security with a rate of 0.90% and a maturity date of 9/12/14, with a Principal Amount of $65,000 and a Market Value of $65,131 | $ | 59,957 | 59,957 | |||||
Total Repurchase Agreement (Cost $59,957) | 59,957 | |||||||
U.S. Government 1.5% | ||||||||
United States Treasury Bills 0.01%, due 1/26/12 (c)(d) | 300,000 | 299,993 | ||||||
0.014%, due 1/12/12 (c) | 7,700,000 | 7,699,769 | ||||||
Total U.S. Government (Cost $7,999,771) | 7,999,762 | |||||||
Total Short-Term Investments (Cost $8,059,728) | 8,059,719 | |||||||
Total Investments (Cost $466,485,855) (f) | 100.1 | % | 535,667,687 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (781,321 | ) | ||||
Net Assets | 100.0 | % | $ | 534,886,366 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments††† October 31, 2011 (continued)
Unrealized | ||||||||
Contracts | Appreciation | |||||||
Long | (Depreciation) (e) | |||||||
Futures Contracts 0.0%‡ | ||||||||
Standard & Poor’s 500 Index Mini December 2011 | 10 | $ | 31,342 | |||||
Total Futures Contracts (Settlement Value $624,650) | $ | 31,342 | ||||||
††† | On a daily basis New York Life Investments confirms that the value of the Fund’s liquid assets (liquid portfolio securities and cash) is sufficient to cover its potential senior securities (e.g., futures, swaps, options). | |
‡ | Less than one-tenth of a percent. | |
(a) | Non-income producing security. | |
(b) | ADR—American Depositary Receipt. | |
(c) | Interest rate presented is yield to maturity. | |
(d) | Represents a security, or a portion thereof, which is maintained at the broker as collateral for futures contracts. | |
(e) | Represents the difference between the value of the contracts at the time they were opened and the value at October 31, 2011. | |
(f) | At October 31, 2011, cost is $468,595,311 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 78,961,804 | ||
Gross unrealized depreciation | (11,889,428 | ) | ||
Net unrealized appreciation | $ | 67,072,376 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 527,607,968 | $ | — | $ | — | $ | 527,607,968 | ||||||||
Short-Term Investments | ||||||||||||||||
Repurchase Agreement | — | 59,957 | — | 59,957 | ||||||||||||
U.S. Government | — | 7,999,762 | — | 7,999,762 | ||||||||||||
Total Short-Term Investments | — | 8,059,719 | — | 8,059,719 | ||||||||||||
Total Investments in Securities | 527,607,968 | 8,059,719 | — | 535,667,687 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts Long (b) | 31,342 | — | — | 31,342 | ||||||||||||
Total Investments in Securities and Other Financial Instruments | $ | 527,639,310 | $ | 8,059,719 | $ | — | $ | 535,699,029 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
12 MainStay Growth Equity Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $466,485,855) | $ | 535,667,687 | ||
Receivables: | ||||
Investment securities sold | 382,021 | |||
Dividends and interest | 333,328 | |||
Fund shares sold | 99,916 | |||
Other assets | 23,010 | |||
Total assets | 536,505,962 | |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 383,849 | |||
Transfer agent (See Note 3) | 320,703 | |||
Fund shares redeemed | 316,468 | |||
Manager (See Note 3) | 306,922 | |||
NYLIFE Distributors (See Note 3) | 158,870 | |||
Shareholder communication | 66,921 | |||
Professional fees | 35,218 | |||
Variation margin on futures contracts | 22,134 | |||
Trustees | 2,051 | |||
Custodian | 1,347 | |||
Accrued expenses | 5,113 | |||
Total liabilities | 1,619,596 | |||
Net assets | $ | 534,886,366 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 48,263 | ||
Additional paid-in capital | 513,530,205 | |||
513,578,468 | ||||
Accumulated net realized gain (loss) on investments and futures transactions | (47,905,276 | ) | ||
Net unrealized appreciation (depreciation) on investments and futures contracts | 69,213,174 | |||
Net assets | $ | 534,886,366 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 241,100,336 | ||
Shares of beneficial interest outstanding | 21,657,201 | |||
Net asset value per share outstanding | $ | 11.13 | ||
Maximum sales charge (5.50% of offering price) | 0.65 | |||
Maximum offering price per share outstanding | $ | 11.78 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 211,043,726 | ||
Shares of beneficial interest outstanding | 18,876,905 | |||
Net asset value per share outstanding | $ | 11.18 | ||
Maximum sales charge (5.50% of offering price) | 0.65 | |||
Maximum offering price per share outstanding | $ | 11.83 | ||
Class B | ||||
Net assets applicable to outstanding shares | $ | 77,566,876 | ||
Shares of beneficial interest outstanding | 7,255,168 | |||
Net asset value and offering price per share outstanding | $ | 10.69 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 3,077,414 | ||
Shares of beneficial interest outstanding | 287,824 | |||
Net asset value and offering price per share outstanding | $ | 10.69 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 2,098,014 | ||
Shares of beneficial interest outstanding | 186,135 | |||
Net asset value and offering price per share outstanding | $ | 11.27 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 6,074,623 | ||
Interest | 2,580 | |||
Total income | 6,077,203 | |||
Expenses | ||||
Manager (See Note 3) | 3,986,304 | |||
Distribution/Service—Investor Class (See Note 3) | 622,943 | |||
Distribution/Service—Class A (See Note 3) | 564,422 | |||
Distribution/Service—Class B (See Note 3) | 898,176 | |||
Distribution/Service—Class C (See Note 3) | 30,553 | |||
Transfer agent (See Note 3) | 1,822,221 | |||
Shareholder communication | 174,193 | |||
Registration | 132,418 | |||
Professional fees | 87,249 | |||
Custodian | 16,664 | |||
Trustees | 15,720 | |||
Miscellaneous | 24,606 | |||
Total expenses | 8,375,469 | |||
Net investment income (loss) | (2,298,266 | ) | ||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Security transactions | 52,710,941 | |||
Futures transactions | 485,338 | |||
Net realized gain (loss) on investments and futures transactions | 53,196,279 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (12,645,058 | ) | ||
Futures contracts | 31,342 | |||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | (12,613,716 | ) | ||
Net realized and unrealized gain (loss) on investments and futures transactions | 40,582,563 | |||
Net increase (decrease) in net assets resulting from operations | $ | 38,284,297 | ||
(a) | Dividends recorded net of foreign withholding taxes in the amount of $6,935. |
The notes to the financial statements are an integral part of,
14 MainStay Growth Equity Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | (2,298,266 | ) | $ | (2,205,858 | ) | ||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | 53,196,279 | 26,923,048 | ||||||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | (12,613,716 | ) | 8,432,580 | |||||
Net increase (decrease) in net assets resulting from operations | 38,284,297 | 33,149,770 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | — | (213 | ) | |||||
Class A | — | (727 | ) | |||||
Class I | — | (285,841 | ) | |||||
Total dividends to shareholders | — | (286,781 | ) | |||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 30,376,044 | 21,912,477 | ||||||
Net asset value of shares issued in connection with the acquisition of MainStay Capital Appreciation Fund (See Note 9) | — | 587,431,416 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | — | 217,948 | ||||||
Cost of shares redeemed | (94,201,927 | ) | (118,523,513 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | (63,825,883 | ) | 491,038,328 | |||||
Net increase (decrease) in net assets | (25,541,586 | ) | 523,901,317 | |||||
Net Assets | ||||||||
Beginning of year | 560,427,952 | 36,526,635 | ||||||
End of year | $ | 534,886,366 | $ | 560,427,952 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 10.42 | $ | 9.32 | $ | 8.26 | $ | 11.79 | ||||||||||
Net investment income (loss) | (0.04 | ) (a) | (0.04 | ) (a) | 0.02 | (a) | (0.02 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.75 | 1.19 | 1.04 | (3.51 | ) | |||||||||||||
Total from investment operations | 0.71 | 1.15 | 1.06 | (3.53 | ) | |||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | — | (0.05 | ) | — | — | |||||||||||||
Net asset value at end of period | $ | 11.13 | $ | 10.42 | $ | 9.32 | $ | 8.26 | ||||||||||
Total investment return (b) | 6.81 | % | 12.41 | % | 12.83 | %(d) | (29.94 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | (0.39 | %) | (0.40 | %) | 0.21 | % | (0.35 | %)†† | ||||||||||
Net expenses | 1.45 | % | 1.52 | % | 1.41 | % | 1.31 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.45 | % | 1.52 | % | 1.41 | % | 1.61 | % †† | ||||||||||
Portfolio turnover rate | 112 | % | 131 | % | 156 | % | 291 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 241,100 | $ | 247,966 | $ | 37 | $ | 24 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. |
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.44 | $ | 9.32 | $ | 8.26 | $ | 13.19 | $ | 11.01 | ||||||||||||
Net investment income (loss) | (0.01 | ) (a) | (0.01 | ) (a) | 0.02 | (a) | (0.02 | ) | 0.01 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.75 | 1.20 | 1.05 | (4.84 | ) | 2.25 | ||||||||||||||||
Total from investment operations | 0.74 | 1.19 | 1.07 | (4.86 | ) | 2.26 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | — | (0.07 | ) | (0.01 | ) | — | — | |||||||||||||||
From net realized gain on investments | — | — | — | (0.07 | ) | (0.08 | ) | |||||||||||||||
Total dividends and distributions | — | (0.07 | ) | (0.01 | ) | (0.07 | ) | (0.08 | ) | |||||||||||||
Net asset value at end of year | $ | 11.18 | $ | 10.44 | $ | 9.32 | $ | 8.26 | $ | 13.19 | ||||||||||||
Total investment return (b) | 7.09 | % | 12.77 | % | 13.01 | % | (37.06 | %) | 20.51 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | (0.13 | %) | (0.10 | %) | 0.26 | % | (0.16 | %) | 0.08 | % | ||||||||||||
Net expenses | 1.19 | % | 1.23 | % | 1.31 | % | 1.17 | % | 1.25 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.19 | % | 1.23 | % | 1.32 | % | 1.18 | % | 1.37 | % | ||||||||||||
Portfolio turnover rate | 112 | % | 131 | % | 156 | % | 291 | % | 279 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 211,044 | $ | 210,592 | $ | 92 | $ | 49 | $ | 66 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. |
The notes to the financial statements are an integral part of,
16 MainStay Growth Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class B | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.08 | $ | 9.04 | $ | 8.07 | $ | 12.99 | $ | 10.93 | ||||||||||||
Net investment income (loss) | (0.12 | ) (a) | (0.11 | ) (a) | (0.07 | ) (a) | (0.10 | ) | (0.08 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.73 | 1.15 | 1.04 | (4.75 | ) | 2.22 | ||||||||||||||||
Total from investment operations | 0.61 | 1.04 | 0.97 | (4.85 | ) | 2.14 | ||||||||||||||||
Less distributions: | ||||||||||||||||||||||
From net realized gain on investments | — | — | — | (0.07 | ) | (0.08 | ) | |||||||||||||||
Net asset value at end of year | $ | 10.69 | $ | 10.08 | $ | 9.04 | $ | 8.07 | $ | 12.99 | ||||||||||||
Total investment return (b) | 6.05 | % | 11.50 | % | 12.02 | % | (37.55 | %) | 19.67 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | (1.13 | %) | (1.14 | %) | (0.82 | %) | (1.04 | %) | (0.67 | %) | ||||||||||||
Net expenses | 2.20 | % | 2.27 | % | 2.18 | % | 2.06 | % | 2.00 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 2.20 | % | 2.27 | % | 2.18 | % | 2.26 | % | 2.12 | % | ||||||||||||
Portfolio turnover rate | 112 | % | 131 | % | 156 | % | 291 | % | 279 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 77,567 | $ | 95,899 | $ | 122 | $ | 42 | $ | 65 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. |
Class C | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.08 | $ | 9.03 | $ | 8.06 | $ | 12.99 | $ | 10.93 | ||||||||||||
Net investment income (loss) | (0.12 | ) (a) | (0.11 | ) (a) | (0.04 | ) (a) | (0.12 | ) | (0.08 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.73 | 1.16 | 1.01 | (4.74 | ) | 2.22 | ||||||||||||||||
Total from investment operations | 0.61 | 1.05 | 0.97 | (4.86 | ) | 2.14 | ||||||||||||||||
Less distributions: | ||||||||||||||||||||||
From net realized gain on investments | — | — | — | (0.07 | ) | (0.08 | ) | |||||||||||||||
Net asset value at end of year | $ | 10.69 | $ | 10.08 | $ | 9.03 | $ | 8.06 | $ | 12.99 | ||||||||||||
Total investment return (b) | 6.05 | % | 11.63 | % (c) | 12.03 | % (c) | (37.63 | %) | 19.56 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | (1.14 | %) | (1.14 | %) | (0.52 | %) | (1.04 | %) | (0.67 | %) | ||||||||||||
Net expenses | 2.20 | % | 2.27 | % | 2.16 | % | 2.06 | % | 2.00 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 2.20 | % | 2.27 | % | 2.16 | % | 2.26 | % | 2.12 | % | ||||||||||||
Portfolio turnover rate | 112 | % | 131 | % | 156 | % | 291 | % | 279 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 3,077 | $ | 2,889 | $ | 45 | $ | 40 | $ | 65 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.50 | $ | 9.36 | $ | 8.30 | $ | 13.24 | $ | 11.04 | ||||||||||||
Net investment income (loss) | 0.01 | (a) | 0.01 | (a) | 0.06 | (a) | 0.02 | 0.02 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.76 | 1.22 | 1.04 | (4.87 | ) | 2.28 | ||||||||||||||||
Total from investment operations | 0.77 | 1.23 | 1.10 | (4.85 | ) | 2.30 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | — | (0.09 | ) | (0.04 | ) | (0.02 | ) | (0.02 | ) | |||||||||||||
From net realized gain on investments | — | — | — | (0.07 | ) | (0.08 | ) | |||||||||||||||
Total dividends and distributions | — | (0.09 | ) | (0.04 | ) | (0.09 | ) | (0.10 | ) | |||||||||||||
Net asset value at end of year | $ | 11.27 | $ | 10.50 | $ | 9.36 | $ | 8.30 | $ | 13.24 | ||||||||||||
Total investment return (b) | 7.33 | % | 13.07 | % | 13.29 | % | (36.80 | %) | 20.93 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.13 | % | 0.14 | % | 0.74 | % | 0.21 | % | 0.31 | % | ||||||||||||
Net expenses | 0.94 | % | 0.98 | % | 1.03 | % | 0.81 | % | 0.92 | % | ||||||||||||
Expenses (before reimbursement/waiver) | 0.94 | % | 0.98 | % | 1.05 | % | 0.81 | % | 0.92 | % | ||||||||||||
Portfolio turnover rate | 112 | % | 131 | % | 156 | % | 291 | % | 279 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 2,098 | $ | 3,082 | $ | 36,230 | $ | 75,450 | $ | 173,475 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. |
The notes to the financial statements are an integral part of,
18 MainStay Growth Equity Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Growth Equity Fund (the “Fund”), a diversified fund. The Fund is the successor of the MainStay Growth Equity Fund, a series of Eclipse Funds Inc. (the “Predecessor Fund”). The reorganization of the Predecessor Fund with and into the Fund occurred on February 26, 2010. All information and references to periods prior to February 26, 2010, relate to the Predecessor Fund.
The Fund currently offers five classes of shares. Class A, Class B, Class C and Class I shares commenced operations on November 4, 2005. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class B and Class C shares are offered at NAV without an initial sales charge, although a declining CDSC may be imposed on redemptions made within six years of the date of purchase of Class B shares and a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Investor Class or Class A shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The five classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class B and Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek long-term growth of capital.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each valuation date. Securities that are not traded on the valuation
mainstayinvestments.com 19
Notes to Financial Statements (continued)
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. Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund did not hold any securities that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or Subadvisor conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. As of October 31, 2011, the Fund did not hold any foreign equity securities.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
20 MainStay Growth Equity Fund
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(I) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security, or securities index). The Fund is subject to equity price risk in the normal course of investment in these transactions. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking to market” such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. Risks arise from the possible imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the terms of their contracts. However, the Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a broker that holds margin on behalf of the Fund, the Fund may not be entitled to the return of all of the margin owed to the Fund, potentially resulting in a loss. The Fund may also invest in futures contracts to help manage the duration and yield curve of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAV and may result in a loss to the Fund.
(J) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(K) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. These derivatives are not accounted for as hedging instruments.
mainstayinvestments.com 21
Notes to Financial Statements (continued)
Fair value of derivatives as of October 31, 2011:
Asset Derivatives
Statement of | ||||||||||||
Assets | Equity | |||||||||||
and Liabilities | Contracts | |||||||||||
Location | Risk | Total | ||||||||||
Futures Contracts | Net Assets— Unrealized appreciation (depreciation) on investments and futures contracts (a) | $ | 31,342 | $ | 31,342 | |||||||
Total Fair Value | $ | 31,342 | $ | 31,342 | ||||||||
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2011:
Realized Gain (Loss)
Statement of | Equity | ||||||||||
Operations | Contracts | ||||||||||
Location | Risk | Total | |||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | 485,338 | $ | 485,338 | ||||||
Total Realized Gain (Loss) | $ | 485,338 | $ | 485,338 | |||||||
Change in Unrealized Appreciation (Depreciation)
Statement of | Equity | |||||||||
Operations | Contracts | |||||||||
Location | Risk | Total | ||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | 31,342 | $ | 31,342 | |||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 31,342 | $ | 31,342 | ||||||
Number of Contracts, Notional Amounts or Shares/Units (1)
Equity | ||||||||
Contracts | ||||||||
Risk | Total | |||||||
Futures Contracts (2) | 66 | 66 | ||||||
(1) | Amount disclosed represents the weighted average held during the year ended October 31, 2011. |
(2) | Amount(s) represent(s) number of contracts or number of shares/units. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. Madison Square Investors LLC (“MSI” or “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MSI, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.70% up to $500 million and 0.675% over $500 million. The effective management fee rate was 0.70% for the year ended October 31, 2011.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $3,986,304.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from the Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
22 MainStay Growth Equity Fund
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $29,386 and $8,146, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Investor Class, Class A, Class B and Class C shares of $20, $2,917, $125,921 and $622, respectively, for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 1,053,626 | ||
Class A | 368,608 | |||
Class B | 380,169 | |||
Class C | 12,908 | |||
Class I | 6,910 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Investor Class | $ | 23,729 | 0.0 | %‡ | ||||
Class A | 96,918 | 0.0 | ‡ | |||||
Class C | 80 | 0.0 | ‡ | |||||
Class I | 1,198 | 0.1 | ||||||
‡ | Less than one-tenth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $7,933. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | — | $ | (45,764,478 | ) | $ | — | $ | 67,072,376 | $ | 21,307,898 | ||||||||
The difference between book-basis and tax basis unrealized depreciation is primarily due to wash sale deferrals, marking to market of futures contracts, and return of capital distributions from non real estate investment trusts (“REITs”) securities.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed | Net Realized | |||||||||
Net Investment | Gain (Loss) on | Additional | ||||||||
Income (Loss) | Investments | Paid-In Capital | ||||||||
$ | 2,298,266 | $ | 100,142 | $ | (2,398,408 | ) | ||||
The reclassifications for the Fund are primarily due to net operating loss and return of capital distributions from non REITs securities.
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $45,764,478 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. The Fund acquired $94,184,714 of capital losses in its reorganization with MainStay Capital Appreciation Fund (see Note 9). Use of these losses may be limited due to the provisions of IRC section 382. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2016 | $ | 45,764 | ||||
The Fund utilized $52,566,547 of capital loss carryforwards during the year ended October 31, 2011.
mainstayinvestments.com 23
Notes to Financial Statements (continued)
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | — | $ | 286,781 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $631,980 and $700,390, respectively.
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 541,447 | $ | 6,075,727 | |||||
Shares redeemed | (2,750,665 | ) | (30,802,228 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (2,209,218 | ) | (24,726,501 | ) | ||||
Shares converted into Investor Class (See Note 1) | 1,367,265 | 15,016,165 | ||||||
Shares converted from Investor Class (See Note 1) | (1,297,812 | ) | (14,543,692 | ) | ||||
Net increase (decrease) | (2,139,765 | ) | $ | (24,254,028 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 533,152 | $ | 5,215,864 | |||||
Shares issued in connection with the acquisition of MainStay Capital Appreciation Fund (See Note 9) | 25,405,384 | 249,912,764 | ||||||
Shares issued to shareholders in reinvestment of dividends | 22 | 213 | ||||||
Shares redeemed | (3,083,748 | ) | (30,190,362 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 22,854,810 | 224,938,479 | ||||||
Shares converted into Investor Class (See Note 1) | 1,581,410 | 15,442,867 | ||||||
Shares converted from Investor Class (See Note 1) | (643,247 | ) | (6,437,168 | ) | ||||
Net increase (decrease) | 23,792,973 | $ | 233,944,178 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 904,882 | $ | 10,187,755 | |||||
Shares redeemed | (3,645,644 | ) | (40,670,532 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (2,740,762 | ) | (30,482,777 | ) | ||||
Shares converted into Class A (See Note 1) | 1,736,959 | 19,488,109 | ||||||
Shares converted from Class A (See Note 1) | (297,153 | ) | (3,162,991 | ) | ||||
Net increase (decrease) | (1,300,956 | ) | $ | (14,157,659 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 866,379 | $ | 8,514,412 | |||||
Shares issued in connection with the acquisition of MainStay Capital Appreciation Fund (See Note 9) | 21,838,919 | 214,573,935 | ||||||
Shares issued to shareholders in reinvestment of dividends | 41 | 399 | ||||||
Shares redeemed | (3,597,576 | ) | (35,085,241 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 19,107,763 | 188,003,505 | ||||||
Shares converted into Class A (See Note 1) | 1,196,535 | 11,876,607 | ||||||
Shares converted from Class A (See Note 1) | (136,340 | ) | (1,383,236 | ) | ||||
Net increase (decrease) | 20,167,958 | $ | 198,496,876 | |||||
24 MainStay Growth Equity Fund
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 644,762 | $ | 6,951,691 | |||||
Shares redeemed | (1,334,476 | ) | (14,374,545 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (689,714 | ) | (7,422,854 | ) | ||||
Shares converted from Class B (See Note 1) | (1,568,542 | ) | (16,797,591 | ) | ||||
Net increase (decrease) | (2,258,256 | ) | $ | (24,220,445 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 745,402 | $ | 7,168,004 | |||||
Shares issued in connection with the acquisition of MainStay Capital Appreciation Fund (See Note 9) | 12,472,995 | 119,463,886 | ||||||
Shares redeemed | (1,661,510 | ) | (15,745,052 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 11,556,887 | 110,886,838 | ||||||
Shares converted from Class B (See Note 1) | (2,056,952 | ) | (19,499,070 | ) | ||||
Net increase (decrease) | 9,499,935 | $ | 91,387,768 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 46,021 | $ | 488,561 | |||||
Shares redeemed | (44,742 | ) | (483,904 | ) | ||||
Net increase (decrease) | 1,279 | $ | 4,657 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 35,846 | $ | 344,998 | |||||
Shares issued in connection with the acquisition of MainStay Capital Appreciation Fund (See Note 9) | 313,217 | 3,001,872 | ||||||
Shares redeemed | (67,518 | ) | (645,915 | ) | ||||
Net increase (decrease) | 281,545 | $ | 2,700,955 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 579,157 | $ | 6,672,310 | |||||
Shares redeemed | (686,643 | ) | (7,870,718 | ) | ||||
Net increase (decrease) | (107,486 | ) | $ | (1,198,408 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 69,486 | $ | 669,199 | |||||
Shares issued in connection with the acquisition of MainStay Capital Appreciation Fund (See Note 9) | 48,621 | 478,959 | ||||||
Shares issued to shareholders in reinvestment of dividends | 22,291 | 217,336 | ||||||
Shares redeemed | (3,716,021 | ) | (36,856,943 | ) | ||||
Net increase (decrease) | (3,575,623 | ) | $ | (35,491,449 | ) | |||
Note 9–Fund Acquisitions
At a meeting held on June 23, 2009, the Board of Trustees approved a plan of reorganization where by the Fund would acquire the assets, including the investments, and assume the liabilities of MainStay Capital Appreciation Fund, a series of The MainStay Funds. Shareholders of the MainStay Capital Appreciation Fund approved this reorganization on November 16, 2009, which was then completed on November 24, 2009. The aggregate net assets of the Fund immediately before the acquisition were $32,383,788 and the combined net assets after the acquisition were $619,815,204.
The acquisition was accomplished by a tax-free exchange of the following:
MainStay Capital Appreciation Fund | Shares | Value | ||||||
Investor Class | 9,208,553 | $ | 249,912,764 | |||||
Class A | 7,862,472 | 214,573,935 | ||||||
Class B | 4,991,180 | 119,463,886 | ||||||
Class C | 125,395 | 3,001,872 | ||||||
Class I | 17,134 | 478,959 | ||||||
In exchange for the MainStay Capital Appreciation Fund shares and net assets, the Fund issued 25,405,384 Investor Class Shares; 21,838,919 Class A shares; 12,472,995 Class B shares; 313,217 Class C shares; and 48,621 Class I shares.
MainStay Capital Appreciation Fund’s net assets after adjustments for any permanent book-to-tax differences at the acquisition date were as follows, which include the following amounts of capital stock, unrealized appreciation, accumulated net realized loss and undistributed net investment loss:
Accumulated | Undistributed | |||||||||||||||||||
Total Net | Unrealized | Net Realized | Net Investment | |||||||||||||||||
Assets | Capital Stock | Appreciation | Loss | Loss | ||||||||||||||||
MainStay Capital Appreciation Fund | $ | 587,431,416 | $ | 613,141,766 | $ | 69,756,562 | $ | (95,112,046 | ) | $ | (354,866 | ) | ||||||||
For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received from MainStay Capital Appreciation Fund was carried forward to align ongoing reporting of the Fund’s realized and unrealized gains losses with amounts distributable to shareholders for tax purposes.
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 25
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Growth Equity Fund (“the Fund”), one of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statement of operations for the year then ended, and the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Growth Equity Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, and the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
26 MainStay Growth Equity Fund
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; or (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request (i) by calling 800-MAINSTAY (624-6782); (ii) by visiting the Fund’s website at mainstayinvestments.com; or (iii) on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by (i) visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 27
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
28 MainStay Growth Equity Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 29
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
30 MainStay Growth Equity Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 31
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
32 MainStay Growth Equity Fund
This page intentionally left blank
mainstayinvestments.com 33
This page intentionally left blank
34 MainStay Growth Equity Fund
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24845 MS284-11 | MSGE11-12/11 |
NB8
MainStay High Yield Municipal Bond Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 22 | |
Notes to Financial Statements | 27 | |
Report of Independent Registered Public Accounting Firm | 33 | |
Federal Income Tax Information | 34 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 34 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 34 | |
Board Members and Officers | 35 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (3/31/10) | Ratio2 | ||||||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges | –0 | .65% | 5 | .94% | 1 | .77% | ||||||||
Excluding sales charges | 4 | .03 | 9 | .05 | 1 | .77 | ||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges | –0 | .68 | 6 | .08 | 1 | .62 | ||||||||
Excluding sales charges | 4 | .00 | 9 | .20 | 1 | .62 | ||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | 2 | .24 | 8 | .30 | 2 | .52 | ||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 3 | .22 | 8 | .30 | 2 | .52 | |||||||||
Class I Shares | No Sales Charge | 4 | .21 | 9 | .38 | 1 | .37 | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
Barclays Capital Municipal Bond Index3 | 3 | .78% | 5 | .71% | ||||
High Yield Municipal Bond Composite Index4 | 3 | .54 | 6 | .74 | ||||
Average Lipper High Yield Municipal Debt Fund5 | 1 | .65 | 5 | .63 | ||||
3. | The Barclays Capital Municipal Bond Index includes approximately 15,000 municipal bonds, rated Baa or better by Moody’s, with a maturity of at least two years. Bonds subject to the Alternative Minimum Tax or with floating or zero coupons are excluded. The Barclays Capital Municipal Bond Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume the reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
4. | The High Yield Municipal Bond Composite Index is comprised of the Barclays Capital High Yield Municipal Bond Index and the Barclays Capital Municipal Bond Index weighted 60%/40%, respectively. The Barclays Capital High Yield Municipal Bond Index is an unmanaged index made up of bonds that are non-investment grade, unrated, or rated below Ba1 by Moody’s Investors Service with a remaining maturity of at least one year. |
5. | The average Lipper high yield municipal debt fund is representative of funds that typically invest at least 50% or more of their assets in municipal debt issues rated BBB or less. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay High Yield Municipal Bond Fund
Cost in Dollars of a $1,000 Investment in MainStay High Yield Municipal Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,086.30 | $ | 4.63 | $ | 1,020.80 | $ | 4.48 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,085.60 | $ | 4.47 | $ | 1,020.90 | $ | 4.33 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,081.80 | $ | 8.61 | $ | 1,016.90 | $ | 8.34 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,087.60 | $ | 3.16 | $ | 1,022.20 | $ | 3.06 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.88% for Investor Class, 0.85% for Class A, 1.64% for Class C and 0.60% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
State Composition as of October 31, 2011 (Unaudited)
California | 12.9 | % | ||
Texas | 10.6 | |||
New York | 8.3 | |||
New Jersey | 7.9 | |||
Pennsylvania | 7.3 | |||
Ohio | 4.5 | |||
Florida | 4.1 | |||
Alabama | 3.8 | |||
Indiana | 3.7 | |||
Colorado | 3.2 | |||
Illinois | 2.3 | |||
Louisiana | 2.3 | |||
Virginia | 2.3 | |||
Michigan | 2.2 | |||
Missouri | 2.2 | |||
Oklahoma | 1.9 | |||
Washington | 1.8 | |||
Georgia | 1.7 | |||
Arizona | 1.5 | |||
Rhode Island | 1.2 | |||
Iowa | 1.1 | |||
Puerto Rico | 1.0 | |||
Maryland | 0.9 | |||
Massachusetts | 0.8 | |||
Nevada | 0.8 | |||
Utah | 0.8 | |||
Kentucky | 0.7 | |||
Wisconsin | 0.7 | |||
District of Columbia | 0.6 | |||
Minnesota | 0.6 | |||
Mississippi | 0.6 | |||
Guam | 0.5 | |||
New Hampshire | 0.5 | |||
Multi-State | 0.4 | |||
Tennessee | 0.4 | |||
Wyoming | 0.4 | |||
Connecticut | 0.3 | |||
West Virginia | 0.2 | |||
North Carolina | 0.1 | |||
Oregon | 0.1 | |||
Vermont | 0.1 | |||
South Carolina | 0.0 | ‡ | ||
Other Assets, Less Liabilities | 2.7 | |||
100.0 | % | |||
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Issuers Held as of October 31, 2011
1. | New York State Mortgage Agency, 1.50%–3.50%, due 4/1/37–10/1/37 | |
2. | Capital Beltway Funding Corp. Revenue, 6.00%, due 12/31/47 | |
3. | Texas Private Activity Bond Surface Transportation Corp. Revenue, 6.875%–7.50%, due 6/30/33-6/30/40 | |
4. | Anderson Indiana Economic Development Revenue, 5.00%, due 10/1/24–10/1/32 | |
5. | New Jersey Economic Development Authority Revenue, Cigarette Tax, 5.50%–5.75%, due 6/15/29–6/15/34 | |
6. | Buckeye, Ohio, Tobacco Settlement Financing Authority, 5.125%–5.875%, due 6/1/24–6/1/34 | |
7. | San Buenaventura, CA, Community Memorial Health System, 7.50%, due 12/1/41 | |
8. | E-470 Public Highway Authority Revenue , due 9/1/22–9/1/40 | |
9. | Tobacco Settlement Financing Corp., New Jersey, 4.50%–4.625%, due 6/1/23–6/1/26 | |
10. | Norman Regional Hospital Authority Revenue, 5.125%–5.50%, due 9/1/32–9/1/37 |
8 MainStay High Yield Municipal Bond Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers John Loffredo, CFA, Robert DiMella, CFA, and Michael Petty of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay High Yield Municipal Bond Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay High Yield Municipal Bond Fund returned 4.03% for Investor Class shares, 4.00% for Class A shares and 3.22% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 4.21%. All share classes outperformed the 1.65% return of the average Lipper1 high yield municipal debt fund for the 12 months ended October 31, 2011. Investor Class, Class A and Class I shares outperformed—and Class C shares underperformed—the 3.78% return of the Barclays Capital Municipal Bond Index2 for the same period. The Barclays Capital Municipal Bond Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s performance relative to the Barclays Capital Municipal Bond Index was primarily due to individual security selection. During the reporting period, this Index, which consists of investment-grade municipal bonds, recorded higher returns than BBB-rated3 municipal bonds and the high-yield municipal bond market overall. Through favorable security selection, however, three of the Fund’s four share classes outperformed the Index during the reporting period, even though the Fund invests mainly in securities rated BBB and below.
What was the Fund’s duration4 strategy during the reporting period?
The Fund typically maintains a duration close to that of the Barclays Capital Municipal Bond Index. That said, we believe the Fund’s market sensitivity is driven more by spread duration,5 which measures the Fund’s sensitivity to changes in yield spreads,6 than by interest-rate sensitivity. During the reporting period, the Fund had an overweight position in lower-rated investment-grade bonds and in higher-rated non-investment-grade bonds with excess return potential—based on spread—relative to the benchmark.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
During the latter part of the reporting period, we sold 30-year Treasury futures short7 as a hedge to shorten duration and to seek to mute volatility in the Fund. This position detracted from the Fund’s performance and was closed out prior to the end of the reporting period.
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
During the reporting period, fund flows were the most significant factor that influenced decisions for the Fund. The Fund nearly quadrupled in size during the reporting period, while the overall municipal bond fund industry experienced significant outflows.8 In part, the outflows were caused by what we viewed as misplaced concerns about imminent municipal defaults. Nevertheless, the outflows forced several fund liquidations, which, in turn, pushed down prices of securities overall. The Fund was able to capitalize on forced selling by investing its cash inflows during periods of market dislocation, thereby adding solid credits to the Fund’s portfolio at prices that, in our opinion, were attractive. We focused most of our purchases for the Fund on bonds rated BBB and BB,9 as these securities suffered the greatest price declines during the first half of the reporting period.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Barclays Capital Municipal Bond Index.
3. An obligation rated ‘BBB’ by Standard & Poor’s (“S&P”) is deemed by S&P to exhibit adequate protection parameters. It is the opinion of S&P, however, that adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund.
4. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered to be a more accurate sensitivity gauge than average maturity.
5. Spread duration measures the sensitivity of a security or a portfolio to changes in yield spreads. In this context, the yield spread refers to the incremental yield over comparable U.S. Treasury securities that a security or portfolio is currently delivering. Spread duration is commonly quantified as the percent change in price for the security or portfolio resulting from a one percentage point (100 basis point) change in spreads. An increase in spreads is called widening and would result in a price decline for a security or portfolio with positive spread duration. A decline in spreads is called tightening and would result in a price increase for a security or portfolio with positive spread duration.
6. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
7. Short selling or “shorting��� is a way to profit from the decline in price of a security, such as a stock or a bond.
8. As reported by AMG Data Services. AMG Data Services, a subsidiary of Lipper Inc., is a firm that gathers and reports information on asset flows into and out of domestic and foreign funds.
9. An obligation rated ‘BB’ by Standard & Poor’s (“S&P”) is deemed by S&P to be less vulnerable to nonpayment than other speculative issues. In the opinion of S&P, however, an obligation rated ‘BB’ faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund.
mainstayinvestments.com 9
During the reporting period, which market segments were the strongest contributors to the Fund’s performance and which market segments were particularly weak?
The best contributions to the Fund’s performance came from the tax-backed and health care sectors. (Contributions take weightings and total returns into account.) The weakest overall contribution came from the tobacco sector, as tobacco bonds overall suffered during the reporting period from ratings downgrades and reports of weaker cigarette consumption. Industrial development revenue bonds (IDRs) also detracted from the Fund’s performance during the reporting period.
Did the Fund make any significant purchases or sales during the reporting period?
Most purchases and sales were significant, as the Fund experienced growth in assets during the reporting period. We continued to build a well-balanced and widely diversified investment portfolio during the reporting period, with strict limits on sector concentration and individual credit exposure. Within that framework, we emphasized bonds rated BBB and BB, as we believed that they offered the most attractive long-term total-return prospects.
How did the Fund’s sector weightings change during the reporting period?
As mentioned earlier, the Fund experienced significant asset growth during the reporting period. As a result, the amount of principal in virtually all sectors in which the Fund invests increased. However, the weighting of the Fund’s investment in the IDR sector relative to the benchmark was reduced substantially because of a rally in corporate-backed municipal bonds and because we believed that there were better opportunities in other municipal bonds. We also reduced the Fund’s weighting in general obligation municipal bonds during the reporting period. We increased the Fund’s exposure to revenue-backed municipal bonds in the health care, transportation and charter school sectors because we felt they offered attractive return potential.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2011, the Fund had an underweight position relative to the Barclays Capital Municipal Bond Index in tobacco bonds, IDRs and securities based on land-secured infrastructure projects. As of October 31, 2011, the weighted average dollar price of the Fund’s portfolio was at a deep discount to par, reflecting, in our view, the relative attractiveness of municipal high-yield bonds and the potential for total return should municipal credit spreads tighten going forward.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay High Yield Municipal Bond Fund
Portfolio of Investments October 31, 2011
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds 95.2%† | ||||||||
Alabama 3.8% | ||||||||
Alabama Industrial Development Authority Solid Waste Disposal Revenue, Pine City Fiber Co. 6.45%, due 12/1/23 (a) | $ | 1,800,000 | $ | 1,560,490 | ||||
Alabama Water Pollution Control Authority Refunding, Revolving Fund Loan Series B, Insured: AMBAC 4.125%, due 2/15/14 | 590,000 | 546,676 | ||||||
Birmingham Jefferson Civic Center Authority Special Tax Series A, Insured: AMBAC 4.25%, due 7/1/16 | 245,000 | 203,796 | ||||||
Series A, Insured: AMBAC 4.50%, due 7/1/22 | 250,000 | 174,293 | ||||||
Jefferson County Public Building Authority Lease Revenue Insured: AMBAC 5.00%, due 4/1/12 | 635,000 | 626,859 | ||||||
Insured: AMBAC 5.00%, due 4/1/13 | 250,000 | 237,168 | ||||||
Insured: AMBAC 5.00%, due 4/1/14 | 175,000 | 160,757 | ||||||
Insured: AMBAC 5.00%, due 4/1/15 | 760,000 | 684,304 | ||||||
Insured: AMBAC 5.00%, due 4/1/16 | 525,000 | 460,546 | ||||||
Insured: AMBAC 5.125%, due 4/1/18 | 1,115,000 | 916,708 | ||||||
Insured AMBAC 5.125%, due 4/1/21 | 250,000 | 193,240 | ||||||
Jefferson County, Capital Improvement and Refunding Series A, Insured: NATL-RE 5.00%, due 4/1/21 | 1,250,000 | 1,082,037 | ||||||
Jefferson County, General Obligation Limited Warrants Series A, Insured: NATL-RE 5.25%, due 4/1/17 | 600,000 | 540,834 | ||||||
Jefferson County, Limited Obligation School Warrants Series A, Insured: AMBAC 4.75%, due 1/1/25 | 200,000 | 175,622 | ||||||
Series A 5.25%, due 1/1/13 | 950,000 | 949,895 | ||||||
Series A | ||||||||
5.25%, due 1/1/15 | 500,000 | 497,920 | ||||||
Series A 5.25%, due 1/1/16 | 100,000 | 98,988 | ||||||
Montgomery Airport Authority Revenue Insured: RADIAN 5.375%, due 8/1/32 | 500,000 | 443,630 | ||||||
Tuscaloosa Educational Building Authority Revenue, Stillman College Project Series A 5.25%, due 6/1/37 | 200,000 | 145,908 | ||||||
9,699,671 | ||||||||
Arizona 1.5% | ||||||||
Maricopa County Stadium District Revenue Insured: AMBAC 5.25%, due 6/1/12 | 250,000 | 250,140 | ||||||
Insured: AMBAC 5.375%, due 6/1/15 | 1,750,000 | 1,707,580 | ||||||
Pima County Industrial Development Authority Education Revenue, Paradise Education Center Project | ||||||||
Series A 5.00%, due 6/1/16 | 105,000 | 102,520 | ||||||
Series A 5.875%, due 6/1/33 | 325,000 | 282,305 | ||||||
6.10%, due 6/1/45 | 1,100,000 | 968,693 | ||||||
Yavapai County Industrial Development Authority Education Revenue, Agribusiness and Equine Center 7.875%, due 3/1/42 | 500,000 | 520,955 | ||||||
3,832,193 | ||||||||
California 11.7% | ||||||||
California Infrastructure & Economic Development Bank Revenue, Stockton Port District Project Insured: ACA 5.50%, due 7/1/32 | 350,000 | 278,740 | ||||||
California Municipal Finance Authority Revenue—Southwestern Law School 6.50%, due 11/1/41 | 1,500,000 | 1,504,365 | ||||||
California Municipal Finance Authority Revenue, University of LA Verne Series: A 6.25%, due 6/1/40 | 500,000 | 512,635 | ||||||
California Statewide Communities Development Authority Revenue 7.50%, due 11/1/41 | 1,000,000 | 1,081,100 | ||||||
Davis Redevelopment Agency Tax Allocation, Subordinated Davis Redevelopment Project Series A 7.00%, due 12/1/36 | 1,375,000 | 1,506,697 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest issuers held, as of October 31, 2011. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
California (continued) | ||||||||
Foothill-Eastern Transportation Corridor Agency Toll Road Revenue Insured: NATL-RE 5.00%, due 1/1/35 | $ | 100,000 | $ | 82,791 | ||||
5.75%, due 1/15/40 | 475,000 | 430,008 | ||||||
Golden State Tobacco Securitization Corp. Series A-1 4.50%, due 6/1/27 | 4,050,000 | 3,277,260 | ||||||
Hayward, California Unified School District, Capital Appreciation Election Series A, Insured: AGM (zero coupon), due 8/1/37 | 6,135,000 | 1,040,619 | ||||||
Inland Empire Tobacco Securitization Authority TOB Settlement | ||||||||
Series A 4.625%, due 6/1/21 | 1,360,000 | 1,079,377 | ||||||
Series A 5.00%, due 6/1/21 | 1,400,000 | 1,146,978 | ||||||
Lancaster Financing Authority Tax Allocation Revenue Insured: AMBAC 5.00%, due 2/1/16 | 325,000 | 304,252 | ||||||
Lemoore Redevelopment Agency Tax Allocation 7.375%, due 8/1/40 | 1,000,000 | 1,076,030 | ||||||
March Joint Powers Redevelopment Agency Tax Allocation, Air Force Base Redevelopment Project | ||||||||
Series A 7.50%, due 8/1/41 | 550,000 | 605,462 | ||||||
Series B 7.50%, due 8/1/41 | 450,000 | 495,378 | ||||||
Mendocino-Lake Community College District Series B, Insured: AGM (zero coupon), due 8/1/39 | 8,400,000 | 1,172,304 | ||||||
Series B, Insured: AGM (zero coupon), due 8/1/51 | 40,000,000 | 2,043,200 | ||||||
National City Community Development Commission Tax Allocation, National City Redevelopment Project 7.00%, due 8/1/32 | 1,000,000 | 1,091,790 | ||||||
Oakley, California Redevelopment Agency Tax Allocation Revenue Series A, Insured: AMBAC 5.00%, due 9/1/33 | 100,000 | 67,715 | ||||||
X San Buenaventura, CA, Community Memorial Health System 7.50%, due 12/1/41 | 4,750,000 | 4,847,089 | ||||||
San Francisco City and County Redevelopment Financing Authority Tax Allocation, Mission Bay South Redevelopment Series D 7.00%, due 8/1/41 | 435,000 | 458,225 | ||||||
San Joaquin Hills Transportation Corridor Agency Series A, Insured: NATL-RE (zero coupon), due 1/15/25 | 3,000,000 | 1,020,450 | ||||||
Series A, Insured: NATL-RE (zero coupon), due 1/15/32 | 530,000 | 95,204 | ||||||
Series A, Insured: NATL-RE (zero coupon), due 1/15/34 | 3,000,000 | 460,020 | ||||||
Series A, Insured: NATL-RE 5.25%, due 1/15/30 | 1,340,000 | 1,057,488 | ||||||
Series A, Insured: NATL-RE 5.375%, due 1/15/29 | 165,000 | 135,163 | ||||||
San Ysidro School District Series F, Insured: AGM (zero coupon), due 8/1/49 | 27,410,000 | 1,705,998 | ||||||
Turlock California Health Facility Revenue 5.375%, due 10/15/34 | 1,010,000 | 881,922 | ||||||
Turlock California Public Financing Authority 7.50%, due 9/1/39 | 500,000 | 528,530 | ||||||
29,986,790 | ||||||||
Colorado 3.2% | ||||||||
Arkansas River Power Authority Revenue 6.00%, due 10/1/40 | 595,000 | 597,802 | ||||||
Colorado Educational & Cultural Facilities Authority Revenue, Johnson & Wales University Series A, Insured: XLCA 5.00%, due 4/1/28 | 185,000 | 175,939 | ||||||
Denver City, Colorado County Special Facilities Airport Revenue—United Airlines Project 5.75%, due 10/1/32 (a) | 2,000,000 | 1,779,520 | ||||||
Denver Convention Center Hotel Authority Revenue, Refunding | ||||||||
Series, Insured: XLCA 4.75%, due 12/1/35 | 570,000 | 472,251 | ||||||
Series, Insured: XLCA 5.00%, due 12/1/35 | 130,000 | 112,359 | ||||||
X E-470 Public Highway Authority Revenue | ||||||||
Series B, Insured: NATL-RE (zero coupon), due 9/1/22 | 5,000,000 | 2,556,700 | ||||||
Series B, Insured: NATL-RE (zero coupon), due 9/1/25 | 100,000 | 40,958 | ||||||
Series B, Insured: NATL-RE (zero coupon), due 9/1/27 | 540,000 | 190,064 |
The notes to the financial statements are an integral part of,
12 MainStay High Yield Municipal Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Colorado (continued) | ||||||||
E-470 Public Highway Authority Revenue (continued) | ||||||||
Series B, Insured: NATL-RE (zero coupon), due 9/1/28 | $ | 350,000 | $ | 113,463 | ||||
Series B, Insured: NATL-RE (zero coupon), due 9/1/29 | 4,500,000 | 1,364,400 | ||||||
Series B, Insured: NATL-RE (zero coupon), due 9/1/30 (zero coupon), due 9/1/40 | 400,000 1,000,000 | 112,196 131,370 | ||||||
Fronterra Village Metropolitan District No. 2, Colorado, Refunding & Improvement Insured: RADIAN 4.875%, due 12/1/27 | 500,000 | 426,100 | ||||||
Table Rock Metropolitan District General Obligation, Refunding Improvement Insured: RADIAN 4.25%, due 12/1/27 | 275,000 | 231,434 | ||||||
8,304,556 | ||||||||
Connecticut 0.3% | ||||||||
Connecticut Special Parking Revenue Series A, Insured: ACA 6.60%, due 7/1/24 (a) | 785,000 | 772,566 | ||||||
District of Columbia 0.6% | ||||||||
District of Columbia Revenue, Center Strategic & International Studies 6.625%, due 3/1/41 | 1,000,000 | 1,026,030 | ||||||
District of Columbia Revenue, James F. Oyster Elementary School Pilot Insured: ACA 6.25%, due 11/1/31 | 610,000 | 555,063 | ||||||
1,581,093 | ||||||||
Florida 4.1% | ||||||||
Bay County Florida Educational Facilities Revenue Series A 6.00%, due 9/1/40 | 1,000,000 | 929,020 | ||||||
Capital Projects Finance Authority, Student Housing Revenue Series F-1, Insured: NATL-RE 5.00%, due 10/1/31 | 1,850,000 | 1,480,888 | ||||||
Escambia County Health Facilities Authority Revenue, Baptist Hospital, Project Series A 6.00%, due 8/15/36 | 200,000 | 198,830 | ||||||
Miami Beach Health Facilities Authority, Hospital Revenue, Refunding, Mount Sinai Medical Center of Florida 5.375%, due 11/15/28 | 920,000 | 870,108 | ||||||
6.75%, due 11/15/29 | 1,000,000 | 1,017,640 | ||||||
Mid-Bay Bridge Florida Authority Springing Lien Revenue Series A 7.25%, due 10/1/40 | 2,500,000 | 2,624,100 | ||||||
North Sumter County Florida Utility Dependent District Revenue 6.25%, due 10/1/43 | 1,500,000 | 1,526,550 | ||||||
Seminole County Industrial Development Authority Revenue Series A 7.375%, due 11/15/41 | 750,000 | 780,172 | ||||||
Village Center Community Development District Recreational Revenue Series A, Insured: NATLE-RE 5.00%, due 11/1/32 | 140,000 | 124,634 | ||||||
Volusia County Industrial Development Authority Revenue Insured: CIFG 5.00%, due 6/1/35 | 1,270,000 | 1,099,287 | ||||||
10,651,229 | ||||||||
Georgia 1.7% | ||||||||
Augusta Airport Revenue, General Passenger Facility Charge Series A 5.15%, due 1/1/35 | 1,000,000 | 882,320 | ||||||
Marietta Development Authority Revenue 7.00%, due 6/15/39 | 3,000,000 | 2,942,220 | ||||||
McDuffie County Development Authority Revenue 6.95%, due 12/1/23 (a) | 600,000 | 608,844 | ||||||
4,433,384 | ||||||||
Guam 0.5% | ||||||||
Guam Government Hotel Occupancy Tax Revenue Series: A 6.50%, due 11/1/40 | 1,290,000 | 1,389,911 | ||||||
Illinois 2.3% | ||||||||
Chicago, Illinois, O’Hare International Airport Special Facility Revenue, Refunding, Delta Airlines Term 6.45%, due 5/1/18 | 150,000 | 150,000 | ||||||
Illinois Development Finance Authority Revenue, Community Rehab Providers Series A 5.60%, due 7/1/19 | 565,000 | 485,414 | ||||||
Illinois Finance Authority Education Revenue Series A, Insured: ACA 5.00%, due 9/1/27 | 1,000,000 | 810,310 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Illinois (continued) | ||||||||
Illinois Finance Authority Revenue, Chicago Charter School Project 5.00%, due 12/1/36 | $ | 2,600,000 | $ | 2,292,420 | ||||
Illinois Finance Authority Revenue, Chicago Charter School Revenue Series A 7.125%, due 10/1/41 | 1,500,000 | 1,511,311 | ||||||
Illinois Finance Authority Revenue, Wesleyan University Series B, Insured: CIFG 4.50%, due 9/1/35 | 550,000 | 443,091 | ||||||
Massac County Hospital District Insured: CIFG 4.50%, due 11/1/31 | 110,000 | 105,582 | ||||||
5,798,128 | ||||||||
Indiana 3.7% | ||||||||
X Anderson Indiana Economic Development Revenue | ||||||||
5.00%, due 10/1/24 | 780,000 | 642,938 | ||||||
5.00%, due 10/1/28 | 4,000,000 | 3,107,720 | ||||||
5.00%, due 10/1/32 | 2,545,000 | 1,880,500 | ||||||
Carmel Redevelopment District Series C 6.50%, due 7/15/35 (b) | 1,000,000 | 990,330 | ||||||
Indiana Finance Authority Hospital Revenue, King’s Daughter Hospital 5.50%, due 8/15/40 | 1,000,000 | 924,700 | ||||||
5.50%, due 8/15/45 | 1,500,000 | 1,376,670 | ||||||
Indianapolis in Multifamily Housing Revenue Series B 6.75%, due 7/1/40 | 490,000 | 491,054 | ||||||
9,413,912 | ||||||||
Iowa 1.1% | ||||||||
Iowa Higher Education Loan Authority | ||||||||
Series A 5.00%, due 10/1/21 | 605,000 | 501,956 | ||||||
Series A 5.00%, due 10/1/22 | 1,405,000 | 1,149,866 | ||||||
Xenia Rural Water District Revenue | ||||||||
Insured: CIFG 4.00%, due 12/1/14 | 280,000 | 275,450 | ||||||
Insured: CIFG 4.50%, due 12/1/31 | 505,000 | 423,993 | ||||||
Insured: CIFG 4.50%, due 12/1/41 | 725,000 | 579,420 | ||||||
2,930,685 | ||||||||
Kentucky 0.7% | ||||||||
Glasgow Healthcare Revenue 6.45%, due 2/1/41 | 1,000,000 | 1,024,580 | ||||||
Pikeville Hospital Revenue, Refunding & Improvement Pikeville Medical Center 6.50%, due 3/1/41 | 700,000 | 747,082 | ||||||
1,771,662 | ||||||||
Louisiana 2.3% | ||||||||
Jefferson Parish, Louisiana, Hospital Service District No. 1 Revenue, West Jefferson Medical Center Series A 6.00%, due 1/1/39 | 1,000,000 | 1,005,150 | ||||||
Jefferson Parish, Louisiana, Hospital Service District No. 2 Revenue, East Jefferson General Hospital 6.375%, due 7/1/41 | 2,500,000 | 2,506,875 | ||||||
Louisiana Public Facilities Authority Revenue, Belle Chasse Education Foundation, Project 6.50%, due 5/1/31 | 1,000,000 | 1,052,070 | ||||||
Louisiana Public Facilities Authority Revenue, Black and Gold Facilities, Project Series A, Insured: CIFG 4.50%, due 7/1/38 | 1,230,000 | 836,412 | ||||||
Series A, Insured: CIFG 5.00%, due 7/1/39 | 610,000 | 576,371 | ||||||
5,976,878 | ||||||||
Maryland 0.9% | ||||||||
Maryland Economic Development Corp. Student Housing Revenue, Refunding University Medical College Park Projects Insured: AGC-ICC 4.50%, due 6/1/35 | 1,430,000 | 1,276,075 | ||||||
Maryland Health & Higher Educational Facilities Authority Revenue 6.25%, due 1/1/45 | 1,000,000 | 1,036,940 | ||||||
2,313,015 | ||||||||
Massachusetts 0.8% | ||||||||
Massachusetts Development Finance Agency Revenue, Eastern Nazarene College 5.625%, due 4/1/19 | 100,000 | 99,367 | ||||||
Massachusetts Development Finance Agency Revenue, Human Service Provider Insured: RADIAN 5.00%, due 9/1/35 | 100,000 | 83,954 | ||||||
Massachusetts Port Authority Facilities Revenue, Delta Airlines, Project | ||||||||
Series A, Insured: AMBAC 5.00%, due 1/1/21 (a) | 200,000 | 166,208 |
The notes to the financial statements are an integral part of,
14 MainStay High Yield Municipal Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Massachusetts (continued) | ||||||||
Massachusetts Port Authority Facilities Revenue, Delta Airlines, Project (continued) | ||||||||
Series A, Insured: AMBAC 5.00%, due 1/1/27 (a) | $ | 155,000 | $ | 117,343 | ||||
Series A, Insured: AMBAC 5.50%, due 1/1/19 (a) | 145,000 | 128,967 | ||||||
Massachusetts State Health & Educational Facilities Authority Revenue, Lowell General Hospital Series C 5.125%, due 7/1/35 | 1,565,000 | 1,404,791 | ||||||
2,000,630 | ||||||||
Michigan 2.0% | ||||||||
Chandler Park Academy, Public School Academy Revenue 5.125%, due 11/1/30 | 1,050,000 | 871,773 | ||||||
5.125%, due 11/1/35 | 605,000 | 478,137 | ||||||
Detroit Michigan Series A, Insured: XLCA 5.00%, due 4/1/13 | 100,000 | 97,484 | ||||||
Michigan Finance Authority Educational Facility Revenue Series A 8.00%, due 10/1/30 | 1,250,000 | 1,340,550 | ||||||
Michigan Finance Authority Limited Obligation Revenue 7.50%, due 11/1/40 | 855,000 | 852,991 | ||||||
Michigan Municipal Bond Authority Revenue, Local Government Loan Program Series C, Insured: AMBAC 4.50%, due 5/1/31 | 305,000 | 237,549 | ||||||
Series B, Insured: AMBAC 5.00%, due 12/1/34 | 340,000 | 283,336 | ||||||
Michigan Public Educational Facilities Authority Revenue 8.00%, due 4/1/40 | 500,000 | 510,045 | ||||||
Michigan Tobacco Settlement Finance Authority Series A 6.00%, due 6/1/34 | 500,000 | 376,945 | ||||||
5,048,810 | ||||||||
Minnesota 0.6% | ||||||||
St. Paul Housing & Redevelopment Authority Charter School Lease Revenue Series A 6.625%, due 9/1/42 | 1,000,000 | 1,002,530 | ||||||
Washington County Housing & Redevelopment Authority, Hospital Facilities Revenue, Healtheast Project 5.50%, due 11/15/27 | 500,000 | 476,440 | ||||||
1,478,970 | ||||||||
Mississippi 0.6% | ||||||||
Claiborne County, Mississippi Pollution Control Revenue 6.20%, due 2/1/26 | 175,000 | 175,081 | ||||||
Mississippi Development Bank Special Obligation, Magnolia Regional Health Center Series A 6.75%, due 10/1/36 | 1,250,000 | 1,322,575 | ||||||
1,497,656 | ||||||||
Missouri 2.2% | ||||||||
Arnold Retail Corridor Transportation Development District 6.65%, due 5/1/38 | 500,000 | 506,485 | ||||||
Branson Industrial Development Authority Tax Increment Revenue 5.50%, due 6/1/29 | 3,110,000 | 2,576,386 | ||||||
Kansas City Industrial Development Authority Revenue 6.25%, due 9/1/32 | 1,000,000 | 1,026,840 | ||||||
Lees Summit Tax Increment Revenue 7.25%, due 4/1/30 | 1,500,000 | 1,517,835 | ||||||
5,627,546 | ||||||||
Nevada 0.8% | ||||||||
Clark County Economic Development Revenue, Refunding, Southwest Gas Corp. Project Series B, Insured: FGIC 5.00%, due 12/1/33 (a) | 240,000 | 227,249 | ||||||
Clark County Economic Development Revenue, University Southern Nevada Project Insured: RADIAN 4.625%, due 4/1/37 | 1,610,000 | 1,176,025 | ||||||
Insured: RADIAN 5.00%, due 4/1/27 | 350,000 | 303,646 | ||||||
Director of the State of Nevada Department of Business & Industry Lease Revenue, Tahoe Regional Planning Agency Project Series A, Insured: AMBAC 4.50%, due 6/1/37 | 440,000 | 277,270 | ||||||
1,984,190 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New Hampshire 0.5% | ||||||||
Manchester Housing and Redevelopment Authority Revenue Series A, Insured; ACA 6.75%, due 1/1/14 | $ | 140,000 | $ | 136,237 | ||||
Manchester Housing and Redevelopment Authority Revenue, Capital Appreciation Series B, Insured: RADIAN (zero coupon), due 1/1/17 | 375,000 | 227,396 | ||||||
Series B, Insured: ACA (zero coupon), due 1/1/26 | 1,400,000 | 323,652 | ||||||
New Hampshire Health & Education Facilities Authority Revenue, Franklin Pierce College, Insured: ACA 6.05%, due 10/1/34 | 520,000 | 444,559 | ||||||
New Hampshire Higher Educational & Health Facilities Authority Revenue, Franklin Pierce College Insured: ACA 5.30%, due 10/1/28 | 110,000 | 89,367 | ||||||
1,221,211 | ||||||||
New Jersey 7.8% | ||||||||
Burlington County Bridge Commission Economic Development Revenue, Evergreen Project 5.625%, due 1/1/38 | 500,000 | 423,745 | ||||||
Camden County, New Jersey Improvement Authority Revenue Series A 5.75%, due 2/15/34 | 1,000,000 | 961,670 | ||||||
New Jersey Economic Development Authority Revenue, Applewood Estates Project | ||||||||
Series A, Insured: RADIAN 5.00%, due 10/1/25 | 240,000 | 213,806 | ||||||
Series A, Insured: RADIAN 5.00%, due 10/1/35 | 695,000 | 576,628 | ||||||
New Jersey Economic Development Authority Revenue, Capital Appreciation Series A, Insured: NATL-RE (zero coupon), due 7/1/18 | 225,000 | 163,672 | ||||||
X New Jersey Economic Development Authority Revenue, Cigarette Tax | ||||||||
5.50%, due 6/15/31 | 685,000 | 639,037 | ||||||
5.75%, due 6/15/29 | 3,720,000 | 3,639,164 | ||||||
5.75%, due 6/15/34 | 1,000,000 | 947,900 | ||||||
New Jersey Economic Development Authority Revenue, MSU Student Housing Project 5.875%, due 6/1/42 | 900,000 | 909,306 | ||||||
New Jersey Economic Development Authority Special Facilities Revenue, Continental Airlines Project 5.50%, due 4/1/28 (a) | 180,000 | 153,180 | ||||||
6.25%, due 9/15/19 (a) | 2,500,000 | 2,454,800 | ||||||
6.25%, due 9/15/29 (a) | 1,575,000 | 1,495,368 | ||||||
6.40%, due 9/15/23 (a) | 190,000 | 186,124 | ||||||
New Jersey Health Care Facilities Financing Authority Revenue Insured: MBIA (zero coupon), due 7/1/17 | 120,000 | 92,425 | ||||||
Series B (zero coupon), due 7/1/31 | 205,000 | 58,476 | ||||||
5.00%, due 7/1/36 | 190,000 | 165,796 | ||||||
Insured: RADIAN 5.125%, due 7/1/32 | 175,000 | 147,135 | ||||||
6.25%, due 7/1/35 | 2,500,000 | 2,546,000 | ||||||
X Tobacco Settlement Financing Corp., New Jersey | ||||||||
Series 1A 4.50%, due 6/1/23 | 1,000,000 | 911,110 | ||||||
Series 1A 4.625%, due 6/1/26 | 4,315,000 | 3,465,376 | ||||||
20,150,718 | ||||||||
New York 8.3% | ||||||||
New York City Industrial Development Agency Revenue Insured: AMBAC 4.75%, due 1/1/42 | 200,000 | 162,594 | ||||||
Insured: AMBAC 5.00%, due 1/1/46 | 2,655,000 | 2,232,483 | ||||||
New York City Industrial Development Agency Special Facilities Revenue Series A 8.00%, due 8/1/12 (a) | 2,500,000 | 2,495,425 | ||||||
New York Liberty Development Corp. Revenue Refunding, Second Priority Bank of America 6.375%, due 7/15/49 | 1,000,000 | 1,040,320 | ||||||
X New York State Mortgage Agency Series 132 1.50%, due 4/1/37 (a)(c) | 2,280,000 | 2,280,000 | ||||||
Series 132 3.50%, due 4/1/37 (a)(c) | 3,650,000 | 3,650,000 | ||||||
Series 142 3.50%, due 10/1/37 (a)(c) | 1,500,000 | 1,500,000 | ||||||
Series 150 3.50%, due 10/1/37 (a)(c) | 6,850,000 | 6,850,000 |
The notes to the financial statements are an integral part of,
16 MainStay High Yield Municipal Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New York (continued) | ||||||||
Suffolk County Economic Development Corp. Revenue Refunding, Peconic Landing Southold 6.00%, due 12/1/40 | $ | 1,000,000 | $ | 1,007,940 | ||||
21,218,762 | ||||||||
North Carolina 0.1% | ||||||||
North Carolina Medical Care Commission Retirement Facilities Revenue, First Mortgage Galloway Ridge Series A 5.875%, due 1/1/31 | 230,000 | 222,035 | ||||||
Ohio 4.5% | ||||||||
X Buckeye, Ohio, Tobacco Settlement Financing Authority Series A-2 5.125%, due 6/1/24 | 4,885,000 | 3,763,941 | ||||||
Series A-2 5.75%, due 6/1/34 | 600,000 | 435,456 | ||||||
Series A-2 5.875%, due 6/1/30 | 1,000,000 | 756,080 | ||||||
Cleveland-Cuyahoga County Port Authority Revenue, Student Housing Euclid Avenue Project Insured: AMBAC 4.25%, due 8/1/15 | 200,000 | 194,582 | ||||||
Insured: AMBAC 4.50%, due 8/1/36 | 960,000 | 672,595 | ||||||
Insured: AMBAC 5.00%, due 8/1/21 | 100,000 | 91,103 | ||||||
Insured: AMBAC 5.00%, due 8/1/28 | 110,000 | 90,562 | ||||||
Erie County, Ohio, Hospital Facilities Revenue Series A 5.25%, due 8/15/46 | 275,000 | 244,013 | ||||||
Summit County Port Authority Revenue Series B 6.875%, due 5/15/40 | 1,250,000 | 1,281,275 | ||||||
Summit County Port Authority Revenue, Brimfield Project Series G 4.875%, due 5/15/25 | 500,000 | 430,400 | ||||||
Toledo-Lucas County Port Authority Special Assessment Revenue, Crocker Park Public Improvement Project 5.375%, due 12/1/35 | 4,130,000 | 3,654,844 | ||||||
11,614,851 | ||||||||
Oklahoma 1.9% | ||||||||
X Norman Regional Hospital Authority Revenue | ||||||||
5.125%, due 9/1/37 | 5,100,000 | 4,247,892 | ||||||
Insured: RADIAN 5.50%, due 9/1/32 | 130,000 | 109,902 | ||||||
Tulsa Municipal Airport Trust, AMR Corporation 7.35%, due 12/1/11 | 650,000 | 648,570 | ||||||
5,006,364 | ||||||||
Oregon 0.1% | ||||||||
Oregon State Facilities Authority Revenue, Concordia University Project Series A 6.375%, due 9/1/40 | 250,000 | 254,103 | ||||||
Pennsylvania 7.1% | ||||||||
Allegheny County Higher Education Building Authority Revenue 7.00%, due 11/1/40 | 1,000,000 | 1,046,830 | ||||||
Allegheny County Industrial Development Authority Revenue, Propel Charter Montour Series A 6.75%, due 8/15/35 | 305,000 | 295,670 | ||||||
Erie County, Pennsylvania, Hospital Authority Health Facilities Revenue Series A, Insured: RADIAN 4.50%, due 7/1/23 | 250,000 | 197,808 | ||||||
Harrisburg, PA Series F, Insured: AMBAC (zero coupon), due 3/15/13 | 125,000 | 109,335 | ||||||
Series D, Insured: AMBAC (zero coupon), due 3/15/13 | 265,000 | 231,790 | ||||||
Series D, Insured: AMBAC (zero coupon), due 9/15/13 | 75,000 | 62,477 | ||||||
Series D, Insured: AMBAC (zero coupon), due 3/15/14 | 350,000 | 277,049 | ||||||
Series F, Insured: AMBAC (zero coupon), due 3/15/16 | 210,000 | 136,498 | ||||||
Series D, Insured: AMBAC (zero coupon), due 9/15/16 | 45,000 | 27,843 | ||||||
Series F, Insured: AMBAC (zero coupon), due 9/15/20 | 105,000 | 41,469 | ||||||
Series F, Insured: AMBAC (zero coupon), due 9/15/22 | 100,000 | 31,703 | ||||||
Harrisburg, Pennsylvania, Authority Revenue, University of Science Series B 6.00%, due 9/1/36 | 2,600,000 | 2,303,886 | ||||||
Harrisburg, Pennsylvania, Capital Appreciation, Refunding | ||||||||
Series D, Insured: AMBAC (zero coupon), due 9/15/12 | 25,000 | 22,960 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Pennsylvania (continued) | ||||||||
Harrisburg, Pennsylvania, Capital Appreciation (continued) | ||||||||
Series: F, Insured: AMBAC (zero coupon), due 9/15/13 | $ | 240,000 | $ | 199,925 | ||||
Series F, Insured: AMBAC (zero coupon), due 9/15/14 | 225,000 | 169,403 | ||||||
Series F, Insured: AMBAC (zero coupon), due 3/15/15 | 460,000 | 331,016 | ||||||
Series F, Insured: AMBAC (zero coupon), due 9/15/15 | 165,000 | 113,079 | ||||||
Series D, Insured: AMBAC (zero coupon), due 3/15/16 | 285,000 | 185,247 | ||||||
Harrisburg, Pennsylvania, Parking Authority Revenue Series J, Insured: NATL-RE 5.00%, due 9/1/22 | 500,000 | 442,275 | ||||||
Montgomery County, Pennsylvania, Industrial Development Authority Revenue, Acts Retirement Communities Series A 4.50%, due 11/15/36 | 400,000 | 323,412 | ||||||
Pennsylvania Economic Development Financing Authority Revenue Series B 8.00%, due 5/1/29 | 250,000 | 260,458 | ||||||
Pennsylvania Higher Educational Facilities Authority Revenue Series A, Insured: RADIAN 5.125%, due 4/1/33 | 160,000 | 141,131 | ||||||
Pennsylvania Higher Educational Facilities Authority Revenue, Shippensburg University 6.25%, due 10/1/43 | 1,000,000 | 1,021,420 | ||||||
Pennsylvania Higher Educational Facilities Authority Revenue, University of the Arts | ||||||||
Series A, Insured: RADIAN 5.00%, due 9/15/33 | 150,000 | 125,604 | ||||||
Insured: RADIAN 5.75%, due 3/15/30 | 1,040,000 | 981,406 | ||||||
Philadelphia Authority for Industrial Development Revenue, First Philadelphia Charter Series A 5.85%, due 8/15/37 | 650,000 | 566,806 | ||||||
Philadelphia Authority for Industrial Development Revenue, Please Touch Museum Project | ||||||||
4.25%, due 9/1/19 | 605,000 | 516,410 | ||||||
5.25%, due 9/1/26 | 1,000,000 | 821,530 | ||||||
5.25%, due 9/1/31 | 2,425,000 | 1,882,746 | ||||||
Philadelphia Hospitals and Higher Education Facilities Authority Revenue Series A 6.625%, due 11/15/23 | 3,645,000 | 3,644,599 | ||||||
Susquehanna Area Regional Airport Authority System Revenue Series A, Insured: AMBAC 5.00%, due 1/1/28 (a) | 170,000 | 147,339 | ||||||
Series B, Insured: AMBAC 5.00%, due 1/1/33 | 270,000 | 242,779 | ||||||
West Shore Area Authority Hospital Revenue, Holy Spirit Hospital Sisters 6.50%, due 1/1/41 | 1,200,000 | 1,261,128 | ||||||
18,163,031 | ||||||||
Puerto Rico 1.0% | ||||||||
Puerto Rico Commonwealth Series C 6.50%, due 7/1/40 | 1,000,000 | 1,106,520 | ||||||
Puerto Rico Industrial Tourist Educational Medical & Environmental, Control Facility Financing Authority Series A 6.00%, due 7/1/33 | 1,500,000 | 1,586,055 | ||||||
2,692,575 | ||||||||
Rhode Island 1.2% | ||||||||
Providence Public Buildings Authority Revenue Series A, Insured: AGM 5.875%, due 6/15/26 | 990,000 | 1,053,519 | ||||||
Providence Redevelopment Agency Certificates of Participation Series A, Insured: RADIAN (zero coupon), due 9/1/35 | 280,000 | 59,847 | ||||||
Providence, RI, Special Obligation, Tax Increment Series E, Insured: RADIAN 5.00%, due 6/1/12 | 510,000 | 508,735 | ||||||
Series E, Insured: RADIAN 5.00%, due 6/1/13 | 600,000 | 593,160 | ||||||
Rhode Island Health and Educational Building Corp. Series B, Insured: AMBAC 5.00%, due 5/15/21 | 1,000,000 | 853,740 | ||||||
3,069,001 | ||||||||
South Carolina 0.0%‡ | ||||||||
South Carolina Jobs-Economic Development Authority Health Facilities Revenue 5.70%, due 5/1/26 | 130,000 | 118,261 | ||||||
The notes to the financial statements are an integral part of,
18 MainStay High Yield Municipal Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Tennessee 0.4% | ||||||||
Chattanooga Health Educational & Housing Facility Board Revenue, Refunding Series B 6.00%, due 10/1/35 | $ | 500,000 | $ | 477,995 | ||||
Johnson City Health & Educational Facilities Board Revenue, First Mountain States Health Alliance Series A 5.50%, due 7/1/36 | 570,000 | 559,022 | ||||||
1,037,017 | ||||||||
Texas 10.6% | ||||||||
Alliance Airport Authority, American Airlines Project 7.00%, due 12/1/11 (a) | 2,410,000 | 2,385,972 | ||||||
Austin Convention Enterprises, Inc., Convention Center Revenue Bond Series A, Insured: XLCA 4.30%, due 1/1/33 | 110,000 | 83,047 | ||||||
Series A, Insured: XLCA 5.00%, due 1/1/34 | 1,535,000 | 1,281,710 | ||||||
Central Texas Regional Mobility Authority Revenue (zero coupon), due 1/1/33 | 135,000 | 35,111 | ||||||
6.75%, due 1/1/41 | 4,000,000 | 3,975,280 | ||||||
Harris County-Houston Sports Authority Revenue | ||||||||
Series B, Insured: NATL-RE (zero coupon), due 11/15/13 | 200,000 | 173,618 | ||||||
Series B, Insured: NATL-RE (zero coupon), due 11/15/15 | 1,350,000 | 1,020,073 | ||||||
Series B, Insured: NATL-RE (zero coupon), due 11/15/16 | 100,000 | 70,325 | ||||||
Series B, Insured: NATL-RE (zero coupon), due 11/15/18 | 500,000 | 302,670 | ||||||
Series B, Insured: NATL-RE (zero coupon), due 11/15/22 | 265,000 | 120,604 | ||||||
Series H, Insured: NATL-RE (zero coupon), due 11/15/24 | 230,000 | 90,760 | ||||||
Series H, Insured: NATL-RE (zero coupon), due 11/15/29 | 90,000 | 24,434 | ||||||
Series H, Insured: NATL-RE (zero coupon), due 11/15/30 | 270,000 | 68,191 | ||||||
Series A-3, Insured: NATL-RE (zero coupon), due 11/15/32 | 125,000 | 27,045 | ||||||
Series A-3, Insured: NATL-RE (zero coupon), due 11/15/33 | 200,000 | 39,810 | ||||||
Series A, Insured: NATL-RE (zero coupon), due 11/15/34 | 100,000 | 21,521 | ||||||
Series A-3, Insured: NATL-RE (zero coupon), due 11/15/34 | 50,000 | 9,250 | ||||||
Series A, Insured: NATL-RE (zero coupon), due 11/15/38 | 19,450,000 | 3,183,381 | ||||||
Series H, Insured: NATL-RE (zero coupon), due 11/15/38 | 250,000 | 34,058 | ||||||
Series H, Insured: NATL-RE (zero coupon), due 11/15/41 | 350,000 | 38,220 | ||||||
Series G, Insured: NATL-RE 5.25%, due 11/15/21 | 110,000 | 106,989 | ||||||
Series B, Insured: NATL-RE 5.25%, due 11/15/40 | 350,000 | 292,789 | ||||||
Houston Higher Education Finance Corp. Series A 6.875%, due 5/15/41 | 1,700,000 | 1,825,953 | ||||||
Houston, Texas Airport System Revenue, Special Facilities Continental Airlines | ||||||||
Series B 6.125%, due 7/15/27 (a) | 145,000 | 133,009 | ||||||
Series E 6.75%, due 7/1/21 (a) | 755,000 | 743,358 | ||||||
Series E 7.00%, due 7/1/29 (a) | 500,000 | 500,030 | ||||||
San Juan, Texas Higher Education Finance Authority Revenue, Idea Public Schools Series A 6.70%, due 8/15/40 | 1,000,000 | 1,048,830 | ||||||
X Texas Private Activity Bond Surface Transportation Corp. Revenue | ||||||||
6.875%, due 12/31/39 | 3,050,000 | 3,262,615 | ||||||
7.00%, due 6/30/40 | 1,580,000 | 1,703,098 | ||||||
7.50%, due 6/30/33 | 750,000 | 839,333 | ||||||
Texas State Public Finance Authority Charter School Finance Corp. Revenue, ED—Burnham Wood Project Series A 6.25%, due 9/1/36 | 1,300,000 | 1,149,759 | ||||||
Texas State Public Finance Authority Charter School Finance Corp. Revenue, ED—Cosmos Foundation Series A 5.375%, due 2/15/37 | 500,000 | 468,175 | ||||||
Travis County Health Facilities Development Corp. Revenue, Westminster Manor 7.125%, due 11/1/40 | 1,000,000 | 1,042,780 | ||||||
Tyler Health Facilities Development Corp. 5.375%, due 11/1/37 | 1,250,000 | 1,095,850 | ||||||
27,197,648 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Utah 0.8% | ||||||||
Santa Clara, Utah, Municipal Building Authority Lease Revenue Insured: CIFG 4.125%, due 2/1/28 (b) | $ | 800,000 | $ | 591,392 | ||||
Utah State Charter School Finance Authority Revenue, North Star Academy Series A 7.00%, due 7/15/45 | 600,000 | 604,572 | ||||||
Utah State Charter School Finance Authority Revenue, Science & Arts Academy Series A 7.75%, due 3/15/39 | 950,000 | 965,333 | ||||||
2,161,297 | ||||||||
Vermont 0.1% | ||||||||
Vermont Educational & Health Buildings Financing Agency Revenue | ||||||||
Series A, Insured: RADIAN 5.00%, due 7/1/34 | 200,000 | 151,348 | ||||||
Series A, Insured: RADIAN 5.75%, due 2/15/37 | 140,000 | 132,590 | ||||||
283,938 | ||||||||
Virginia 2.3% | ||||||||
X Capital Beltway Funding Corp. Revenue Series B 6.00%, due 12/31/47 (c) | 6,000,000 | 6,000,000 | ||||||
Washington 1.8% | ||||||||
Everett Public Facilities District Project Revenue 3.00%, due 4/1/36 (c) | 2,020,000 | 2,020,000 | ||||||
Greater Wenatchee Regional Events Center Public Facilities District Revenue, Revenue & Special Tax Building 5.25%, due 12/1/11 | 1,535,000 | 1,412,200 | ||||||
King County, Washington, Public Hospital District No. 4 7.00%, due 12/1/40 | 1,000,000 | 998,680 | ||||||
Tobacco Settlement Authority Revenue, Washington 6.625%, due 6/1/32 | 65,000 | 65,816 | ||||||
4,496,696 | ||||||||
West Virginia 0.2% | ||||||||
Ohio County, West Virginia, Commission Special District Excise Tax Revenue 5.75%, due 3/1/36 | 400,000 | 399,184 | ||||||
Wisconsin 0.7% | ||||||||
Menasha Wisconsin Insured: NATL-RE 3.70%, due 3/1/13 | 740,000 | 711,629 | ||||||
4.40%, due 9/1/17 | 100,000 | 83,939 | ||||||
Public Finance Authority Revenue, Continuing Care Retirement Community Series A 8.25%, due 6/1/46 | 1,000,000 | 1,028,810 | ||||||
Warrens Wisconsin, Refunding 4.70%, due 12/1/19 | 120,000 | 97,699 | ||||||
1,922,077 | ||||||||
Wyoming 0.4% | ||||||||
West Park Hospital District Revenue, West Park Hospital Project Series B 6.50%, due 6/1/27 | 500,000 | 536,250 | ||||||
Wyoming Community Development Authority Student Housing Revenue 6.50%, due 7/1/43 | 500,000 | 518,825 | ||||||
1,055,075 | ||||||||
Total Municipal Bonds (Cost $239,601,938) | 244,777,319 | |||||||
Shares | ||||||||
Unaffiliated Investment Companies 2.1% | ||||||||
California 1.2% | ||||||||
BlackRock MuniYield California Fund, Inc. | 4,960 | 71,374 | ||||||
BlackRock MuniYield California Insured Fund, Inc. | 15,810 | 217,546 | ||||||
Invesco California Insured Municipal Income Trust | 16,147 | 227,673 | ||||||
Invesco California Quality Municipal Securities | 115,127 | 1,471,323 | ||||||
Nuveen California Dividend Advantage Municipal Fund | 35,000 | 480,900 | ||||||
Nuveen California Municipal Market Opportunity Fund | 45,202 | 627,404 | ||||||
Nuveen California Performance Plus Municipal Fund | 3,020 | 42,491 | ||||||
3,138,711 | ||||||||
Michigan 0.2% | ||||||||
Nuveen Michigan Premium Income Fund | 1,405 | 19,375 | ||||||
Nuveen Michigan Quality Income | 23,148 | 325,461 | ||||||
344,836 | ||||||||
Multi-State 0.4% | ||||||||
Invesco Municipal Income Opportunities Trust | 38,418 | 242,802 | ||||||
Invesco Municipal Income Opportunities Trust II | 8,290 | 58,030 | ||||||
Invesco Quality Municipal Income Trust | 12,300 | 159,654 |
The notes to the financial statements are an integral part of,
20 MainStay High Yield Municipal Bond Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Unaffiliated Investment Companies (continued) | ||||||||
Multi-State (continued) | ||||||||
Invesco Quality Municipal Securities | 34,620 | $ | 488,834 | |||||
Nuveen Enhanced Municipal Value Fund | 7,845 | 107,476 | ||||||
1,056,796 | ||||||||
New Jersey 0.1% | ||||||||
BlackRock New Jersey Municipal Bond Trust | 19,900 | 286,162 | ||||||
Invesco Van Kampen Trust For Investment Grade New Jersey Municipals | 1,200 | 19,680 | ||||||
305,842 | ||||||||
New York 0.0%‡ | ||||||||
Nuveen New York Dividend Advantage Municipal Fund | 620 | 8,364 | ||||||
Nuveen New York Investment Quality Municipal Fund | 2,320 | 34,104 | ||||||
42,468 | ||||||||
Pennsylvania 0.2% | ||||||||
Nuveen Pennsylvania Investment Quality Municipal Fund | 9,600 | 136,896 | ||||||
Nuveen Pennsylvania Premium Income Municipal Fund 2 | 20,000 | 266,200 | ||||||
403,096 | ||||||||
Total Unaffiliated Investment Companies (Cost $5,289,701) | 5,291,749 | |||||||
Total Investments (Cost $244,891,639) (d) | 97.3 | % | 250,069,068 | |||||
Other Assets, Less Liabilities | 2.7 | 6,927,894 | ||||||
Net Assets | 100.0 | % | $ | 256,996,962 | ||||
‡ | Less than one-tenth of a percent. | |
(a) | Interest on these securities is subject to alternative minimum tax. | |
(b) | Illiquid security. The total market value of these securities at October 31, 2011 is $1,581,722, which represents 0.6% of the Fund’s net assets. | |
(c) | Variable rate securities that may be tendered back to the issuer at any time prior to maturity at par. Rate shown is the rate in effect at October 31, 2011. | |
(d) | At October 31, 2011, cost is $244,896,593 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 6,746,299 | ||
Gross unrealized depreciation | (1,573,824 | ) | ||
Net unrealized appreciation | $ | 5,172,475 | ||
The following abbreviations are used in the above portfolio:
ACA—ACA Financial Guaranty Corp.
AGC-ICC—Assured Guaranty Corporation—Insured Custody Certificates
AGM—Assured Guaranty Municipal Corp.
AMBAC—Ambac Assurance Corp.
CIFG—CIFG Group
FGIC—Financial Guaranty Insurance Co.
MBIA—MBIA Insurance Corp.
NATL-RE—National Public Finance Guarantee
RADIAN—Radian Asset Assurance, Inc.
XLCA—XL Capital Assurance, Inc.
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Municipal Bonds | $ | — | $ | 244,777,319 | $ | — | $ | 244,777,319 | ||||||||
Unaffiliated Investment Companies | 5,291,749 | — | — | 5,291,749 | ||||||||||||
Total Investments in Securities | $ | 5,291,749 | $ | 244,777,319 | $ | — | $ | 250,069,068 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 21 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $244,891,639) | $ | 250,069,068 | ||
Cash | 51,876 | |||
Receivables: | ||||
Fund shares sold | 7,781,619 | |||
Dividends and interest | 3,682,002 | |||
Investment securities sold | 1,854,717 | |||
Other assets | 34,560 | |||
Total assets | 263,473,842 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 3,115,738 | |||
Investment securities purchased | 2,717,534 | |||
Manager (See Note 3) | 69,980 | |||
NYLIFE Distributors (See Note 3) | 64,727 | |||
Transfer agent (See Note 3) | 23,025 | |||
Shareholder communication | 18,791 | |||
Professional fees | 14,869 | |||
Trustees | 930 | |||
Custodian | 331 | |||
Accrued expenses | 3,839 | |||
Dividend payable | 447,116 | |||
Total liabilities | 6,476,880 | |||
Net assets | $ | 256,996,962 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 24,296 | ||
Additional paid-in capital | 253,073,179 | |||
253,097,475 | ||||
Distributions in excess of net investment income | (25,977 | ) | ||
Accumulated net realized gain (loss) on investments and futures transactions | (1,251,965 | ) | ||
Net unrealized appreciation (depreciation) on investments | 5,177,429 | |||
Net assets | $ | 256,996,962 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 989,086 | ||
Shares of beneficial interest outstanding | 93,590 | |||
Net asset value per share outstanding | $ | 10.57 | ||
Maximum sales charge (4.50% of offering price) | 0.50 | |||
Maximum offering price per share outstanding | $ | 11.07 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 150,071,419 | ||
Shares of beneficial interest outstanding | 14,182,085 | |||
Net asset value per share outstanding | $ | 10.58 | ||
Maximum sales charge (4.50% of offering price) | 0.50 | |||
Maximum offering price per share outstanding | $ | 11.08 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 45,631,616 | ||
Shares of beneficial interest outstanding | 4,322,642 | |||
Net asset value and offering price per share outstanding | $ | 10.56 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 60,304,841 | ||
Shares of beneficial interest outstanding | 5,697,918 | |||
Net asset value and offering price per share outstanding | $ | 10.58 | ||
The notes to the financial statements are an integral part of,
22 MainStay High Yield Municipal Bond Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 7,515,844 | ||
Dividends | 259,685 | |||
Total income | 7,775,529 | |||
Expenses | ||||
Manager (See Note 3) | 662,739 | |||
Distribution/Service—Investor Class (See Note 3) | 1,810 | |||
Distribution/Service—Class A (See Note 3) | 141,848 | |||
Distribution/Service—Class C (See Note 3) | 172,270 | |||
Registration | 94,483 | |||
Transfer agent (See Note 3) | 70,842 | |||
Professional fees | 50,835 | |||
Shareholder communication | 39,759 | |||
Custodian | 15,910 | |||
Offering (See Note 2) | 9,294 | |||
Trustees | 4,141 | |||
Miscellaneous | 8,442 | |||
Total expenses before waiver/reimbursement | 1,272,373 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (224,241 | ) | ||
Net expenses | 1,048,132 | |||
Net investment income (loss) | 6,727,397 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Security transactions | (443,291 | ) | ||
Futures transactions | (808,813 | ) | ||
Realized capital gain distributions from unaffiliated investment companies | 139 | |||
Net realized gain (loss) on investments and futures transactions | (1,251,965 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 2,670,612 | |||
Net realized and unrealized gain (loss) on investments and futures transactions | 1,418,647 | |||
Net increase (decrease) in net assets resulting from operations | $ | 8,146,044 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 23 |
Statements of Changes in Net Assets
for the year ended October 31, 2011 and the period March 31, 2010 (commencement of operations)
through October 31, 2010
through October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 6,727,397 | $ | 1,125,045 | ||||
Net realized gain (loss) on investments and futures transactions | (1,251,965 | ) | 231,616 | |||||
Net change in unrealized appreciation (depreciation) on investments | 2,670,612 | 2,506,817 | ||||||
Net increase (decrease) in net assets resulting from operations | 8,146,044 | 3,863,478 | ||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (39,557 | ) | (8,866 | ) | ||||
Class A | (3,271,088 | ) | (281,977 | ) | ||||
Class C | (849,109 | ) | (50,163 | ) | ||||
Class I | (2,601,030 | ) | (788,554 | ) | ||||
(6,760,784 | ) | (1,129,560 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (1,870 | ) | — | |||||
Class A | (68,664 | ) | — | |||||
Class C | (19,909 | ) | — | |||||
Class I | (141,212 | ) | — | |||||
(231,655 | ) | — | ||||||
Total dividends and distributions to shareholders | (6,992,439 | ) | (1,129,560 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 255,353,011 | 70,786,977 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 4,695,665 | 1,052,548 | ||||||
Cost of shares redeemed | (78,063,267 | ) | (715,495 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 181,985,409 | 71,124,030 | ||||||
Net increase (decrease) in net assets | 183,139,014 | 73,857,948 | ||||||
Net Assets | ||||||||
Beginning of period | 73,857,948 | — | ||||||
End of period | $ | 256,996,962 | $ | 73,857,948 | ||||
Undistributed (distributions in excess of) net investment income at end of period | $ | (25,977 | ) | $ | 7,449 | |||
The notes to the financial statements are an integral part of,
24 MainStay High Yield Municipal Bond Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | Class A | |||||||||||||||||
March 31, | March 31, | |||||||||||||||||
Year | 2010** | Year | 2010** | |||||||||||||||
ended | through | ended | through | |||||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
Net asset value at beginning of period | $ | 10.75 | $ | 10.00 | $ | 10.77 | $ | 10.00 | ||||||||||
Net investment income (loss) | 0.57 | (a) | 0.27 | 0.58 | (a) | 0.27 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.17 | ) | 0.75 | (0.19 | ) | 0.78 | ||||||||||||
Total from investment operations | 0.40 | 1.02 | 0.39 | 1.05 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.55 | ) | (0.27 | ) | (0.55 | ) | (0.28 | ) | ||||||||||
From net realized gain on investments | (0.03 | ) | — | (0.03 | ) | — | ||||||||||||
Total dividends and distributions | (0.58 | ) | (0.27 | ) | (0.58 | ) | (0.28 | ) | ||||||||||
Net asset value at end of period | $ | 10.57 | $ | 10.75 | $ | 10.58 | $ | 10.77 | ||||||||||
Total investment return (b) | 4.03 | % | 10.32 | %(c) | 4.00 | % | 10.59 | %(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 5.58 | % | 5.03 | %†† | 5.58 | % | 5.20 | %†† | ||||||||||
Net expenses | 0.90 | % | 1.00 | %†† | 0.85 | % | 0.85 | %†† | ||||||||||
Expenses (before waiver/reimbursement) | 1.09 | % | 1.73 | %†† | 1.04 | % | 1.58 | %†† | ||||||||||
Portfolio turnover rate | 154 | % | 163 | % | 154 | % | 163 | % | ||||||||||
Net assets at end of period (in 000’s) | $989 | $598 | $ | 150,071 | $ | 23,062 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 25 |
Financial Highlights selected per share data and ratios
Class C | Class I | |||||||||||||||||
March 31, | March 31, | |||||||||||||||||
Year | 2010** | Year | 2010** | |||||||||||||||
ended | through | ended | through | |||||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
Net asset value at beginning of period | $ | 10.75 | $ | 10.00 | $ | 10.77 | $ | 10.00 | ||||||||||
Net investment income (loss) | 0.50 | (a) | 0.22 | 0.60 | (a) | 0.29 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.18 | ) | 0.77 | (0.18 | ) | 0.76 | ||||||||||||
Total from investment operations | 0.32 | 0.99 | 0.42 | 1.05 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.48 | ) | (0.24 | ) | (0.58 | ) | (0.28 | ) | ||||||||||
From net realized gain on investments | (0.03 | ) | — | (0.03 | ) | — | ||||||||||||
Total dividends and distributions | (0.51 | ) | (0.24 | ) | (0.61 | ) | (0.28 | ) | ||||||||||
Net asset value at end of period | $ | 10.56 | $ | 10.75 | $ | 10.58 | $ | 10.77 | ||||||||||
Total investment return (b) | 3.22 | % | 9.96 | %(c) | 4.21 | % | 10.66 | %(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 4.79 | % | 4.33 | %†† | 5.88 | % | 5.26 | %†† | ||||||||||
Net expenses | 1.65 | % | 1.75 | %†† | 0.60 | % | 0.60 | %†† | ||||||||||
Expenses (before waiver/reimbursement) | 1.84 | % | 2.48 | %†† | 0.79 | % | 1.33 | %†† | ||||||||||
Portfolio turnover rate | 154 | % | 163 | % | 154 | % | 163 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 45,632 | $5,477 | $ | 60,305 | $ | 44,720 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
26 MainStay High Yield Municipal Bond Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay High Yield Municipal Bond Fund (the “Fund”), a diversified fund.
The Fund currently offers four classes of shares. Investor Class, Class A, Class C and Class I shares commenced operations on March 31, 2010. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $500,000 or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The four classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek a high level of current income exempt from federal income taxes. The Fund’s secondary investment objective is total return.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities are valued at the evaluated mean prices supplied by a pricing agent or brokers selected by the Fund’s Manager (as defined in Note 3(A)) in consultation with the Fund’s Subadvisor (as defined in Note 3(A)) whose prices reflect broker/dealer supplied valuations and electronic data processing techniques, if such prices are deemed by
mainstayinvestments.com 27
Notes to Financial Statements (continued)
the Fund’s Manager, in consultation with the Fund’s Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, Yankee bonds, convertible bonds, asset-backed securities, and mortgage-backed securities, are generally categorized as Level 2 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund did not hold any securities that were fair valued in such a manner.
Generally, a security is considered illiquid if it cannot be sold or disposed of in the ordinary course of business at approximately the price at which it is valued. Its illiquidity might prevent the sale of such security at a time when the Manager or Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of a Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in determining value, which could vary from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or Subadvisor determines the liquidity of the Fund’s investments; in doing so, the Manager or Subadvisor may consider various factors, including (i) the frequency of trades and quotations, (ii) the number of dealers and prospective purchasers, (iii) dealer undertakings to make a market, and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities generally will be valued in such manner as the Board in good faith deems appropriate to reflect their fair market value.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income monthly and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased, other than Short-Term Investments, for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities or, in the case of a callable security, over the period to the first date of call. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the
28 MainStay High Yield Municipal Bond Fund
expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security, or securities index). The Fund is subject to equity price risk and interest rate risk in the normal course of investing in these transactions. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking to market” such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. Risks arise from the possible imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the terms of their contracts. However, the Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. The Fund may also invest in futures contracts to help manage the duration and yield curve of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAV and may result in a loss to the Fund. At October 31, 2011, the Fund did not hold any futures contracts.
(H) Concentration of Risk. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.
(I) Offering Costs. Costs incurred by the Fund in connection with the commencement of the Fund’s operations were being amortized on a straight line basis over twelve months.
(J) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(K) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(L) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. These derivatives are not accounted for as hedging instruments.
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2011:
Realized Gain (Loss)
Statement of | Interest | |||||||||
Operations | Rate | |||||||||
Location | Risk | Total | ||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | (808,813 | ) | $ | (808,813 | ) | |||
Total Realized Gain (Loss) | $ | (808,813 | ) | $ | (808,813 | ) | ||||
mainstayinvestments.com 29
Notes to Financial Statements (continued)
Number of Contracts, Notional Amounts or Shares/Units (1)
Interest | ||||||
Rate | ||||||
Contracts | ||||||
Risk | Total | |||||
Futures Contracts Short (2) | (100) | (100 | ) | |||
(1) | Amount disclosed represents the weighted average held during the year ended October 31, 2011. |
(2) | Amount(s) represent(s) number of contracts or number of shares/units. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of 0.55% of the Fund’s average daily net assets.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for Class A shares do not exceed 0.85% of its average daily net assets. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of the Fund. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $662,739 and waived its fees and/or reimbursed expenses in the amount of $224,241.
State Street Bank and Trust Company (“State Street”), 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class C Plan, Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $2,100 and $111,233, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Class B and Class C shares of $676 and $8,904 for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 716 | ||
Class A | 30,129 | |||
Class C | 17,996 | |||
Class I | 22,001 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
30 MainStay High Yield Municipal Bond Fund
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Investor Class | $ | 28,570 | 2.9 | % | ||||
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $1,122. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||||||
Undistributed | Capital | Other | Unrealized | Total | ||||||||||||||||||
Ordinary | Tax Exempt | and Other | Temporary | Appreciation | Accumulated | |||||||||||||||||
Income | Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | |||||||||||||||||
$ | — | $ | 421,139 | $ | (1,247,011 | ) | $ | (447,116 | ) | $ | 5,172,475 | $ | 3,899,487 | |||||||||
The difference between book-basis and tax basis unrealized depreciation is primarily due to wash sale deferrals. The other temporary differences are primarily due to dividends payable.
The following table discloses the current year reclassifications between distributions in excess of net investment income, accumulated net realized gain (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed | Net Realized | |||||||||
Net Investment | Gain (Loss) | Additional | ||||||||
Income (Loss) | on Investments | Paid-In Capital | ||||||||
$ | (39 | ) | $ | 39 | $ | — | ||||
The reclassifications for the Fund are primarily due to reclassification of distributions.
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $1,247,011 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2019 | $ | 1,247 | ||||
The tax character of distributions paid during the year ended October 31, 2011 and the period ended October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 729,862 | $ | 39,604 | ||||
Exempt Interest Dividends | 6,262,577 | 1,089,956 | ||||||
Total | $ | 6,992,439 | $ | 1,129,560 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $366,150 and $190,000, respectively.
mainstayinvestments.com 31
Notes to Financial Statements (continued)
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Period ended October 31, 2011: | ||||||||
Shares sold | 63,084 | $ | 651,137 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,766 | 38,468 | ||||||
Shares redeemed | (25,522 | ) | (260,066 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 41,328 | 429,539 | ||||||
Shares converted into Investor Class (See Note 1) | 15,540 | 160,097 | ||||||
Shares converted from Investor Class (See Note 1) | (18,929 | ) | (194,327 | ) | ||||
Net increase (decrease) | 37,939 | $ | 395,309 | |||||
Period ended October 31, 2010 (a): | ||||||||
Shares sold | 75,666 | $ | 792,111 | |||||
Shares issued to shareholders in reinvestment of dividends | 827 | 8,767 | ||||||
Shares redeemed | (20,842 | ) | (220,971 | ) | ||||
Net increase (decrease) | 55,651 | $ | 579,907 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 13,927,732 | $ | 144,855,630 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 210,698 | 2,185,544 | ||||||
Shares redeemed | (2,101,386 | ) | (21,804,649 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 12,037,044 | 125,236,525 | ||||||
Shares converted into Class A (See Note 1) | 18,905 | 194,327 | ||||||
Shares converted from Class A (See Note 1) | (15,518 | ) | (160,097 | ) | ||||
Net increase (decrease) | 12,040,431 | $ | 125,270,755 | |||||
Period ended October 31, 2010 (a): | ||||||||
Shares sold | 2,155,426 | $ | 22,681,777 | |||||
Shares issued to shareholders in reinvestment of dividends | 20,800 | 221,470 | ||||||
Shares redeemed | (34,572 | ) | (370,076 | ) | ||||
Net increase (decrease) | 2,141,654 | $ | 22,533,171 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 4,037,832 | $ | 41,846,270 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 42,085 | 435,529 | ||||||
Shares redeemed | (266,817 | ) | (2,722,001 | ) | ||||
Net increase (decrease) | 3,813,100 | $ | 39,559,798 | |||||
Period ended October 31, 2010 (a): | ||||||||
Shares sold | 517,803 | $ | 5,472,564 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,619 | 38,369 | ||||||
Shares redeemed | (11,880 | ) | (124,448 | ) | ||||
Net increase (decrease) | 509,542 | $ | 5,386,485 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 6,519,805 | $ | 67,999,974 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 200,807 | 2,036,124 | ||||||
Shares redeemed | (5,175,747 | ) | (53,276,551 | ) | ||||
Net increase (decrease) | 1,544,865 | $ | 16,759,547 | |||||
Period ended October 31, 2010 (a): | ||||||||
Shares sold | 4,079,174 | $ | 41,840,525 | |||||
Shares issued to shareholders in reinvestment of dividends | 73,879 | 783,942 | ||||||
Net increase (decrease) | 4,153,053 | $ | 42,624,467 | |||||
(a) | The Fund commenced investment operations on March 31, 2010. |
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
32 MainStay High Yield Municipal Bond Fund
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay High Yield Municipal Bond Fund (“the Fund”), one of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statement of operations and changes in net assets, and the financial highlights for the year or period in the nineteen-month period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay High Yield Municipal Bond Fund of MainStay Funds Trust as of October 31, 2011, and the results of its operations, the changes in its net assets and the financial highlights for the year or period in the nineteen-month period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
mainstayinvestments.com 33
Federal Income Tax Information (Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2011, the Fund designated approximately $250,339 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2011, should be multiplied by 1.0% to arrive at the amount eligible for the corporate dividends received deduction.
For Federal individual income tax purposes, the Fund designated 93.8% of the ordinary income dividends paid during its fiscal year ended October 31, 2011 as attributable to interest income from Tax Exempt Municipal Bonds. Such dividends are currently exempt from Federal income taxes under Section 103(a) of the Internal Revenue Code.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; or (ii) on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX, once it is filed, will be available free of charge upon request (i) by calling 800-MAINSTAY (624-6782); (ii) by visiting the Fund’s website at mainstayinvestments.com; or (iii) on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q will be available without charge on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
34 MainStay High Yield Municipal Bond Fund
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
mainstayinvestments.com 35
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
36 MainStay High Yield Municipal Bond Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
mainstayinvestments.com 37
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
38 MainStay High Yield Municipal Bond Fund
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
mainstayinvestments.com 39
This page intentionally left blank
This page intentionally left blank
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24906 MS284-11 | MSMHY11-12/11 |
NF5
MainStay ICAP Funds
Message from the President and Annual Report
October 31, 2011
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
MainStay ICAP Equity Fund | 5 | |
MainStay ICAP Select Equity Fund | 23 | |
MainStay ICAP Global Fund | 42 | |
MainStay ICAP International Fund | 58 | |
Notes to Financial Statements | 77 | |
Report of Independent Registered Public Accounting Firm | 95 | |
Federal Income Tax Information | 96 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 96 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 96 | |
Board Members and Officers | 97 | |
Investors should refer to each Fund’s Summary Prospectus and/or Prospectus and consider each Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about each Fund. You may obtain copies of each Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read each Summary Prospectus and/or Prospectus carefully before investing.
MainStay ICAP Equity Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||||
Expense | ||||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –1 | .09% | –1 | .67% | 3 | .26% | 1 | .56% | ||||||||||
Excluding sales charges | 4 | .67 | –0 | .55 | 3 | .84 | 1 | .56 | ||||||||||||
Class A Shares4 | Maximum 5.5% Initial Sales Charge | With sales charges | –0 | .83 | –1 | .52 | 3 | .33 | 1 | .18 | ||||||||||
Excluding sales charges | 4 | .94 | –0 | .40 | 3 | .92 | 1 | .18 | ||||||||||||
Class C Shares4 | Maximum 1% CDSC | With sales charges | 2 | .86 | –1 | .30 | 3 | .06 | 2 | .31 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 3 | .86 | –1 | .30 | 3 | .06 | 2 | .31 | |||||||||||
Class I Shares | No Sales Charge | 5 | .23 | –0 | .07 | 4 | .22 | 0 | .93 | |||||||||||
Class R1 Shares4 | No Sales Charge | 5 | .14 | –0 | .16 | 4 | .12 | 1 | .03 | |||||||||||
Class R2 Shares4 | No Sales Charge | 4 | .84 | –0 | .42 | 3 | .86 | 1 | .28 | |||||||||||
Class R3 Shares4 | No Sales Charge | 4 | .59 | –0 | .66 | 3 | .60 | 1 | .53 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. Effective August 31, 2006, ICAP Equity Fund was renamed MainStay ICAP Equity Fund. At that time, the Fund’s existing no-load shares were redesignated as Class I shares. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on April 29, 2008, include the historical performance of Class A shares through April 28, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Performance figures for Class A, C, R1, R2 and R3 shares, first offered on September 1, 2006, include the historical performance of Class I shares through August 31, 2006, adjusted for differences in certain expenses and fees. Unadjusted, the performance for these share classes might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
S&P 500® Index5 | 8 | .09% | 0 | .25% | 3 | .69% | ||||||
S&P 500® Value Index6 | 5 | .61 | –2 | .44 | 3 | .51 | ||||||
Average Lipper Large-Cap Value Fund7 | 4 | .18 | –2 | .04 | 3 | .59 | ||||||
5. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The S&P 500® Value Index represents approximately half of the market capitalization of the stocks in the S&P 500® Index that, on a growth-value spectrum, have been identified as falling either wholly or partially within the value half of the spectrum based on multiple factors. The S&P 500® Value Index is the Fund’s secondary benchmark. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | The average Lipper large-cap value fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper’s U.S. Diversified Equity large-cap floor. Large-cap value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500® Index. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on total returns with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay ICAP Equity Fund
Cost in Dollars of a $1,000 Investment in MainStay ICAP Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 896.00 | $ | 6.93 | $ | 1,017.90 | $ | 7.38 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 897.00 | $ | 5.59 | $ | 1,019.30 | $ | 5.95 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 892.40 | $ | 10.54 | $ | 1,014.10 | $ | 11.22 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 898.20 | $ | 4.31 | $ | 1,020.70 | $ | 4.58 | ||||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 897.80 | $ | 4.74 | $ | 1,020.20 | $ | 5.04 | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 896.80 | $ | 6.07 | $ | 1,018.80 | $ | 6.46 | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 895.50 | $ | 7.26 | $ | 1,017.50 | $ | 7.73 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.45% for Investor Class, 1.17% for Class A, 2.21% for Class C, 0.90% for Class I, 0.99% for Class R1, 1.27% for Class R2 and 1.52% for Class R3) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Sector Composition as of October 31, 2011 (Unaudited)
Financials | 17.8 | % | ||
Health Care | 17.5 | |||
Information Technology | 12.8 | |||
Consumer Discretionary | 12.0 | |||
Energy | 11.4 | |||
Consumer Staples | 10.5 | |||
Telecommunication Services | 7.4 | |||
Industrials | 4.3 | |||
Materials | 2.3 | |||
Short-Term Investment | 3.3 | |||
Other Assets, Less Liabilities | 0.7 | |||
100.0 | % | |||
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten holdings as of October 31, 2011 (excluding short-term investment)
1. | ExxonMobil Corp. | |
2. | Pfizer, Inc. | |
3. | Microsoft Corp. | |
4. | Time Warner, Inc. | |
5. | Procter & Gamble Co. (The) | |
6. | JPMorgan Chase & Co. | |
7. | Vodafone Group PLC, Sponsored ADR | |
8. | Honeywell International, Inc. | |
9. | Johnson & Johnson | |
10. | BCE, Inc. |
8 MainStay ICAP Equity Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jerrold K. Senser, CFA, and Thomas R. Wenzel, CFA, of Institutional Capital LLC (ICAP), the Fund’s Subadvisor.
How did MainStay ICAP Equity Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay ICAP Equity Fund returned 4.67% for Investor Class shares, 4.94% for Class A shares and 3.86% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 5.23%, Class R1 shares returned 5.14%, Class R2 shares returned 4.84% and Class R3 shares returned 4.59%. Investor Class, Class A, Class I, Class R1, Class R2 and Class R3 shares outperformed—and Class C shares underperformed—the 4.18% return of the average Lipper1 large-
cap value fund for the same period. All share classes underperformed the 8.09% return of the S&P 500® Index2 for the 12 months ended October 31, 2011. The S&P 500® Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
cap value fund for the same period. All share classes underperformed the 8.09% return of the S&P 500® Index2 for the 12 months ended October 31, 2011. The S&P 500® Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
A number of factors affected the Fund’s performance relative to the S&P 500® Index. Strong stock selection in the energy and industrials sectors added to the Fund’s relative performance. Weak stock selection in the consumer staples and health care sectors, however, detracted from performance relative to the Fund’s benchmark. The Fund benefited from its relative weighting in the energy sector, initially by overweighting—and later
in the reporting period, by underweighting—the sector. An overweight position in the financials sector, however, detracted from the Fund’s performance relative to the S&P 500® Index.
in the reporting period, by underweighting—the sector. An overweight position in the financials sector, however, detracted from the Fund’s performance relative to the S&P 500® Index.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
The sectors that made the strongest positive contributions to the Fund’s performance relative to the S&P 500® Index were energy, industrials and telecommunication services. (Contributions take weightings and total returns into account.) Favorable stock selection was the primary driver in each case.
Sectors that were particularly weak relative to the S&P 500® Index were consumer staples, financials and health care. Poor stock selection was the primary driver in consumer staples and health care, while an overweight position in the financials sector detracted from the Fund’s relative performance. Although all three sectors detracted from relative performance, only the financials sectors had a negative total return for the reporting period.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The stocks that made the strongest positive contributions to the Fund’s absolute performance were integrated oil companies Occidental Petroleum, ConocoPhillips and Marathon Oil. Each of these companies benefited from the rise in oil prices during the reporting period. Marathon Oil also benefited when plans to spin off its refining business met with investor approval. ConocoPhillips benefited from substantial progress in the company’s efforts to restructure and refocus its business to generate higher returns. Occidental Petroleum remained in the Fund at the end of the reporting period, but we sold the other two positions in favor of stocks that, in our opinion, offered more attractive upside potential.
Major detractors from the Fund’s absolute performance included global investment bank Goldman Sachs Group, diversified financial services firm JPMorgan Chase and drug and medical supply manufacturer Hospira. Goldman Sachs lagged as a difficult trading and investment banking environment—along with ongoing regulatory challenges—cut into the firm’s results and outlook. We sold the Fund’s position in Goldman Sachs during the reporting period because we believed that the firm faced the potential risk of financial distress. JPMorgan Chase underperformed because of the increased likelihood of an extended, low-interest-rate environment. The stock remained in the Fund at the end of the reporting period, as we believed that the company continued to be well positioned in its industry, was attractively valued and had catalysts for potential price appreciation. Hospira underperformed because of ongoing issues at its manufacturing facilities. We sold the Fund’s posi- tion in Hospira, as we believed that it was unclear when these issues would be resolved.
Did the Fund make any significant purchases or sales during the reporting period?
During a reporting period characterized by ongoing volatility and an uncertain economic environment, we continued to look for stocks with attractive valuations and specific catalysts that could trigger appreciation over a 12- to 18-month time frame.
During the reporting period, we added diversified financial services firm JPMorgan Chase. The investment reflected our belief that the company’s strong management team could take advantage of a pickup in global investment banking activity and a turnaround in commercial activity in the United States. We also added diversified health care company Johnson & Johnson. We believed that the company could boost sales with a strong drug pipeline and a recovery in its consumer business (which appeared to be improving toward the end of the reporting period, after a challenging span of product recalls).
1. See footnote on page 6 for more information about Lipper Inc.
2. See footnote on page 6 for more information on the S&P 500® Index.
mainstayinvestments.com 9
In addition to the sales already mentioned, we sold the Fund’s positions in independent energy producer Apache and wireless communications technology company Qualcomm. Both positions were sold because we believed that other stocks had greater upside potential and were more attractive on a relative-valuation basis.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund increased its sector exposure relative to the S&P 500® Index in the health care and consumer discretionary sectors. In the health care sector, we increased the size of the Fund’s already overweight position. In the consumer discretionary sector, the Fund moved from an underweight position at the beginning of the reporting period to an overweight position at the end of the reporting period.
During the reporting period, the Fund decreased its sector weightings relative to the S&P 500® Index in energy and materials. In both cases, the Fund moved from an overweight position relative to the benchmark to an underweight position.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2011, the Fund was most significantly overweight relative to the S&P 500® Index in the health care and telecommunication services sectors and most significantly underweight relative to the Index in information technology and industrials. This positioning reflected our view on the prospects for economic growth and the relative attractiveness of the individual holdings in these sectors.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay ICAP Equity Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 96.0%† | ||||||||
Consumer Discretionary 12.0% | ||||||||
Johnson Controls, Inc. | 604,321 | $ | 19,900,291 | |||||
Lowe’s Cos., Inc. | 521,487 | 10,961,657 | ||||||
McDonald’s Corp. | 55,450 | 5,148,532 | ||||||
X Time Warner, Inc. | 968,713 | 33,895,268 | ||||||
Viacom, Inc. Class B | 565,834 | 24,811,821 | ||||||
94,717,569 | ||||||||
Consumer Staples 10.5% | ||||||||
Archer-Daniels-Midland Co. | 549,300 | 15,896,742 | ||||||
Coca-Cola Co. (The) | 260,031 | 17,765,318 | ||||||
PepsiCo., Inc. | 244,989 | 15,422,058 | ||||||
X Procter & Gamble Co. (The) | 521,250 | 33,354,787 | ||||||
82,438,905 | ||||||||
Energy 11.4% | ||||||||
Chevron Corp. | 28,933 | 3,039,412 | ||||||
X ExxonMobil Corp. | 478,350 | 37,354,350 | ||||||
Marathon Oil Corp. | 374,297 | 9,742,951 | ||||||
Marathon Petroleum Corp. | 142,648 | 5,121,063 | ||||||
Occidental Petroleum Corp. | 252,563 | 23,473,205 | ||||||
Southwestern Energy Co. (a) | 157,400 | 6,617,096 | ||||||
Ultra Petroleum Corp. (a) | 143,150 | 4,560,759 | ||||||
89,908,836 | ||||||||
Financials 17.8% | ||||||||
ACE, Ltd. | 313,991 | 22,654,451 | ||||||
AON Corp. | 105,793 | 4,932,070 | ||||||
BB&T Corp. | 685,565 | 16,001,087 | ||||||
BlackRock, Inc. | 91,969 | 14,511,788 | ||||||
X JPMorgan Chase & Co. | 928,000 | 32,257,280 | ||||||
MetLife, Inc. | 639,226 | 22,475,186 | ||||||
U.S. Bancorp | 231,400 | 5,921,526 | ||||||
Wells Fargo & Co. | 828,256 | 21,460,113 | ||||||
140,213,501 | ||||||||
Health Care 17.5% | ||||||||
Covidien PLC | 293,856 | 13,822,986 | ||||||
X Johnson & Johnson | 426,350 | 27,452,676 | ||||||
Merck & Co., Inc. | 588,210 | 20,293,245 | ||||||
Novartis A.G., ADR (b) | 96,900 | 5,471,943 | ||||||
X Pfizer, Inc. | 1,938,770 | 37,340,710 | ||||||
Sanofi, Sponsored ADR (b) | 457,325 | 16,349,369 | ||||||
WellPoint, Inc. | 241,132 | 16,613,995 | ||||||
137,344,924 | ||||||||
Industrials 4.3% | ||||||||
X Honeywell International, Inc. | 539,025 | 28,244,910 | ||||||
Stanley Black & Decker, Inc. | 85,750 | 5,475,138 | ||||||
33,720,048 | ||||||||
Information Technology 12.8% | ||||||||
Applied Materials, Inc. | 1,281,350 | 15,786,232 | ||||||
Cisco Systems, Inc. | 1,389,050 | 25,739,097 | ||||||
X Microsoft Corp. | 1,378,702 | 36,714,834 | ||||||
Texas Instruments, Inc. | 729,738 | 22,424,849 | ||||||
100,665,012 | ||||||||
Materials 2.3% | ||||||||
Monsanto Co. | 165,219 | 12,019,682 | ||||||
Owens-Illinois, Inc. (a) | 289,383 | 5,810,811 | ||||||
17,830,493 | ||||||||
Telecommunication Services 7.4% | ||||||||
X BCE, Inc. | 672,199 | 26,625,802 | ||||||
X Vodafone Group PLC, Sponsored ADR (b) | 1,120,976 | 31,207,972 | ||||||
57,833,774 | ||||||||
Total Common Stocks (Cost $655,701,396) | 754,673,062 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 3.3% | ||||||||
Repurchase Agreement 3.3% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $25,859,415 (Collateralized by a United States Treasury Bond with rate of 4.625% and a maturity date of 2/15/40, with a Principal Amount of $20,750,000 and a Market Value of $26,378,230) | $ | 25,859,408 | 25,859,408 | |||||
Total Short-Term Investment (Cost $25,859,408) | 25,859,408 | |||||||
Total Investments (Cost $681,560,804) (c) | 99.3 | % | 780,532,470 | |||||
Other Assets, Less Liabilities | 0.7 | 5,611,535 | ||||||
Net Assets | 100.0 | % | $ | 786,144,005 | ||||
(a) | Non-income producing security. | |
(b) | ADR—American Depositary Receipt. | |
(c) | At October 31, 2011, cost is $699,068,378 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 101,407,256 | ||
Gross unrealized depreciation | (19,943,164 | ) | ||
Net unrealized appreciation | $ | 81,464,092 | ||
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 754,673,062 | $ | — | $ | — | $ | 754,673,062 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 25,859,408 | — | 25,859,408 | ||||||||||||
Total Investments in Securities | $ | 754,673,062 | $ | 25,859,408 | $ | — | $ | 780,532,470 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
12 MainStay ICAP Equity Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $681,560,804) | $ | 780,532,470 | ||
Receivables: | ||||
Investment securities sold | 5,700,106 | |||
Dividends and interest | 692,634 | |||
Fund shares sold | 472,262 | |||
Other assets | 46,325 | |||
Total assets | 787,443,797 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 580,233 | |||
Manager (See Note 3) | 497,103 | |||
Transfer agent (See Note 3) | 106,807 | |||
Shareholder communication | 45,344 | |||
Professional fees | 41,660 | |||
NYLIFE Distributors (See Note 3) | 17,095 | |||
Trustees | 2,938 | |||
Custodian | 1,086 | |||
Accrued expenses | 7,526 | |||
Total liabilities | 1,299,792 | |||
Net assets | $ | 786,144,005 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 22,386 | ||
Additional paid-in capital | 886,504,085 | |||
886,526,471 | ||||
Undistributed net investment income | 424,398 | |||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (199,778,530 | ) | ||
Net unrealized appreciation (depreciation) on investments | 98,971,666 | |||
Net assets | $ | 786,144,005 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 11,633,185 | ||
Shares of beneficial interest outstanding | 331,900 | |||
Net asset value per share outstanding | $ | 35.05 | ||
Maximum sales charge (5.50% of offering price) | 2.04 | |||
Maximum offering price per share outstanding | $ | 37.09 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 28,387,647 | ||
Shares of beneficial interest outstanding | 809,362 | |||
Net asset value per share outstanding | $ | 35.07 | ||
Maximum sales charge (5.50% of offering price) | 2.04 | |||
Maximum offering price per share outstanding | $ | 37.11 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 7,871,969 | ||
Shares of beneficial interest outstanding | 226,307 | |||
Net asset value and offering price per share outstanding | $ | 34.78 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 725,422,228 | ||
Shares of beneficial interest outstanding | 20,653,265 | |||
Net asset value and offering price per share outstanding | $ | 35.12 | ||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 3,868,512 | ||
Shares of beneficial interest outstanding | 110,080 | |||
Net asset value and offering price per share outstanding | $ | 35.14 | ||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 6,096,299 | ||
Shares of beneficial interest outstanding | 173,790 | |||
Net asset value and offering price per share outstanding | $ | 35.08 | ||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 2,864,165 | ||
Shares of beneficial interest outstanding | 81,746 | |||
Net asset value and offering price per share outstanding | $ | 35.04 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 19,610,117 | ||
Interest | 2,667 | |||
Total income | 19,612,784 | |||
Expenses | ||||
Manager (See Note 3) | 6,358,601 | |||
Transfer agent (See Note 3) | 671,013 | |||
Distribution/Service—Investor Class (See Note 3) | 30,237 | |||
Distribution/Service—Class A (See Note 3) | 77,340 | |||
Distribution/Service—Class C (See Note 3) | 78,781 | |||
Distribution/Service—Class R2 (See Note 3) | 13,921 | |||
Distribution/Service—Class R3 (See Note 3) | 12,626 | |||
Professional fees | 114,765 | |||
Registration | 105,177 | |||
Shareholder communication | 100,496 | |||
Trustees | 22,071 | |||
Custodian | 13,413 | |||
Shareholder service (See Note 3) | 11,717 | |||
Miscellaneous | 40,707 | |||
Total expenses before waiver/reimbursement | 7,650,865 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (200,356 | ) | ||
Net expenses | 7,450,509 | |||
Net investment income (loss) | 12,162,275 | |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Security transactions (b) | 68,278,903 | |||
Foreign currency transactions | 1,908 | |||
Net realized gain (loss) on investments and foreign currency transactions | 68,280,811 | |||
Net change in unrealized appreciation (depreciation) on investments | (32,010,667 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 36,270,144 | |||
Net increase (decrease) in net assets resulting from operations | $ | 48,432,419 | ||
(a) | Dividends recorded net of foreign withholding taxes in the amount of $484,779. |
(b) | Includes realized gain of $21,152,510 due to an in-kind redemption. (See Note 11) |
The notes to the financial statements are an integral part of,
14 MainStay ICAP Equity Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 12,162,275 | $ | 10,896,132 | ||||
Net realized gain (loss) on investments and foreign currency transactions (a) | 68,280,811 | 75,384,460 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (32,010,667 | ) | 23,063,886 | |||||
Net increase (decrease) in net assets resulting from operations | 48,432,419 | 109,344,478 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (117,006 | ) | (93,023 | ) | ||||
Class A | (387,274 | ) | (298,176 | ) | ||||
Class C | (25,833 | ) | (20,816 | ) | ||||
Class I | (11,377,342 | ) | (10,501,064 | ) | ||||
Class R1 | (52,227 | ) | (30,641 | ) | ||||
Class R2 | (64,883 | ) | (33,083 | ) | ||||
Class R3 | (23,374 | ) | (10,232 | ) | ||||
Total dividends to shareholders | (12,047,939 | ) | (10,987,035 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 267,191,470 | 271,846,099 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 11,654,741 | 10,725,860 | ||||||
Cost of shares redeemed (b) | (383,522,536 | ) | (278,527,891 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | (104,676,325 | ) | 4,044,068 | |||||
Net increase (decrease) in net assets | (68,291,845 | ) | 102,401,511 | |||||
Net Assets | ||||||||
Beginning of year | 854,435,850 | 752,034,339 | ||||||
End of year | $ | 786,144,005 | $ | 854,435,850 | ||||
Undistributed net investment income at end of year | $ | 424,398 | $ | 308,154 | ||||
(a) | Includes realized gains of $21,152,510 and $7,782,475 due to in-kind redemptions during the years ended October 31, 2011 and 2010, respectively. (See Note 11) |
(b) | Includes in-kind redemptions in the amount of $97,079,910 and $55,704,242 during the years ended October 31, 2011 and 2010, respectively. (See Note 11) |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
April 29, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 33.81 | $ | 29.89 | $ | 26.95 | $ | 39.51 | ||||||||||
Net investment income (loss) | 0.37 | (a) | 0.22 | (a) | 0.32 | (a) | 0.27 | |||||||||||
Net realized and unrealized gain (loss) on investments | 1.22 | 3.95 | 3.15 | (12.55 | ) | |||||||||||||
Total from investment operations | 1.59 | 4.17 | 3.47 | (12.28 | ) | |||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.35 | ) | (0.25 | ) | (0.53 | ) | (0.28 | ) | ||||||||||
Net asset value at end of period | $ | 35.05 | $ | 33.81 | $ | 29.89 | $ | 26.95 | ||||||||||
Total investment return (b) | 4.67 | % | 14.02 | % | 13.32 | % | (31.24 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.01 | % | 0.69 | % | 1.24 | % | 1.54 | % †† | ||||||||||
Net expenses | 1.46 | % | 1.56 | % | 1.29 | % | 1.19 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.46 | % | 1.56 | % | 1.69 | % | 1.61 | % †† | ||||||||||
Portfolio turnover rate | 74 | % | 64 | % | 93 | % | 106 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 11,633 | $ | 12,036 | $ | 11,465 | $ | 10,798 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
16 MainStay ICAP Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.84 | $ | 29.89 | $ | 26.93 | $ | 41.53 | $ | 45.01 | $ | 44.82 | ||||||||||||||
Net investment income (loss) | 0.49 | (a) | 0.34 | (a) | 0.35 | (a) | 0.42 | 0.66 | 0.20 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.19 | 3.96 | 3.15 | (14.59 | ) | 1.88 | 4.02 | |||||||||||||||||||
Total from investment operations | 1.68 | 4.30 | 3.50 | (14.17 | ) | 2.54 | 4.22 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.45 | ) | (0.35 | ) | (0.54 | ) | (0.43 | ) | (0.61 | ) | (0.30 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.41 | ) | (3.73 | ) | ||||||||||||||||||
Total dividends and distributions | (0.45 | ) | (0.35 | ) | (0.54 | ) | (0.43 | ) | (6.02 | ) | (4.03 | ) | ||||||||||||||
Net asset value at end of period | $ | 35.07 | $ | 33.84 | $ | 29.89 | $ | 26.93 | $ | 41.53 | $ | 45.01 | ||||||||||||||
Total investment return (b) | 4.94 | % | 14.44 | % | 13.46 | % | (34.38 | %)(c) | 5.78 | % | 9.55 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.34 | % | 1.08 | % | 1.35 | % | 1.38 | % †† | 1.22 | % | 1.28 | %†† | ||||||||||||||
Net expenses | 1.18 | % | 1.18 | % | 1.18 | % | 1.18 | % †† | 1.18 | % | 1.30 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.18 | % | 1.18 | % | 1.26 | % | 1.35 | % †† | 1.36 | % | 1.39 | %†† | ||||||||||||||
Portfolio turnover rate | 74 | % | 64 | % | 93 | % | 106 | % | 71 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 28,388 | $ | 24,138 | $ | 25,257 | $ | 21,826 | $ | 51,349 | $ | 6,798 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 17 |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.59 | $ | 29.78 | $ | 26.86 | $ | 41.43 | $ | 44.96 | $ | 44.82 | ||||||||||||||
Net investment income (loss) | 0.09 | (a) | (0.02 | ) (a) | 0.13 | (a) | 0.19 | 0.34 | 0.08 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.21 | 3.93 | 3.13 | (14.55 | ) | 1.85 | 4.03 | |||||||||||||||||||
Total from investment operations | 1.30 | 3.91 | 3.26 | (14.36 | ) | 2.19 | 4.11 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.10 | ) | (0.34 | ) | (0.21 | ) | (0.31 | ) | (0.24 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.41 | ) | (3.73 | ) | ||||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.10 | ) | (0.34 | ) | (0.21 | ) | (5.72 | ) | (3.97 | ) | ||||||||||||||
Net asset value at end of period | $ | 34.78 | $ | 33.59 | $ | 29.78 | $ | 26.86 | $ | 41.43 | $ | 44.96 | ||||||||||||||
Total investment return (b) | 3.86 | % | 13.15 | % | 12.51 | % | (34.82 | %)(c) | 4.99 | % | 9.30 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.26 | % | (0.07 | %) | 0.52 | % | 0.65 | % †† | 0.49 | % | 0.54 | %†† | ||||||||||||||
Net expenses | 2.21 | % | 2.31 | % | 2.04 | % | 1.94 | % †† | 1.93 | % | 2.05 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 2.21 | % | 2.31 | % | 2.44 | % | 2.30 | % †† | 2.11 | % | 2.14 | %†† | ||||||||||||||
Portfolio turnover rate | 74 | % | 64 | % | 93 | % | 106 | % | 71 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 7,872 | $ | 6,825 | $ | 5,206 | $ | 4,996 | $ | 8,606 | $ | 1,922 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
18 MainStay ICAP Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||||||
January 1, | ||||||||||||||||||||||||||
2008*** | ||||||||||||||||||||||||||
through | ||||||||||||||||||||||||||
Year ended October 31, | October 31, | Year ended December 31, | ||||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.89 | $ | 29.93 | $ | 26.97 | $ | 41.57 | $ | 45.03 | $ | 41.17 | ||||||||||||||
Net investment income (loss) | 0.57 | (a) | 0.43 | (a) | 0.45 | (a) | 0.54 | 0.77 | 0.63 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.22 | 3.96 | 3.14 | (14.62 | ) | 1.94 | 7.59 | |||||||||||||||||||
Total from investment operations | 1.79 | 4.39 | 3.59 | (14.08 | ) | 2.71 | 8.22 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.56 | ) | (0.43 | ) | (0.63 | ) | (0.52 | ) | (0.76 | ) | (0.63 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.41 | ) | (3.73 | ) | ||||||||||||||||||
Total dividends and distributions | (0.56 | ) | (0.43 | ) | (0.63 | ) | (0.52 | ) | (6.17 | ) | (4.36 | ) | ||||||||||||||
Net asset value at end of period | $ | 35.12 | $ | 33.89 | $ | 29.93 | $ | 26.97 | $ | 41.57 | $ | 45.03 | ||||||||||||||
Total investment return (b) | 5.23 | % | 14.76 | % | 13.86 | % | (34.18 | %)(c) | 6.20 | % | 20.17 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.57 | % | 1.35 | % | 1.76 | % | 1.79 | % †† | 1.63 | % | 1.42 | % | ||||||||||||||
Net expenses | 0.90 | % | 0.90 | % | 0.83 | % | 0.80 | % †† | 0.80 | % | 0.80 | % | ||||||||||||||
Expenses (before reimbursement/waiver) | 0.93 | % | 0.93 | % | 1.02 | % | 0.96 | % †† | 0.92 | % | 0.88 | % | ||||||||||||||
Portfolio turnover rate | 74 | % | 64 | % | 93 | % | 106 | % | 71 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 725,422 | $ | 801,517 | $ | 705,425 | $ | 732,479 | $ | 1,041,210 | $ | 982,543 |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment 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. | mainstayinvestments.com 19 |
Financial Highlights selected per share data and ratios
Class R1 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.91 | $ | 29.94 | $ | 26.98 | $ | 41.59 | $ | 45.00 | $ | 44.82 | ||||||||||||||
Net investment income (loss) | 0.53 | (a) | 0.40 | (a) | 0.39 | (a) | 0.52 | 0.77 | 0.22 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.22 | 3.97 | 3.18 | (14.64 | ) | 1.94 | 4.03 | |||||||||||||||||||
Total from investment operations | 1.75 | 4.37 | 3.57 | (14.12 | ) | 2.71 | 4.25 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.52 | ) | (0.40 | ) | (0.61 | ) | (0.49 | ) | (0.71 | ) | (0.34 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.41 | ) | (3.73 | ) | ||||||||||||||||||
Total dividends and distributions | (0.52 | ) | (0.40 | ) | (0.61 | ) | (0.49 | ) | (6.12 | ) | (4.07 | ) | ||||||||||||||
Net asset value at end of period | $ | 35.14 | $ | 33.91 | $ | 29.94 | $ | 26.98 | $ | 41.59 | $ | 45.00 | ||||||||||||||
Total investment return (b) | 5.14 | % | 14.67 | % | 13.73 | % | (34.24 | %)(c) | 6.10 | % | 9.67 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.47 | % | 1.24 | % | 1.49 | % | 1.66 | % †† | 1.72 | % | 1.38 | %†† | ||||||||||||||
Net expenses | 0.99 | % | 1.01 | % | 0.94 | % | 0.90 | % †† | 0.90 | % | 0.90 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.03 | % | 1.03 | % | 1.11 | % | 1.06 | % †† | 1.02 | % | 0.99 | %†† | ||||||||||||||
Portfolio turnover rate | 74 | % | 64 | % | 93 | % | 106 | % | 71 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,869 | $ | 3,351 | $ | 2,268 | $ | 1,370 | $ | 1,097 | $ | 40 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
20 MainStay ICAP Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R2 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.85 | $ | 29.90 | $ | 26.94 | $ | 41.54 | $ | 45.02 | $ | 44.82 | ||||||||||||||
Net investment income (loss) | 0.44 | (a) | 0.30 | (a) | 0.33 | (a) | 0.44 | 0.63 | 0.12 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.21 | 3.97 | 3.17 | (14.62 | ) | 1.92 | 4.13 | |||||||||||||||||||
Total from investment operations | 1.65 | 4.27 | 3.50 | (14.18 | ) | 2.55 | 4.25 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.42 | ) | (0.32 | ) | (0.54 | ) | (0.42 | ) | (0.62 | ) | (0.32 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.41 | ) | (3.73 | ) | ||||||||||||||||||
Total dividends and distributions | (0.42 | ) | (0.32 | ) | (0.54 | ) | (0.42 | ) | (6.03 | ) | (4.05 | ) | ||||||||||||||
Net asset value at end of period | $ | 35.08 | $ | 33.85 | $ | 29.90 | $ | 26.94 | $ | 41.54 | $ | 45.02 | ||||||||||||||
Total investment return (b) | 4.84 | % | 14.36 | % | 13.47 | % | (34.38 | %)(c) | 5.82 | % | 9.58 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.22 | % | 0.93 | % | 1.27 | % | 1.43 | % †† | 1.29 | % | 0.77 | %†† | ||||||||||||||
Net expenses | 1.28 | % | 1.28 | % | 1.19 | % | 1.15 | % †† | 1.15 | % | 1.15 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.28 | % | 1.28 | % | 1.36 | % | 1.31 | % †† | 1.27 | % | 1.24 | %†† | ||||||||||||||
Portfolio turnover rate | 74 | % | 64 | % | 93 | % | 106 | % | 71 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 6,096 | $ | 4,313 | $ | 2,050 | $ | 781 | $ | 1,156 | $ | 1,161 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. | |
(c) | Total investment 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. | mainstayinvestments.com 21 |
Financial Highlights selected per share data and ratios
Class R3 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.81 | $ | 29.89 | $ | 26.93 | $ | 41.52 | $ | 45.00 | $ | 44.82 | ||||||||||||||
Net investment income (loss) | 0.33 | (a) | 0.22 | (a) | 0.23 | (a) | 0.38 | 0.57 | 0.13 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.23 | 3.97 | 3.21 | (14.61 | ) | 1.86 | 4.06 | |||||||||||||||||||
Total from investment operations | 1.56 | 4.19 | 3.44 | (14.23 | ) | 2.43 | 4.19 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.33 | ) | (0.27 | ) | (0.48 | ) | (0.36 | ) | (0.50 | ) | (0.28 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.41 | ) | (3.73 | ) | ||||||||||||||||||
Total dividends and distributions | (0.33 | ) | (0.27 | ) | (0.48 | ) | (0.36 | ) | (5.91 | ) | (4.01 | ) | ||||||||||||||
Net asset value at end of period | $ | 35.04 | $ | 33.81 | $ | 29.89 | $ | 26.93 | $ | 41.52 | $ | 45.00 | ||||||||||||||
Total investment return (b) | 4.59 | % | 14.07 | % | 13.22 | % | (34.51 | %)(c) | 5.55 | % | 9.49 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.92 | % | 0.70 | % | 0.88 | % | 1.16 | % †† | 0.98 | % | 0.86 | %†† | ||||||||||||||
Net expenses | 1.53 | % | 1.53 | % | 1.45 | % | 1.40 | % †† | 1.40 | % | 1.40 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.53 | % | 1.53 | % | 1.60 | % | 1.57 | % †† | 1.52 | % | 1.49 | %†† | ||||||||||||||
Portfolio turnover rate | 74 | % | 64 | % | 93 | % | 106 | % | 71 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,864 | $ | 2,257 | $ | 365 | $ | 72 | $ | 67 | $ | 27 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
22 MainStay ICAP Equity Fund | and should be read in conjunction with, the financial statements. |
MainStay ICAP Select Equity Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||||
Expense | ||||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –3 | .54% | –1 | .11% | 4 | .73% | 1 | .51% | ||||||||||
Excluding sales charges | 2 | .08 | 0 | .01 | 5 | .32 | 1 | .51 | ||||||||||||
Class A Shares4 | Maximum 5.5% Initial Sales Charge | With sales charges | –3 | .28 | –0 | .95 | 4 | .82 | 1 | .23 | ||||||||||
Excluding sales charges | 2 | .35 | 0 | .18 | 5 | .41 | 1 | .23 | ||||||||||||
Class B Shares5 | Maximum 5% CDSC | With sales charges | –3 | .68 | –1 | .12 | 4 | .54 | 2 | .26 | ||||||||||
if Redeemed Within the First Six Years of Purchase | Excluding sales charges | 1 | .32 | –0 | .72 | 4 | .54 | 2 | .26 | |||||||||||
Class C Shares4 | Maximum 1% CDSC | With sales charges | 0 | .32 | –0 | .72 | 4 | .54 | 2 | .26 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 1 | .32 | –0 | .72 | 4 | .54 | 2 | .26 | |||||||||||
Class I Shares | No Sales Charge | 2 | .63 | 0 | .47 | 5 | .69 | 0 | .98 | |||||||||||
Class R1 Shares4 | No Sales Charge | 2 | .47 | 0 | .34 | 5 | .57 | 1 | .08 | |||||||||||
Class R2 Shares4 | No Sales Charge | 2 | .21 | 0 | .09 | 5 | .31 | 1 | .33 | |||||||||||
Class R3 Shares4 | No Sales Charge | 1 | .99 | –0 | .15 | 5 | .05 | 1 | .58 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. Effective August 31, 2006, ICAP Select Equity Fund was renamed MainStay ICAP Select Equity Fund. At that time, the Fund’s existing no-load shares were redesignated as Class I shares. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on April 29, 2008, include the historical performance of Class A shares through April 28, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance for Investor Class shares might have been lower. |
4. | Performance figures for Class A, C, R1, R2 and R3 shares, first offered on September 1, 2006, includes the historical performance of Class I shares through August 31, 2006, adjusted for differences in certain expenses and fees. Unadjusted, the performance for these share classes might have been lower. |
5. | Performance figures for Class B shares, first offered on November 13, 2009, include the historical performance of Class I shares through November 12, 2009, adjusted for differences in certain expenses and fees. Unadjusted, the performance for Class B shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 23
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
S&P 500® Index6 | 8 | .09% | 0 | .25% | 3 | .69% | ||||||
S&P 500® Value Index7 | 5 | .61 | –2 | .44 | 3 | .51 | ||||||
Average Lipper Large-Cap Value Fund8 | 4 | .18 | –2 | .04 | 3 | .59 | ||||||
6. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | The S&P 500® Value Index represents approximately half of the market capitalization of the stocks in the S&P 500® Index that, on a growth-value spectrum, have been identified as falling either wholly or partially within the value half of the spectrum based on multiple factors. The S&P 500® Value Index is the Fund’s secondary benchmark. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
8. | The average Lipper large-cap value fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper’s U.S. Diversified Equity large-cap floor. Large-cap value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on total returns with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
24 MainStay ICAP Select Equity Fund
Cost in Dollars of a $1,000 Investment in MainStay ICAP Select Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 883.00 | $ | 6.79 | $ | 1,018.00 | $ | 7.27 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 884.30 | $ | 5.60 | $ | 1,019.30 | $ | 6.01 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 879.80 | $ | 10.33 | $ | 1,014.20 | $ | 11.07 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 879.80 | $ | 10.33 | $ | 1,014.20 | $ | 11.07 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 885.20 | $ | 4.28 | $ | 1,020.70 | $ | 4.58 | ||||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 884.50 | $ | 5.13 | $ | 1,019.80 | $ | 5.50 | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 883.60 | $ | 6.27 | $ | 1,018.60 | $ | 6.72 | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 882.30 | $ | 7.45 | $ | 1,017.30 | $ | 7.98 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.43% for Investor Class, 1.18% for Class A, 2.18% for Class B and Class C, 0.90% for Class I, 1.08% for Class R1, 1.32% for Class R2 and 1.57% for Class R3) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 25
Sector Composition as of October 31, 2011 (Unaudited)
Health Care | 18.0 | % | ||
Information Technology | 15.8 | |||
Financials | 15.5 | |||
Consumer Discretionary | 13.2 | |||
Consumer Staples | 12.2 | |||
Energy | 11.3 | |||
Telecommunication Services | 4.6 | |||
Industrials | 4.2 | |||
Materials | 1.6 | |||
Short-Term Investment | 3.1 | |||
Other Assets, Less Liabilities | 0.5 | |||
100.0 | % | |||
See Portfolio of Investments beginning on page 29 for specific holdings within these categories.
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | Pfizer, Inc. | |
2. | Microsoft Corp. | |
3. | Procter & Gamble Co. (The) | |
4. | Time Warner, Inc. | |
5. | JPMorgan Chase & Co. | |
6. | ExxonMobil Corp. | |
7. | Vodafone Group PLC, Sponsored ADR | |
8. | Occidental Petroleum Corp. | |
9. | Honeywell International, Inc. | |
10. | Johnson & Johnson |
26 MainStay ICAP Select Equity Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jerrold K. Senser, CFA, and Thomas R. Wenzel, CFA, of Institutional Capital LLC (ICAP), the Fund’s Subadvisor.
How did MainStay ICAP Select Equity Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay ICAP Select Equity Fund returned 2.08% for Investor Class shares, 2.35% for Class A shares and 1.32% for both Class B and Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 2.63%, Class R1 shares returned 2.47%, Class R2 shares returned 2.21% and Class R3 shares returned 1.99%. All share classes underperformed the 4.18% return of the average Lipper1 large-cap value fund and the 8.09% return of the S&P 500® Index2 for the 12 months ended October 31, 2011. The S&P 500® Index is the Fund’s broad-based securities-market index. See page 23 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund underperformed the S&P 500® Index during the reporting period primarily because of weak stock selection in the financials and consumer staples sectors. Having an overweight allocation to the financials sector also detracted from the Fund’s relative performance. These effects were partially offset by favorable stock selection in the energy and industrials sectors. An overweight position in the health care sector also helped the Fund’s performance relative to its benchmark.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
The sectors that made the strongest positive contributions to the Fund’s performance relative to the S&P 500® Index were energy, industrials and telecommunication services. (Contributions take weightings and total returns into account.) Favorable stock selection was the primary driver for both energy and industrials, while an overweight position relative to the benchmark in telecommunication services added to the Fund’s relative performance.
Sectors that were particularly weak relative to the S&P 500® Index were financials, consumer staples and consumer discretionary. Stock selection was the primary driver in each case. Although all three sectors detracted from the Fund’s relative performance, only the financials sector had a negative total return for the reporting period.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The stocks that made the strongest positive contributions to the Fund’s absolute performance were integrated oil companies Occidental Petroleum, ConocoPhillips and Marathon Oil. Each of these companies benefited from the rise in oil prices during the reporting period. Marathon Oil also benefited when plans to spin off its refining business met with investor approval. ConocoPhillips benefited from substantial progress in the company’s efforts to restructure and refocus its business to generate higher returns. Occidental Petroleum remained in the Fund at the end of the reporting period, but we sold the other two positions in favor of stocks that, in our opinion, offered more attractive upside potential.
Major detractors from the Fund’s absolute performance included global investment bank Goldman Sachs Group, diversified financial services firm JPMorgan Chase and insurance company MetLife. Goldman Sachs lagged as a difficult trading and investment banking environment—along with ongoing regulatory challenges—cut into the firm’s results and outlook. We sold the Fund’s position in Goldman Sachs during the reporting period because we believed that the firm faced the potential risk of financial distress. JPMorgan Chase and MetLife underperformed because of the increased likelihood of an extended, low-interest-rate environment. The stocks of JPMorgan Chase and MetLife remained in the Fund at the end of the reporting period, as we believed that the companies were well positioned in their industries, were attractively valued and had catalysts for potential price appreciation.
Did the Fund make any significant purchases or sales during the reporting period?
During a reporting period characterized by ongoing volatility and an uncertain economic environment, we continued to look for stocks with attractive valuations and specific catalysts that could trigger appreciation over a 12- to 18-month time frame.
During the reporting period, we added media company Time Warner to the Fund. The investment reflected our belief that the company’s advertising growth and ability to increase cable network affiliate fees could provide consistent revenue and earnings upside. In our view, increasing market penetration—
along with strong programming and ratings—should give Time Warner leverage on affiliate fees. We also increased our posi- tion in diversified financial services firm JPMorgan Chase. We believed that the company’s strong management team could take advantage of a pickup in global investment banking activ- ity and a turnaround in commercial activity in the United States. We also added diversified health care company Johnson & Johnson. We believed that the company could boost sales with
along with strong programming and ratings—should give Time Warner leverage on affiliate fees. We also increased our posi- tion in diversified financial services firm JPMorgan Chase. We believed that the company’s strong management team could take advantage of a pickup in global investment banking activ- ity and a turnaround in commercial activity in the United States. We also added diversified health care company Johnson & Johnson. We believed that the company could boost sales with
1. See footnote on page 24 for more information about Lipper Inc.
2. See footnote on page 24 for more information on the S&P 500® Index.
mainstayinvestments.com 27
a strong drug pipeline and a recovery in its consumer business (which appeared to be improving toward the end of the report- ing period, after a challenging span of product recalls).
In addition to the sales already mentioned, we sold the Fund’s positions in insurance broker Aon and wireless communications technology company Qualcomm. Both positions were sold because we believed that other stocks had greater upside potential and were more attractive on a relative-valuation basis.
Were there any significant sector weighting changes during the reporting period?
During the reporting period, the Fund increased its sector exposure relative to the S&P 500® Index in consumer discretionary and health care. In the consumer discretionary sector, the Fund moved from an underweight position at the beginning of the reporting period to an overweight position at the end of the reporting period. In the health care sector, the Fund increased the size of its already overweight position.
Over the same period, the Fund decreased its weighting relative to the S&P 500® Index in the energy sector, going from an overweight position to an underweight position as the Fund trimmed several stocks in the sector. The Fund also decreased the size of its position in the materials sector, moving from an approximately neutral position at the beginning of the reporting period to an underweight position at the end of the reporting period.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2011, the Fund was most significantly overweight relative to the S&P 500® Index in the health care and consumer discretionary sectors and most significantly underweight relative to the Index in industrials and information technology. This positioning reflected our view on the prospects for economic growth and the relative attractiveness of individual holdings in these sectors.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
28 MainStay ICAP Select Equity Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 96.4%† | ||||||||
Consumer Discretionary 13.2% | ||||||||
Johnson Controls, Inc. | 3,827,640 | $ | 126,044,185 | |||||
Lowe’s Cos., Inc. | 2,516,580 | 52,898,512 | ||||||
X Time Warner, Inc. | 5,095,250 | 178,282,797 | ||||||
Viacom, Inc. Class B | 2,814,102 | 123,398,373 | ||||||
480,623,867 | ||||||||
Consumer Staples 12.2% | ||||||||
Archer-Daniels-Midland Co. | 2,609,150 | 75,508,801 | ||||||
Coca-Cola Co. (The) | 1,525,250 | 104,205,080 | ||||||
PepsiCo., Inc. | 1,187,897 | 74,778,116 | ||||||
X Procter & Gamble Co. (The) | 2,942,100 | 188,264,979 | ||||||
442,756,976 | ||||||||
Energy 11.3% | ||||||||
X ExxonMobil Corp. | 2,158,200 | 168,533,838 | ||||||
Marathon Petroleum Corp. | 1,088,664 | 39,083,037 | ||||||
X Occidental Petroleum Corp. | 1,757,271 | 163,320,767 | ||||||
Southwestern Energy Co. (a) | 972,000 | 40,862,880 | ||||||
411,800,522 | ||||||||
Financials 15.5% | ||||||||
BB&T Corp. | 3,500,750 | 81,707,505 | ||||||
BlackRock, Inc. | 469,550 | 74,090,295 | ||||||
X JPMorgan Chase & Co. | 4,962,800 | 172,506,928 | ||||||
MetLife, Inc. | 3,416,350 | 120,118,866 | ||||||
Wells Fargo & Co. | 4,530,078 | 117,374,321 | ||||||
565,797,915 | ||||||||
Health Care 18.0% | ||||||||
Covidien PLC | 1,580,990 | 74,369,770 | ||||||
X Johnson & Johnson | 2,267,750 | 146,020,422 | ||||||
Merck & Co., Inc. | 3,481,630 | 120,116,235 | ||||||
X Pfizer, Inc. | 12,387,810 | 238,589,221 | ||||||
Sanofi, Sponsored ADR (b) | 2,121,800 | 75,854,350 | ||||||
654,949,998 | ||||||||
Industrials 4.2% | ||||||||
X Honeywell International, Inc. | 2,918,926 | 152,951,722 | ||||||
Information Technology 15.8% | ||||||||
Applied Materials, Inc. | 6,384,200 | 78,653,344 | ||||||
Cisco Systems, Inc. | 7,666,350 | 142,057,465 | ||||||
X Microsoft Corp. | 8,642,075 | 230,138,457 | ||||||
Texas Instruments, Inc. | 4,065,320 | 124,927,284 | ||||||
575,776,550 | ||||||||
Materials 1.6% | ||||||||
Monsanto Co. | 808,300 | 58,803,825 | ||||||
Telecommunication Services 4.6% | ||||||||
X Vodafone Group PLC, Sponsored ADR (b) | 5,973,750 | 166,309,200 | ||||||
Total Common Stocks (Cost $3,194,389,217) | 3,509,770,575 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 3.1% | ||||||||
Repurchase Agreement 3.1% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $113,775,539 (Collateralized by a United States Treasury Bond with a rate of 4.625% and a maturity date of 2/15/40 with a Principal Amount of $91,290,000 and a Market Value of $116,051,500) | $ | 113,775,507 | 113,775,507 | |||||
Total Short-Term Investment (Cost $113,775,507) | 113,775,507 | |||||||
Total Investments (Cost $3,308,164,724) (c) | 99.5 | % | 3,623,546,082 | |||||
Other Assets, Less Liabilities | 0.5 | 18,022,426 | ||||||
Net Assets | 100.0 | % | $ | 3,641,568,508 | ||||
(a) | Non-income producing security. | |
(b) | ADR—American Depositary Receipt. | |
(c) | At October 31, 2011, cost is $3,347,229,882 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 367,926,859 | ||
Gross unrealized depreciation | (91,610,659 | ) | ||
Net unrealized appreciation | $ | 276,316,200 | ||
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 29 |
Portfolio of Investments October 31, 2011 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 3,509,770,575 | $ | — | $ | — | $ | 3,509,770,575 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 113,775,507 | — | 113,775,507 | ||||||||||||
Total Investments in Securities | $ | 3,509,770,575 | $ | 113,775,507 | $ | — | $ | 3,623,546,082 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
30 MainStay ICAP Select Equity Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $3,308,164,724) | $ | 3,623,546,082 | ||
Receivables: | ||||
Investment securities sold | 15,585,873 | |||
Fund shares sold | 6,188,122 | |||
Dividends and interest | 3,695,499 | |||
Other assets | 76,243 | |||
Total assets | 3,649,091,819 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 3,894,382 | |||
Manager (See Note 3) | 2,107,190 | |||
Transfer agent (See Note 3) | 920,595 | |||
NYLIFE Distributors (See Note 3) | 289,929 | |||
Shareholder communication | 163,104 | |||
Professional fees | 120,462 | |||
Trustees | 13,788 | |||
Custodian | 2,252 | |||
Accrued expenses | 11,609 | |||
Total liabilities | 7,523,311 | |||
Net assets | $ | 3,641,568,508 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 108,881 | ||
Additional paid-in capital | 3,958,881,525 | |||
3,958,990,406 | ||||
Undistributed net investment income | 2,308,905 | |||
Accumulated net realized gain (loss) on investments | (635,112,161 | ) | ||
Net unrealized appreciation (depreciation) on investments | 315,381,358 | |||
Net assets | $ | 3,641,568,508 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 181,060,070 | ||
Shares of beneficial interest outstanding | 5,418,727 | |||
Net asset value per share outstanding | $ | 33.41 | ||
Maximum sales charge (5.50% of offering price) | 1.94 | |||
Maximum offering price per share outstanding | $ | 35.35 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 542,404,470 | ||
Shares of beneficial interest outstanding | 16,231,578 | |||
Net asset value per share outstanding | $ | 33.42 | ||
Maximum sales charge (5.50% of offering price) | 1.95 | |||
Maximum offering price per share outstanding | $ | 35.37 | ||
Class B | ||||
Net assets applicable to outstanding shares | $ | 64,648,710 | ||
Shares of beneficial interest outstanding | 1,950,176 | |||
Net asset value and offering price per share outstanding | $ | 33.15 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 95,886,646 | ||
Shares of beneficial interest outstanding | 2,892,745 | |||
Net asset value and offering price per share outstanding | $ | 33.15 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 2,702,188,720 | ||
Shares of beneficial interest outstanding | 80,730,634 | |||
Net asset value and offering price per share outstanding | $ | 33.47 | ||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 20,155,813 | ||
Shares of beneficial interest outstanding | 602,060 | |||
Net asset value and offering price per share outstanding | $ | 33.48 | ||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 21,933,115 | ||
Shares of beneficial interest outstanding | 656,374 | |||
Net asset value and offering price per share outstanding | $ | 33.42 | ||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 13,290,964 | ||
Shares of beneficial interest outstanding | 398,222 | |||
Net asset value and offering price per share outstanding | $ | 33.38 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 31 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 84,787,380 | ||
Interest | 12,185 | |||
Total income | 84,799,565 | |||
Expenses | ||||
Manager (See Note 3) | 26,989,361 | |||
Transfer agent (See Note 3) | 5,011,839 | |||
Distribution/Service—Investor Class (See Note 3) | 466,052 | |||
Distribution/Service—Class A (See Note 3) | 1,391,969 | |||
Distribution/Service—Class B (See Note 3) | 792,871 | |||
Distribution/Service—Class C (See Note 3) | 1,036,703 | |||
Distribution/Service—Class R2 (See Note 3) | 56,643 | |||
Distribution/Service—Class R3 (See Note 3) | 71,124 | |||
Shareholder communication | 459,452 | |||
Professional fees | 330,345 | |||
Registration | 272,534 | |||
Trustees | 96,079 | |||
Shareholder service (See Note 3) | 56,755 | |||
Custodian | 30,109 | |||
Miscellaneous | 118,808 | |||
Total expenses before waiver/reimbursement | 37,180,644 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (1,711,037 | ) | ||
Net expenses | 35,469,607 | |||
Net investment income (loss) | 49,329,958 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 77,235,932 | |||
Net change in unrealized appreciation (depreciation) on investments | (37,365,800 | ) | ||
Net realized and unrealized gain (loss) on investments | 39,870,132 | |||
Net increase (decrease) in net assets resulting from operations | $ | 89,200,090 | ||
(a) | Dividends recorded net of foreign withholding taxes in the amount of $1,421,687. |
The notes to the financial statements are an integral part of,
32 MainStay ICAP Select Equity Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 49,329,958 | $ | 29,143,762 | ||||
Net realized gain (loss) on investments | 77,235,932 | 209,704,930 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (37,365,800 | ) | 120,085,266 | |||||
Net increase (decrease) in net assets resulting from operations | 89,200,090 | 358,933,958 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (1,889,805 | ) | (973,105 | ) | ||||
Class A | (7,150,175 | ) | (3,954,028 | ) | ||||
Class B | (286,942 | ) | (190,597 | ) | ||||
Class C | (409,925 | ) | (196,794 | ) | ||||
Class I | (37,555,367 | ) | (23,139,398 | ) | ||||
Class R1 | (272,453 | ) | (163,665 | ) | ||||
Class R2 | (268,316 | ) | (180,261 | ) | ||||
Class R3 | (128,405 | ) | (42,212 | ) | ||||
Total dividends to shareholders | (47,961,388 | ) | (28,840,060 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 1,531,458,603 | 898,072,750 | ||||||
Net asset value of shares issued in connection with the acquisition of MainStay Value Fund (See Note 10) | — | 354,083,152 | ||||||
Net asset value of shares issued in connection with the acquisition of MainStay Mid Cap Value Fund (See Note 10) | — | 152,265,264 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 41,828,636 | 25,609,235 | ||||||
Cost of shares redeemed | (912,367,908 | ) | (560,864,715 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 660,919,331 | 869,165,686 | ||||||
Net increase (decrease) in net assets | 702,158,033 | 1,199,259,584 | ||||||
Net Assets | ||||||||
Beginning of year | 2,939,410,475 | 1,740,150,891 | ||||||
End of year | $ | 3,641,568,508 | $ | 2,939,410,475 | ||||
Undistributed net investment income at end of year | $ | 2,308,905 | $ | 940,335 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 33 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
April 29, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 33.06 | $ | 28.68 | $ | 25.62 | $ | 36.87 | ||||||||||
Net investment income (loss) | 0.38 | 0.22 | (a) | 0.25 | 0.25 | (a) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.32 | 4.38 | 3.10 | (11.25 | ) | |||||||||||||
Total from investment operations | 0.70 | 4.60 | 3.35 | (11.00 | ) | |||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.35 | ) | (0.22 | ) | (0.29 | ) | (0.25 | ) | ||||||||||
Net asset value at end of period | $ | 33.41 | $ | 33.06 | $ | 28.68 | $ | 25.62 | ||||||||||
Total investment return (b) | 2.08 | % | 16.12 | % | 13.33 | % | (29.97 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.08 | % | 0.71 | % | 0.99 | % | 1.49 | % †† | ||||||||||
Net expenses | 1.43 | % | 1.47 | % | 1.30 | % | 1.15 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.43 | % | 1.51 | % | 1.45 | % | 1.31 | % †† | ||||||||||
Portfolio turnover rate | 71 | % | 55 | % | 101 | % | 117 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 181,060 | $ | 185,828 | $ | 9,808 | $ | 7,601 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
34 MainStay ICAP Select Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.07 | $ | 28.69 | $ | 25.62 | $ | 38.79 | $ | 41.60 | $ | 39.46 | ||||||||||||||
Net investment income (loss) | 0.46 | 0.31 | (a) | 0.32 | 0.42 | (a) | 0.48 | (a) | 0.24 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.33 | 4.38 | 3.09 | (13.18 | ) | 2.23 | 3.62 | |||||||||||||||||||
Total from investment operations | 0.79 | 4.69 | 3.41 | (12.76 | ) | 2.71 | 3.86 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.44 | ) | (0.31 | ) | (0.34 | ) | (0.41 | ) | (0.51 | ) | (0.29 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.01 | ) | (1.43 | ) | ||||||||||||||||||
Total dividends and distributions | (0.44 | ) | (0.31 | ) | (0.34 | ) | (0.41 | ) | (5.52 | ) | (1.72 | ) | ||||||||||||||
Net asset value at end of period | $ | 33.42 | $ | 33.07 | $ | 28.69 | $ | 25.62 | $ | 38.79 | $ | 41.60 | ||||||||||||||
Total investment return (b) | 2.35 | % | 16.46 | % | 13.58 | % | (33.14 | %)(c) | 6.62 | % | 9.84 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.33 | % | 1.01 | % | 1.21 | % | 1.47 | % †† | 1.09 | % | 1.73 | %†† | ||||||||||||||
Net expenses | 1.18 | % | 1.18 | % | 1.09 | % | 1.10 | % †† | 1.15 | % | 1.20 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.21 | % | 1.23 | % | 1.28 | % | 1.24 | % †† | 1.26 | % | 1.29 | %†† | ||||||||||||||
Portfolio turnover rate | 71 | % | 55 | % | 101 | % | 117 | % | 123 | % | 115 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 542,404 | $ | 478,386 | $ | 190,956 | $ | 142,130 | $ | 161,070 | $ | 16,514 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 35 |
Financial Highlights selected per share data and ratios
Class B | ||||||||
November 13, | ||||||||
2009** | ||||||||
Year ended | through | |||||||
October 31, | October 31, | |||||||
2011 | 2010 | |||||||
Net asset value at beginning of period | $ | 32.84 | $ | 29.93 | ||||
Net investment income (loss) | 0.10 | (0.01 | ) (a) | |||||
Net realized and unrealized gain (loss) on investments | 0.34 | 2.99 | ||||||
Total from investment operations | 0.44 | 2.98 | ||||||
Less dividends: | ||||||||
From net investment income | (0.13 | ) | (0.07 | ) | ||||
Net asset value at end of period | $ | 33.15 | $ | 32.84 | ||||
Total investment return (b) | 1.32 | % | 9.98 | %(c) | ||||
Ratios (to average net assets)/Supplemental Data: | ||||||||
Net investment income (loss) | 0.35 | % | (0.04 | %)†† | ||||
Net expenses | 2.18 | % | 2.22 | % †† | ||||
Expenses (before waiver/reimbursement) | 2.18 | % | 2.26 | % †† | ||||
Portfolio turnover rate | 71 | % | 55 | % | ||||
Net assets at end of period (in 000’s) | $ | 64,649 | $ | 85,952 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
36 MainStay ICAP Select Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 32.84 | $ | 28.56 | $ | 25.53 | $ | 38.68 | $ | 41.56 | $ | 39.46 | ||||||||||||||
Net investment income (loss) | 0.12 | (0.01 | ) (a) | 0.07 | 0.18 | (a) | 0.14 | (a) | 0.13 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.33 | 4.36 | 3.09 | (13.12 | ) | 2.24 | 3.63 | |||||||||||||||||||
Total from investment operations | 0.45 | 4.35 | 3.16 | (12.94 | ) | 2.38 | 3.76 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.07 | ) | (0.13 | ) | (0.21 | ) | (0.25 | ) | (0.23 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.01 | ) | (1.43 | ) | ||||||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.07 | ) | (0.13 | ) | (0.21 | ) | (5.26 | ) | (1.66 | ) | ||||||||||||||
Net asset value at end of period | $ | 33.15 | $ | 32.84 | $ | 28.56 | $ | 25.53 | $ | 38.68 | $ | 41.56 | ||||||||||||||
Total investment return (b) | 1.32 | % | 15.25 | % | 12.50 | % | (33.59 | %)(c) | 5.83 | % | 9.59 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.34 | % | (0.02 | %) | 0.28 | % | 0.65 | % †† | 0.33 | % | 0.91 | %†† | ||||||||||||||
Net expenses | 2.18 | % | 2.22 | % | 2.05 | % | 1.91 | % †† | 1.90 | % | 1.95 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 2.18 | % | 2.26 | % | 2.21 | % | 2.05 | % †† | 2.01 | % | 2.04 | %†† | ||||||||||||||
Portfolio turnover rate | 71 | % | 55 | % | 101 | % | 117 | % | 123 | % | 115 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 95,887 | $ | 95,241 | $ | 55,841 | $ | 47,831 | $ | 45,789 | $ | 3,293 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment 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. | mainstayinvestments.com 37 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||||||
January 1, | ||||||||||||||||||||||||||
2008*** | ||||||||||||||||||||||||||
through | ||||||||||||||||||||||||||
Year ended October 31, | October 31, | Year ended December 31, | ||||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.12 | $ | 28.74 | $ | 25.67 | $ | 38.84 | $ | 41.62 | $ | 36.17 | ||||||||||||||
Net investment income (loss) | 0.55 | 0.41 | (a) | 0.37 | 0.51 | (a) | 0.64 | (a) | 0.57 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.34 | 4.37 | 3.10 | (13.20 | ) | 2.21 | 6.83 | |||||||||||||||||||
Total from investment operations | 0.89 | 4.78 | 3.47 | (12.69 | ) | 2.85 | 7.40 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.54 | ) | (0.40 | ) | (0.40 | ) | (0.48 | ) | (0.62 | ) | (0.52 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.01 | ) | (1.43 | ) | ||||||||||||||||||
Total dividends and distributions | (0.54 | ) | (0.40 | ) | (0.40 | ) | (0.48 | ) | (5.63 | ) | (1.95 | ) | ||||||||||||||
Net asset value at end of period | $ | 33.47 | $ | 33.12 | $ | 28.74 | $ | 25.67 | $ | 38.84 | $ | 41.62 | ||||||||||||||
Total investment return (b) | 2.63 | % | 16.77 | % | 13.89 | % | (32.99 | %)(c) | 6.95 | % | 20.60 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.61 | % | 1.32 | % | 1.50 | % | 1.78 | % †† | 1.44 | % | 1.45 | % | ||||||||||||||
Net expenses | 0.90 | % | 0.90 | % | 0.83 | % | 0.80 | % †† | 0.80 | % | 0.80 | % | ||||||||||||||
Expenses (before reimbursement/waiver) | 0.96 | % | 0.98 | % | 1.03 | % | 0.94 | % †† | 0.91 | % | 0.88 | % | ||||||||||||||
Portfolio turnover rate | 71 | % | 55 | % | 101 | % | 117 | % | 123 | % | 115 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,702,189 | $ | 2,041,651 | $ | 1,454,261 | $ | 1,296,268 | $ | 1,863,460 | $ | 1,519,408 |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
38 MainStay ICAP Select Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R1 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.13 | $ | 28.74 | $ | 25.68 | $ | 38.85 | $ | 41.62 | $ | 39.46 | ||||||||||||||
Net investment income (loss) | 0.51 | 0.35 | (a) | 0.35 | 0.42 | (a) | 0.59 | (a) | 0.26 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.33 | 4.39 | 3.08 | (13.13 | ) | 2.24 | 3.63 | |||||||||||||||||||
Total from investment operations | 0.84 | 4.74 | 3.43 | (12.71 | ) | 2.83 | 3.89 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.49 | ) | (0.35 | ) | (0.37 | ) | (0.46 | ) | (0.59 | ) | (0.30 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.01 | ) | (1.43 | ) | ||||||||||||||||||
Total dividends and distributions | (0.49 | ) | (0.35 | ) | (0.37 | ) | (0.46 | ) | (5.60 | ) | (1.73 | ) | ||||||||||||||
Net asset value at end of period | $ | 33.48 | $ | 33.13 | $ | 28.74 | $ | 25.68 | $ | 38.85 | $ | 41.62 | ||||||||||||||
Total investment return (b) | 2.47 | % | 16.60 | % | 13.69 | % | (33.03 | %)(c) | 6.87 | % | 9.94 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.45 | % | 1.12 | % | 1.23 | % | 1.55 | % †† | 1.33 | % | 1.89 | %†† | ||||||||||||||
Net expenses | 1.06 | % | 1.08 | % | 0.98 | % | 0.91 | % †† | 0.90 | % | 0.90 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.06 | % | 1.08 | % | 1.13 | % | 1.06 | % †† | 1.01 | % | 0.99 | %†† | ||||||||||||||
Portfolio turnover rate | 71 | % | 55 | % | 101 | % | 117 | % | 123 | % | 115 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 20,156 | $ | 15,583 | $ | 13,628 | $ | 5,286 | $ | 1,440 | $ | 63 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. | |
(c) | Total investment 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. | mainstayinvestments.com 39 |
Financial Highlights selected per share data and ratios
Class R2 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.07 | $ | 28.69 | $ | 25.63 | $ | 38.80 | $ | 41.60 | $ | 39.46 | ||||||||||||||
Net investment income (loss) | 0.40 | 0.27 | (a) | 0.26 | 0.40 | (a) | 0.53 | (a) | 0.17 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.35 | 4.38 | 3.11 | (13.18 | ) | 2.18 | 3.68 | |||||||||||||||||||
Total from investment operations | 0.75 | 4.65 | 3.37 | (12.78 | ) | 2.71 | 3.85 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.40 | ) | (0.27 | ) | (0.31 | ) | (0.39 | ) | (0.50 | ) | (0.28 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.01 | ) | (1.43 | ) | ||||||||||||||||||
Total dividends and distributions | (0.40 | ) | (0.27 | ) | (0.31 | ) | (0.39 | ) | (5.51 | ) | (1.71 | ) | ||||||||||||||
Net asset value at end of period | $ | 33.42 | $ | 33.07 | $ | 28.69 | $ | 25.63 | $ | 38.80 | $ | 41.60 | ||||||||||||||
Total investment return (b) | 2.21 | % | 16.29 | % | 13.46 | % | (33.18 | %)(c) | 6.56 | % | 9.85 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.21 | % | 0.88 | % | 1.07 | % | 1.42 | % †† | 1.18 | % | 1.25 | %†† | ||||||||||||||
Net expenses | 1.31 | % | 1.33 | % | 1.22 | % | 1.15 | % †† | 1.15 | % | 1.15 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.31 | % | 1.33 | % | 1.38 | % | 1.29 | % †† | 1.26 | % | 1.24 | %†† | ||||||||||||||
Portfolio turnover rate | 71 | % | 55 | % | 101 | % | 117 | % | 123 | % | 115 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 21,933 | $ | 24,776 | $ | 11,099 | $ | 10,796 | $ | 12,712 | $ | 27 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
40 MainStay ICAP Select Equity Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R3 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 33.02 | $ | 28.66 | $ | 25.60 | $ | 38.76 | $ | 41.58 | $ | 39.46 | ||||||||||||||
Net investment income (loss) | 0.34 | 0.18 | (a) | 0.21 | 0.28 | (a) | 0.31 | (a) | 0.14 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.33 | 4.38 | 3.10 | (13.10 | ) | 2.29 | 3.67 | |||||||||||||||||||
Total from investment operations | 0.67 | 4.56 | 3.31 | (12.82 | ) | 2.60 | 3.81 | |||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.31 | ) | (0.20 | ) | (0.25 | ) | (0.34 | ) | (0.41 | ) | (0.26 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (5.01 | ) | (1.43 | ) | ||||||||||||||||||
Total dividends and distributions | (0.31 | ) | (0.20 | ) | (0.25 | ) | (0.34 | ) | (5.42 | ) | (1.69 | ) | ||||||||||||||
Net asset value at end of period | $ | 33.38 | $ | 33.02 | $ | 28.66 | $ | 25.60 | $ | 38.76 | $ | 41.58 | ||||||||||||||
Total investment return (b) | 1.99 | % | 15.97 | % | 13.16 | % | (33.29 | %)(c) | 6.30 | % | 9.77 | %(c) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.98 | % | 0.58 | % | 0.78 | % | 1.02 | % †† | 0.70 | % | 1.00 | %†† | ||||||||||||||
Net expenses | 1.56 | % | 1.58 | % | 1.47 | % | 1.40 | % †† | 1.40 | % | 1.40 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.56 | % | 1.58 | % | 1.63 | % | 1.55 | % †† | 1.51 | % | 1.49 | %†† | ||||||||||||||
Portfolio turnover rate | 71 | % | 55 | % | 101 | % | 117 | % | 123 | % | 115 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 13,291 | $ | 11,994 | $ | 4,558 | $ | 2,963 | $ | 185 | $ | 27 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. | |
(c) | Total investment 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. | mainstayinvestments.com 41 |
MainStay ICAP Global Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (4/30/08) | Ratio2 | ||||||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –6 | .98% | –5 | .37% | 1 | .72% | ||||||||
Excluding sales charges | –1 | .56 | –3 | .83 | 1 | .72 | ||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –6 | .82 | –5 | .27 | 1 | .53 | ||||||||
Excluding sales charges | –1 | .40 | –3 | .73 | 1 | .53 | ||||||||||
Class C Shares | Maximum 1% CDSC | With sales charges | –3 | .16 | –4 | .51 | 2 | .47 | ||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | –2 | .19 | –4 | .51 | 2 | .47 | |||||||||
Class I Shares | No Sales Charge | –1 | .23 | –3 | .53 | 1 | .27 | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
42 MainStay ICAP Global Fund
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
MSCI World Index3 | 1 | .76% | –3 | .85% | ||||
Average Lipper Global Large-Cap Value Fund4 | –1 | .60 | –5 | .78 | ||||
3. | The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an Index. |
4. | The average Lipper global large-cap value fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies both inside and outside of the U.S. with market capitalizations (on a three-year weighted basis) above Lipper’s global large-cap floor. Global large-cap value funds typically have a below average price-to-cash flow ratio, price-to-book ratio, and three-year sales-per-share growth value compared to their large-cap-specific subset of the S&P/Citigroup World BMI. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on total returns with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 43
Cost in Dollars of a $1,000 Investment in MainStay ICAP Global Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 857.90 | $ | 5.62 | $ | 1,019.20 | $ | 6.11 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 858.30 | $ | 5.39 | $ | 1,019.40 | $ | 5.85 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 855.30 | $ | 9.12 | $ | 1,015.40 | $ | 9.91 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 859.20 | $ | 4.22 | $ | 1,020.70 | $ | 4.58 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.20% for Investor Class, 1.15% for Class A, 1.95% for Class C and 0.90% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
44 MainStay ICAP Global Fund
Sector Composition as of October 31, 2011 (Unaudited)
Financials | 15.6 | % | ||
Consumer Discretionary | 14.6 | |||
Health Care | 13.8 | |||
Information Technology | 11.0 | |||
Energy | 10.9 | |||
Telecommunication Services | 9.7 | |||
Industrials | 8.8 | |||
Consumer Staples | 8.0 | |||
Materials | 5.9 | |||
Utilities | 0.3 | |||
Short-Term Investment | 1.6 | |||
Other Assets, Less Liabilities | −0.2 | |||
100.0 | % | |||
See Portfolio of Investments beginning on page 48 for specific holdings within these categories.
Top Ten Holdings as of October 31, 2011 (excluding short-term investment)
1. | Pfizer, Inc. | |
2. | Vodafone Group PLC, Sponsored ADR | |
3. | Microsoft Corp. | |
4. | Novartis A.G. | |
5. | Time Warner, Inc. | |
6. | Sanofi S.A. | |
7. | Bridgestone Corp. | |
8. | Akzo Nobel N.V. | |
9. | Nippon Telegraph & Telephone Corp. | |
10. | Petroleo Brasileiro S.A., ADR |
mainstayinvestments.com 45
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jerrold K. Senser, CFA, and Thomas R. Wenzel, CFA, of Institutional Capital LLC (ICAP), the Fund’s Subadvisor.
How did MainStay ICAP Global Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay ICAP Global Fund returned −1.56% for Investor Class shares, −1.40% for Class A shares and −2.19% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned −1.23%. Investor Class, Class A and Class I shares outperformed—and Class C shares underperformed—the −1.60% return of the average Lipper1 global large-cap value fund for the 12 months ended October 31, 2011. All share classes underperformed the 1.76% return of the MSCI World Index2 for the same period. The MSCI World Index is the Fund’s broad-based securities-market index. See page 42 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
During the reporting period, a number of factors affected the Fund’s performance relative to the MSCI World Index. Strong stock selection in the consumer discretionary and telecommunication services sectors added to the Fund’s relative performance, as did an overweight position in the health care sector. Weak stock selection in the financials and industrials sectors detracted from the Fund’s relative performance, as did an underweight position in the information technology sector.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
The sectors that made the strongest positive contributions to the Fund’s performance relative to the MSCI World Index were consumer discretionary, telecommunication services and energy. (Contributions take weightings and total returns into account.) Strong stock selection was the primary driver in each case.
The sectors that were particularly weak relative to the MSCI World Index were financials, industrials and utilities. Weak stock selection was the primary driver in each case.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The stocks that made the strongest positive contributions to the Fund’s absolute performance were integrated oil companies Occidental Petroleum, Marathon Oil and ConocoPhillips. Each of these companies benefited from the rise in oil prices during the reporting period. Marathon Oil also benefited when plans to spin off its refining business met with investor approval. ConocoPhillips benefited from substantial progress in the company’s efforts to restructure and refocus its business to generate higher returns. Occidental Petroleum remained in the Fund at the end of the reporting period, but we sold the other two positions in favor of stocks that, in our opinion, offered more attractive upside potential.
Major detractors from the Fund’s absolute performance included Italian bank Intesa Sanpaolo, Swiss bank UBS and global in- vestment bank Goldman Sachs Group. Intesa Sanpaolo lagged on continuing concerns about the European sovereign debt crisis. UBS underperformed when a loss from unauthorized trading undermined confidence in the company’s risk controls. Goldman Sachs lagged as a difficult trading and investment banking environment—along with ongoing regulatory challenges—cut into the firm’s results and outlook. Each of these stocks generated negative returns during the reporting period, and the Fund sold all three positions.
Did the Fund make any significant purchases or sales during the reporting period?
During a reporting period characterized by ongoing volatility and an uncertain economic environment, we continued to look for stocks with attractive valuations and specific catalysts that could trigger appreciation over a 12- to 18-month time frame.
During the reporting period, we added Dutch paint and coat-ings manufacturer AkzoNobel to the Fund. We believe that this company can improve its margins through price increases that will offset the rise in raw material costs. We also added French food and beverage company Danone. This company has a strong position in dairy products and infant nutrition, which are categories we find attractive. We felt that this positioning and the company’s exposure to emerging markets could lead to above-average organic revenue growth. We also added diversified health care company Johnson & Johnson. We believed that the company could boost sales with a strong drug pipeline and a recovery in its consumer business (which appeared to be improving, after a challenging span of product recalls).
In addition to the sales already mentioned, we sold the Fund’s positions in Canadian gold miner Barrick Gold and wireless communications technology company Qualcomm. Both were sold when we found other stocks that we believed had greater upside potential and were more attractive on a relative-valuation basis. We also sold the Fund’s position in Hong Kong conglomerate Hutchison Whampoa when the company’s stock neared our target price.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund increased its sector exposure relative to the MSCI World Index in telecommunication services and consumer staples. In telecommunication services, the Fund went from a small underweight position at the
1. See footnote on page 43 for more information about Lipper Inc.
2. See footnote on page 43 for more information on the MSCI World Index.
46 MainStay ICAP Global Fund
beginning of the reporting period to an overweight position at the end. In consumer staples, the Fund went from a sub- stantially underweight position to a position that was less underweight. Over the same period, the Fund decreased its weightings relative to the MSCI World Index in industrials and financials. In both cases, the Fund moved from an overweight position to an underweight position.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2011, the Fund was most significantly overweight relative to the MSCI World Index in the telecommunication services and consumer discretionary sectors and most significantly underweight relative to the Index in utilities and financials. This positioning reflected our view on the prospects for economic growth and the relative attractiveness of individual holdings in these sectors.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 47
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 98.6%† | ||||||||
Consumer Discretionary 14.6% | ||||||||
X Bridgestone Corp. | 58,400 | $ | 1,366,209 | |||||
Genting Berhad | 152,950 | 533,027 | ||||||
Genting Singapore PLC (a) | 363,200 | 495,948 | ||||||
Johnson Controls, Inc. | 21,350 | 703,055 | ||||||
Lowe’s Cos., Inc. | 16,150 | 339,473 | ||||||
Nissan Motor Co., Ltd. | 114,100 | 1,051,188 | ||||||
Sands China, Ltd. (a) | 108,650 | 319,678 | ||||||
X Time Warner, Inc. | 43,100 | 1,508,069 | ||||||
Viacom, Inc. Class B | 23,300 | 1,021,705 | ||||||
7,338,352 | ||||||||
Consumer Staples 8.0% | ||||||||
Archer-Daniels-Midland Co. | 19,200 | 555,648 | ||||||
Coca-Cola Co. (The) | 7,800 | 532,896 | ||||||
Danone S.A. | 15,700 | 1,085,272 | ||||||
Pernod Ricard S.A. | 8,300 | 773,443 | ||||||
Procter & Gamble Co. (The) | 16,600 | 1,062,234 | ||||||
4,009,493 | ||||||||
Energy 10.9% | ||||||||
ENI S.p.A. | 43,650 | 961,200 | ||||||
ExxonMobil Corp. | 16,150 | 1,261,154 | ||||||
Occidental Petroleum Corp. | 12,450 | 1,157,103 | ||||||
X Petroleo Brasileiro S.A., ADR (b) | 47,200 | 1,274,872 | ||||||
Southwestern Energy Co. (a) | 6,700 | 281,668 | ||||||
Total S.A. | 10,250 | 536,008 | ||||||
5,472,005 | ||||||||
Financials 15.6% | ||||||||
Banco Bilbao Vizcaya Argentaria S.A. | 67,100 | 603,642 | ||||||
BB&T Corp. | 24,050 | 561,327 | ||||||
BlackRock, Inc. | 4,100 | 646,939 | ||||||
Deutsche Boerse A.G. (a) | 5,050 | 278,634 | ||||||
DnB NOR ASA | 82,900 | 958,702 | ||||||
JPMorgan Chase & Co. | 34,450 | 1,197,482 | ||||||
MetLife, Inc. | 23,650 | 831,534 | ||||||
Standard Chartered PLC | 52,162 | 1,215,178 | ||||||
Tokio Marine Holdings, Inc. | 32,550 | 774,724 | ||||||
Wells Fargo & Co. | 31,550 | 817,460 | ||||||
7,885,622 | ||||||||
Health Care 13.8% | ||||||||
Covidien PLC | 11,950 | 562,128 | ||||||
Johnson & Johnson | 11,000 | 708,290 | ||||||
Merck & Co., Inc. | 20,129 | 694,451 | ||||||
X Novartis A.G. | 29,650 | 1,675,006 | ||||||
X Pfizer, Inc. | 94,700 | 1,823,922 | ||||||
X Sanofi S.A. | 21,050 | 1,506,828 | ||||||
6,970,625 | ||||||||
Industrials 8.8% | ||||||||
ABB, Ltd. (a) | 42,500 | 801,242 | ||||||
China Communications Construction Co., Ltd. Class H | 363,700 | 270,942 | ||||||
Honeywell International, Inc. | 19,250 | 1,008,700 | ||||||
KOMATSU, Ltd. | 17,200 | 423,497 | ||||||
Mitsubishi Corp. | 42,500 | 874,833 | ||||||
Siemens A.G. | 6,550 | 686,501 | ||||||
TNT Express N.V. | 41,647 | 351,785 | ||||||
4,417,500 | ||||||||
Information Technology 11.0% | ||||||||
Applied Materials, Inc. | 58,993 | 726,794 | ||||||
Cisco Systems, Inc. | 44,950 | 832,923 | ||||||
X Microsoft Corp. | 64,650 | 1,721,629 | ||||||
Samsung Electronics Co., Ltd., GDR (c) | 2,062 | 883,698 | ||||||
SAP A.G. | 11,000 | 662,856 | ||||||
Texas Instruments, Inc. | 23,150 | 711,400 | ||||||
5,539,300 | ||||||||
Materials 5.9% | ||||||||
X Akzo Nobel N.V. | 25,500 | 1,340,917 | ||||||
Holcim, Ltd. (a) | 11,650 | 738,282 | ||||||
JFE Holdings, Inc. | 27,900 | 525,729 | ||||||
Monsanto Co. | 3,100 | 225,525 | ||||||
Rio Tinto PLC | 2,800 | 151,406 | ||||||
2,981,859 | ||||||||
Telecommunication Services 9.7% | ||||||||
BCE, Inc. | 21,750 | 861,518 | ||||||
Koninklijke KPN N.V. | 75,800 | 990,399 | ||||||
X Nippon Telegraph & Telephone Corp. | 25,100 | 1,283,185 | ||||||
X Vodafone Group PLC, Sponsored ADR (b) | 62,400 | 1,737,216 | ||||||
4,872,318 | ||||||||
Utilities 0.3% | ||||||||
GDF Suez S.A. | 6,276 | 176,729 | ||||||
Total Common Stocks (Cost $47,465,398) | 49,663,803 | |||||||
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
48 MainStay ICAP Global Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Short-Term Investment 1.6% | ||||||||
Repurchase Agreement 1.6% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity, $784,683 (Collateralized by a Federal Home Loan Mortgage Corp. security with a rate of 0.90% and a maturity date of 9/12/14, with a Principal Amount of $800,000 and a Market Value of $801,612) | $ | 784,683 | $ | 784,683 | ||||
Total Short-Term Investment (Cost $784,683) | 784,683 | |||||||
Total Investments (Cost $48,250,081) (d) | 100.2 | % | 50,448,486 | |||||
Other Assets, Less Liabilities | (0.2 | ) | (76,654 | ) | ||||
Net Assets | 100.0 | % | $ | 50,371,832 | ||||
(a) | Non-income producing security. | |
(b) | ADR—American Depositary Receipt. | |
(c) | GDR—Global Depositary Receipt. | |
(d) | At October 31, 2011, cost is $48,702,317 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 4,312,922 | ||
Gross unrealized depreciation | (2,566,753 | ) | ||
Net unrealized appreciation | $ | 1,746,169 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks (b) | $ | 25,367,115 | $ | 24,296,688 | $ | — | $ | 49,663,803 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 784,683 | — | 784,683 | ||||||||||||
Total Investments in Securities | $ | 25,367,115 | $ | 25,081,371 | $ | — | $ | 50,448,486 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | Level 2 assets represent the following international equities: Sands China, Ltd., China Communications Construction Co., Ltd. Class H, Danone S.A., Pernod Ricard S.A., Total S.A., Sanofi S.A., GDF Suez S.A., Deutsche Boerse A.G., Siemens A.G., SAP A.G., ENI S.p.A., Bridgestone Corp., Nissan Motor Co., Ltd., Tokio Marine Holdings, Inc., KOMATSU, Ltd., Mitsubishi Corp., JFE Holdings, Inc., Nippon Telegraph & Telephone Corp., Genting Berhad, TNT Express N.V., Akzo Nobel N.V., Koninklijke KPN N.V., DnB NOR ASA, Samsung Electronics Co., Ltd., Banco Bilbao Vizcaya Argentaria S.A., Novartis A.G., ABB, Ltd., Holcim, Ltd., Genting Singapore PLC, Standard Chartered PLC, and Rio Tinto PLC. |
The Fund recognizes transfers between the levels as of the beginning of the period.
During the year ended October 31, 2011, certain foreign equity securities with a market value of $10,971,023 held by the Fund at October 31, 2010, transferred from Level 1 to Level 2 due to these securities being fair valued at period end by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 49 |
Portfolio of Investments October 31, 2011 (continued)
The table below sets forth the diversification of the MainStay ICAP Global Fund investments by country.
Country Composition (Unaudited)
Value | Percent † | |||||||
Brazil | $ | 1,274,872 | 2.5 | % | ||||
Canada | 861,518 | 1.7 | ||||||
Cayman Islands | 319,678 | 0.6 | ||||||
China | 270,942 | 0.6 | ||||||
France | 4,078,280 | 8.1 | ||||||
Germany | 1,627,991 | 3.2 | ||||||
Ireland | 562,128 | 1.1 | ||||||
Italy | 961,200 | 1.9 | ||||||
Japan | 6,299,365 | 12.5 | ||||||
Malaysia | 533,027 | 1.1 | ||||||
Netherlands | 2,683,101 | 5.3 | ||||||
Norway | 958,702 | 1.9 | ||||||
Republic of Korea | 883,698 | 1.8 | ||||||
Spain | 603,642 | 1.2 | ||||||
Switzerland | 3,214,530 | 6.4 | ||||||
United Kingdom | 3,599,748 | 7.2 | ||||||
United States | 21,716,064 | 43.1 | ||||||
50,448,486 | 100.2 | |||||||
Other Assets, Less Liabilities | (76,654 | ) | (0.2 | ) | ||||
Net Assets | $ | 50,371,832 | 100.0 | % | ||||
† Percentages indicated are based on Fund net assets. |
The notes to the financial statements are an integral part of,
50 MainStay ICAP Global Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $48,250,081) | $ | 50,448,486 | ||
Cash denominated in foreign currencies (identified cost $1,283) | 1,308 | |||
Receivables: | ||||
Investment securities sold | 676,384 | |||
Dividends | 109,742 | |||
Fund shares sold | 20,412 | |||
Other assets | 25,740 | |||
Total assets | 51,282,072 | |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 838,322 | |||
Fund shares redeemed | 24,189 | |||
Manager (See Note 3) | 20,237 | |||
Professional fees | 15,177 | |||
Shareholder communication | 6,473 | |||
Transfer agent (See Note 3) | 2,609 | |||
Custodian | 1,685 | |||
NYLIFE Distributors (See Note 3) | 1,356 | |||
Trustees | 192 | |||
Total liabilities | 910,240 | |||
Net assets | $ | 50,371,832 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 6,074 | ||
Additional paid-in capital | 59,315,032 | |||
59,321,106 | ||||
Undistributed net investment income | 152,704 | |||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (11,295,801 | ) | ||
Net unrealized appreciation (depreciation) on investments | 2,198,405 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | (4,582 | ) | ||
Net assets | $ | 50,371,832 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 558,022 | ||
Shares of beneficial interest outstanding | 67,521 | |||
Net asset value per share outstanding | $ | 8.26 | ||
Maximum sales charge (5.50% of offering price) | 0.48 | |||
Maximum offering price per share outstanding | $ | 8.74 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 4,583,705 | ||
Shares of beneficial interest outstanding | 553,731 | |||
Net asset value per share outstanding | $ | 8.28 | ||
Maximum sales charge (5.50% of offering price) | 0.48 | |||
Maximum offering price per share outstanding | $ | 8.76 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 357,171 | ||
Shares of beneficial interest outstanding | 43,405 | |||
Net asset value and offering price per share outstanding | $ | 8.23 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 44,872,934 | ||
Shares of beneficial interest outstanding | 5,409,606 | |||
Net asset value and offering price per share outstanding | $ | 8.30 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 51 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 1,356,497 | ||
Expenses | ||||
Manager (See Note 3) | 405,887 | |||
Registration | 60,594 | |||
Professional fees | 59,807 | |||
Custodian | 21,934 | |||
Transfer agent (See Note 3) | 15,806 | |||
Shareholder communication | 14,533 | |||
Distribution/Service—Investor Class (See Note 3) | 1,223 | |||
Distribution/Service—Class A (See Note 3) | 9,823 | |||
Distribution/Service—Class C (See Note 3) | 2,751 | |||
Trustees | 1,419 | |||
Miscellaneous | 17,160 | |||
Total expenses before waiver/reimbursement | 610,937 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (140,137 | ) | ||
Net expenses | 470,800 | |||
Net investment income (loss) | 885,697 | |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Security transactions | 1,198,614 | |||
Foreign currency transactions | (24,341 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 1,174,273 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (3,039,204 | ) | ||
Translation of other assets and liabilities in foreign currencies | (6,373 | ) | ||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (3,045,577 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (1,871,304 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (985,607 | ) | |
(a) | Dividends recorded net of foreign withholding taxes in the amount of $91,126. |
The notes to the financial statements are an integral part of,
52 MainStay ICAP Global Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 885,697 | $ | 619,013 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 1,174,273 | 2,790,459 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (3,045,577 | ) | 1,537,833 | |||||
Net increase (decrease) in net assets resulting from operations | (985,607 | ) | 4,947,305 | |||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (7,201 | ) | (3,744 | ) | ||||
Class A | (73,325 | ) | (20,971 | ) | ||||
Class C | (2,203 | ) | (766 | ) | ||||
Class I | (763,342 | ) | (540,529 | ) | ||||
Total dividends to shareholders | (846,071 | ) | (566,010 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 7,644,241 | 3,333,671 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 841,932 | 48,990 | ||||||
Cost of shares redeemed | (2,087,598 | ) | (790,752 | )(a) | ||||
Increase (decrease) in net assets derived from capital share transactions | 6,398,575 | 2,591,909 | ||||||
Net increase (decrease) in net assets | 4,566,897 | 6,973,204 | ||||||
Net Assets | ||||||||
Beginning of year | 45,804,935 | 38,831,731 | ||||||
End of year | $ | 50,371,832 | $ | 45,804,935 | ||||
Undistributed net investment income at end of year | $ | 152,704 | $ | 137,420 | ||||
(a) | Cost of shares redeemed net of redemption fees of $19 for the year ended October 31, 2010. (See Note 2(L)) |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 53 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
April 30, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.51 | $ | 7.67 | $ | 6.46 | $ | 10.00 | ||||||||||
Net investment income (loss) | 0.13 | (a) | 0.10 | 0.11 | 0.08 | (a) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.25 | ) | 0.83 | 1.24 | (3.57 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.00 | ‡ | (0.00 | ) ‡ | (0.00 | )‡ | ||||||||||
Total from investment operations | (0.12 | ) | 0.93 | 1.35 | (3.49 | ) | ||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.13 | ) | (0.09 | ) | (0.14 | ) | (0.05 | ) | ||||||||||
Redemption fee (b) | — | — | — | 0.00 | ‡(a) | |||||||||||||
Net asset value at end of period | $ | 8.26 | $ | 8.51 | $ | 7.67 | $ | 6.46 | ||||||||||
Total investment return (c) | (1.56 | %) | 12.32 | % | 21.46 | % | (35.07 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.50 | % | 1.26 | % | 1.57 | % | 1.84 | % †† | ||||||||||
Net expenses | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.62 | % | 1.72 | % | 1.68 | % | 2.18 | % †† | ||||||||||
Portfolio turnover rate | 71 | % | 79 | % | 106 | % | 75 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 558 | $ | 368 | $ | 209 | $ | 56 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
54 MainStay ICAP Global Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||
April 30, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.52 | $ | 7.68 | $ | 6.47 | $ | 10.00 | ||||||||||
Net investment income (loss) | 0.13 | (a) | 0.12 | 0.10 | 0.09 | (a) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.24 | ) | 0.81 | 1.26 | (3.57 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
Total from investment operations | (0.11 | ) | 0.93 | 1.36 | (3.48 | ) | ||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.13 | ) | (0.09 | ) | (0.15 | ) | (0.05 | ) | ||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | |||||||||||
Net asset value at end of period | $ | 8.28 | $ | 8.52 | $ | 7.68 | $ | 6.47 | ||||||||||
Total investment return (c) | (1.40 | %) | 12.36 | % | 21.49 | % | (34.97 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.46 | % | 1.30 | % | 1.63 | % | 2.02 | % †† | ||||||||||
Net expenses | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.42 | % | 1.53 | % | 1.46 | % | 1.99 | % †† | ||||||||||
Portfolio turnover rate | 71 | % | 79 | % | 106 | % | 75 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 4,584 | $ | 2,398 | $ | 801 | $ | 374 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment 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. | mainstayinvestments.com 55 |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||
April 30, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.48 | $ | 7.65 | $ | 6.45 | $ | 10.00 | ||||||||||
Net investment income (loss) | 0.06 | (a) | 0.04 | 0.06 | 0.05 | (a) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.24 | ) | 0.83 | 1.24 | (3.57 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
Total from investment operations | (0.18 | ) | 0.87 | 1.30 | (3.52 | ) | ||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.07 | ) | (0.04 | ) | (0.10 | ) | (0.03 | ) | ||||||||||
Redemption fee (b) | — | — | — | 0.00 | ‡(a) | |||||||||||||
Net asset value at end of period | $ | 8.23 | $ | 8.48 | $ | 7.65 | $ | 6.45 | ||||||||||
Total investment return (c) | (2.19 | %) | 11.45 | % | 20.56 | % | (35.26 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 0.74 | % | 0.49 | % | 0.71 | % | 1.15 | % †† | ||||||||||
Net expenses | 1.95 | % | 1.95 | % | 1.95 | % | 1.95 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 2.37 | % | 2.47 | % | 2.42 | % | 2.93 | % †† | ||||||||||
Portfolio turnover rate | 71 | % | 79 | % | 106 | % | 75 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 357 | $ | 172 | $ | 142 | $ | 20 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
56 MainStay ICAP Global Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||
April 30, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.53 | $ | 7.69 | $ | 6.47 | $ | 10.00 | ||||||||||
Net investment income (loss) | 0.16 | (a) | 0.12 | 0.13 | 0.10 | (a) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.24 | ) | 0.83 | 1.25 | (3.58 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
Total from investment operations | (0.08 | ) | 0.95 | 1.38 | (3.48 | ) | ||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.15 | ) | (0.11 | ) | (0.16 | ) | (0.05 | ) | ||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | — | 0.00 | ‡(a) | ||||||||||||
Net asset value at end of period | $ | 8.30 | $ | 8.53 | $ | 7.69 | $ | 6.47 | ||||||||||
Total investment return (c) | (1.23 | %) | 12.56 | % | 21.74 | % | (34.86 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.78 | % | 1.50 | % | 2.02 | % | 2.25 | % †† | ||||||||||
Net expenses | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % †† | ||||||||||
Expenses (before reimbursement/waiver) | 1.17 | % | 1.27 | % | 1.20 | % | 1.74 | % †† | ||||||||||
Portfolio turnover rate | 71 | % | 79 | % | 106 | % | 75 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 44,873 | $ | 42,867 | $ | 37,680 | $ | 31,662 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(d) | Total investment 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. | mainstayinvestments.com 57 |
MainStay ICAP International Fund
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||||
Expense | ||||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –9 | .69% | –2 | .87% | 6 | .24% | 1 | .55% | ||||||||||
Excluding sales charges | –4 | .44 | –1 | .77 | 6 | .84 | 1 | .55 | ||||||||||||
Class A Shares4 | Maximum 5.5% Initial Sales Charge | With sales charges | –9 | .58 | –2 | .73 | 6 | .32 | 1 | .36 | ||||||||||
Excluding sales charges | –4 | .31 | –1 | .62 | 6 | .92 | 1 | .36 | ||||||||||||
Class C Shares4 | Maximum 1% CDSC | With sales charges | –6 | .10 | –2 | .51 | 6 | .04 | 2 | .29 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | –5 | .16 | –2 | .51 | 6 | .04 | 2 | .29 | |||||||||||
Class I Shares | No Sales Charge | –3 | .95 | –1 | .31 | 7 | .22 | 1 | .11 | |||||||||||
Class R1 Shares4 | No Sales Charge | –4 | .09 | –1 | .43 | 7 | .10 | 1 | .21 | |||||||||||
Class R2 Shares4 | No Sales Charge | –4 | .37 | –1 | .70 | 6 | .82 | 1 | .46 | |||||||||||
Class R3 Shares4 | No Sales Charge | –4 | .65 | –1 | .96 | 6 | .55 | 1 | .71 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. Effective August 31, 2006 ICAP International Fund was renamed MainStay ICAP International Fund. At that time, the Fund’s existing no-load shares were redesignated as Class I shares. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on April 29, 2008, include the historical performance of Class A shares through April 28, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance for Investor Class shares might have been lower. |
4. | Performance figures for Class A, C, R1, R2 and R3 shares, first offered on September 1, 2006, include the historical performance of Class I shares through August 31, 2006, adjusted for differences in certain expenses and fees. Unadjusted, the performance for these shares classes might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
58 MainStay ICAP International Fund
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
MSCI EAFE® Index5 | –4 | .08% | –2 | .41% | 5 | .73% | ||||||
MSCI Europe Index6 | –5 | .24 | –2 | .74 | 5 | .68 | ||||||
Average Lipper International Large-Cap Core Fund7 | –5 | .53 | –2 | .76 | 4 | .88 | ||||||
5. | The MSCI EAFE® Index consists of international stocks representing the developed world outside North America. The MSCI EAFE® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The MSCI Europe Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe. The MSCI Europe Index is the Fund’s secondary benchmark. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | The average Lipper international large-cap core fund is representative of funds that, by portfolio practice, invest at least 75% of their equity assets in companies strictly outside of the U.S. with market capitalizations (on a three-year weighted basis) above Lipper’s international large-cap floor. International large-cap core funds typically have an average price-to cash flow ratio, price-to-book ratio, and three-year sales-per-share growth value compared to their large-cap-specific subset of the S&P/Citigroup World ex-U.S. BMI. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on total returns with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 59
Cost in Dollars of a $1,000 Investment in MainStay ICAP International Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 845.20 | $ | 6.51 | $ | 1,018.10 | $ | 7.12 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 845.60 | $ | 6.00 | $ | 1,018.70 | $ | 6.56 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 842.00 | $ | 10.03 | $ | 1,014.30 | $ | 10.97 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 847.40 | $ | 4.42 | $ | 1,020.40 | $ | 4.84 | ||||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 846.50 | $ | 4.89 | $ | 1,019.90 | $ | 5.35 | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 845.30 | $ | 6.47 | $ | 1,018.20 | $ | 7.07 | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 844.10 | $ | 7.62 | $ | 1,016.90 | $ | 8.34 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.40% for Investor Class, 1.29% for Class A, 2.16% for Class C, 0.95% for Class I, 1.05% for Class R1, 1.39% for Class R2 and 1.64% for Class R3) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
60 MainStay ICAP International Fund
Sector Composition as of October 31, 2011 (Unaudited)
Financials | 15.7 | % | ||
Telecommunication Services | 15.3 | |||
Health Care | 11.9 | |||
Industrials | 11.4 | |||
Consumer Discretionary | 10.4 | |||
Energy | 10.3 | |||
Materials | 8.4 | |||
Consumer Staples | 8.0 | |||
Information Technology | 5.7 | |||
Utilities | 1.4 | |||
Short-Term Investment | 1.5 | |||
Other Assets, Less Liabilities | (0.0 | )‡ | ||
100.0 | % | |||
‡ Less than one-tenth of a percent.
See Portfolio of Investments beginning on page 64 for specific holding within these categories.
Top Ten holdings as of October 31, 2011 (excluding short-term investment)
1. | Sanofi S.A. | |
2. | Vodafone Group PLC, Sponsored ADR | |
3. | Novartis A.G. | |
4. | Bridgestone Corp. | |
5. | Nippon Telegraph & Telephone Corp. | |
6. | Danone S.A. | |
7. | Akzo Nobel N.V. | |
8. | ENI S.p.A. | |
9. | Pernod Ricard S.A. | |
10. | Standard Chartered PLC |
mainstayinvestments.com 61
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jerrold K. Senser, CFA, and Thomas R. Wenzel, CFA, of Institutional Capital LLC (ICAP), the Fund’s Subadvisor.
How did MainStay ICAP International Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay ICAP International Fund returned –4.44% for Investor Class shares, –4.31% for Class A shares and –5.16% for Class C shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned –3.95%, Class R1 shares returned –4.09%, Class R2 shares returned –4.37% and Class R3 shares returned –4.65%. All share classes outperformed the –5.53% return of the aver-age Lipper1 international large-cap core fund for the 12 months ended October 31, 2011. Class I shares outperformed—and Investor Class, Class A, Class C, Class R1, Class R2 and Class R3 shares underperformed—the –4.08% return of the MSCI EAFE® Index2 for the same period. The MSCI EAFE® Index is the Fund’s broad-based securities-market index. See page 58 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
During the reporting period, a number of factors affected the Fund’s performance relative to the MSCI EAFE® Index. Strong stock selection in the consumer discretionary and information technology sectors added to relative performance, as did an overweight position in the health care sector. Weak stock selec- tion in the financials and industrials sectors detracted from the Fund’s performance relative to the benchmark, as did an underweight position in the consumer staples sector.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
The sectors that made the strongest positive contributions to the Fund’s performance relative to the MSCI EAFE® Index were consumer discretionary, telecommunication services and information technology. (Contributions take weightings and total returns into account.) Favorable stock selection was the primary driver in the consumer discretionary and information technology sectors. Both stock selection and an overweight position in the telecommunication services sector added to the Fund’s relative performance.
The sectors that were particularly weak relative to the MSCI EAFE® Index were financials, industrials and consumer staples. Stock selection was the primary driver in financials and industrials. An underweight position in the consumer staples sector detracted from the Fund’s relative performance.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The stocks that made the strongest positive contributions to the Fund’s absolute performance were Japanese tire manufacturer Bridgestone, Japanese telecommunication services provider NTT and Dutch financial services firm ING. Bridgestone, the world’s largest tire maker, had strong performance as the company was able to pass higher prices through to its customers to offset rising input costs. NTT advanced as investors reacted favorably to improving profitability in its broadband business. ING’s stock rose as the company’s restructuring plans began to improve the core operations of its banking business. Bridgestone and NTT remained in the Fund at the end of the reporting period, while ING was sold when the company’s shares achieved our target price.
Detractors from the Fund’s absolute performance included Italian bank Intesa Sanpaolo, German pharmaceutical and chemical company Bayer and Swiss bank UBS. Intesa Sanpaolo lagged on continuing concerns about the European sovereign debt crisis. Bayer was weak as concerns about the outlook for its chemical business and drug pipeline weighed on the stock. UBS underperformed when a loss from unauthorized trading undermined confidence in the firm’s risk controls. Each of these stocks generated negative returns during the reporting period. We sold the Fund’s positions in Intesa Sanpaolo and UBS during the reporting period. Bayer remained in the Fund at the end of the reporting period, as we continued to believe that the company was attractively valued and had catalysts for potential price appreciation.
Did the Fund make any significant purchases or sales during the reporting period?
During a reporting period characterized by ongoing volatility and an uncertain economic environment, we continued to look for stocks with attractive valuations and specific catalysts that could trigger appreciation over a 12- to 18-month time frame.
During the reporting period, we added Dutch paint and coat- ings manufacturer AkzoNobel to the Fund. We believe that this company can improve its margins through price increases that will offset the rise in raw material costs. We also added French food and beverage company Danone. The company has a strong position in dairy products and infant nutrition, which are categories we find attractive. We felt that this positioning and the company’s exposure to emerging markets could lead to above-average organic revenue growth.
In addition to the sales already mentioned, we sold the Fund’s position in Canadian gold miner Barrick Gold when we found other stocks that we believed had greater upside potential and were more attractive on a relative-valuation basis. We also sold
1. See footnote on page 59 for more information about Lipper Inc.
2. See footnote on page 59 for more information on the MSCI EAFE® Index.
62 MainStay ICAP International Fund
the Fund’s position in Hong Kong conglomerate Hutchison Whampoa when the company’s stock neared our target price.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund increased its sector exposure relative to the MSCI EAFE® Index in telecommuni- cation services and consumer staples. In telecommunication services, the Fund went from a slightly overweight position at the beginning of the reporting period to a significantly overweight position at the end. In consumer staples, the Fund went from a substantially underweight position to a position that was less underweight.
Over the same period, the Fund decreased its weightings rela- tive to the MSCI EAFE® Index in the industrials sector, going from a substantially overweight position at the beginning of the reporting period to a slightly underweight position at the end. The Fund also decreased its relative weighting in financials, becoming even more underweight relative to the MSCI EAFE® Index.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2011, the Fund was most significantly overweight relative to the MSCI EAFE® Index in the telecommunication services and health care sectors and most significantly underweight relative to the Index in financials and consumer staples. This positioning reflected our view on the prospects for economic growth and the relative attractiveness of individual holdings in these sectors.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 63
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Common Stocks 98.5%† | ||||||||
Consumer Discretionary 10.4% | ||||||||
X Bridgestone Corp. | 1,742,300 | $ | 40,759,355 | |||||
Genting Berhad | 3,049,550 | 10,627,601 | ||||||
Genting Singapore PLC (a) | 8,041,100 | 10,980,094 | ||||||
Nissan Motor Co., Ltd. | 2,768,350 | 25,504,435 | ||||||
Sands China, Ltd. (a) | 2,563,600 | 7,542,813 | ||||||
95,414,298 | ||||||||
Consumer Staples 8.0% | ||||||||
X Danone S.A. | 547,350 | 37,835,884 | ||||||
X Pernod Ricard S.A. | 381,150 | 35,517,828 | ||||||
73,353,712 | ||||||||
Energy 10.3% | ||||||||
X ENI S.p.A. | 1,640,100 | 36,116,021 | ||||||
Petroleo Brasileiro S.A., ADR (b) | 1,081,850 | 29,220,768 | ||||||
Repsol YPF, S.A. | 380,250 | 11,455,365 | ||||||
Total S.A. | 338,700 | 17,711,803 | ||||||
94,503,957 | ||||||||
Financials 15.7% | ||||||||
Banco Bilbao Vizcaya Argentaria S.A. | 2,482,900 | 22,336,542 | ||||||
China Construction Bank Corp. Class H | 18,522,077 | 13,463,362 | ||||||
Deutsche Boerse A.G. (a) | 225,000 | 12,414,384 | ||||||
DnB NOR ASA | 2,388,500 | 27,621,966 | ||||||
Muenchener Rueckversicherungs-Gesellschaft A.G. Registered | 124,550 | 16,696,505 | ||||||
X Standard Chartered PLC | 1,309,481 | 30,505,966 | ||||||
Tokio Marine Holdings, Inc. | 897,800 | 21,368,570 | ||||||
144,407,295 | ||||||||
Health Care 11.9% | ||||||||
Bayer A.G. | 105,750 | 6,744,721 | ||||||
GlaxoSmithKline PLC | 320,450 | 7,182,737 | ||||||
X Novartis A.G. | 799,350 | 45,157,368 | ||||||
X Sanofi S.A. | 696,300 | 49,843,447 | ||||||
108,928,273 | ||||||||
Industrials 11.4% | ||||||||
ABB, Ltd. (a) | 1,551,900 | 29,257,601 | ||||||
China Communications Construction Co., Ltd. Class H | 10,181,350 | 7,584,696 | ||||||
KOMATSU, Ltd. | 559,050 | 13,764,887 | ||||||
Mitsubishi Corp. | 1,011,800 | 20,827,202 | ||||||
Siemens A.G. | 205,600 | 21,548,792 | ||||||
TNT Express N.V. | 1,428,743 | 12,068,345 | ||||||
105,051,523 | ||||||||
Information Technology 5.7% | ||||||||
Samsung Electronics Co., Ltd., GDR (c) | 70,997 | 30,426,709 | ||||||
SAP A.G. | 359,750 | 21,678,414 | ||||||
52,105,123 | ||||||||
Materials 8.4% | ||||||||
X Akzo Nobel N.V. | 705,150 | 37,080,308 | ||||||
Holcim, Ltd. (a) | 377,150 | 23,900,699 | ||||||
JFE Holdings, Inc. | 570,550 | 10,751,064 | ||||||
Rio Tinto PLC | 103,300 | 5,585,786 | ||||||
77,317,857 | ||||||||
Telecommunication Services 15.3% | ||||||||
BCE, Inc. | 619,850 | 24,552,258 | ||||||
Koninklijke KPN N.V. | 2,313,400 | 30,226,778 | ||||||
X Nippon Telegraph & Telephone Corp. | 780,750 | 39,914,209 | ||||||
X Vodafone Group PLC, Sponsored ADR (b) | 1,636,500 | 45,560,160 | ||||||
140,253,405 | ||||||||
Utilities 1.4% | ||||||||
Energias de Portugal S.A. | 2,310,100 | 7,265,336 | ||||||
GDF Suez S.A. | 209,000 | 5,885,326 | ||||||
13,150,662 | ||||||||
Total Common Stocks (Cost $885,619,279) | 904,486,105 | |||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 1.5% | ||||||||
Repurchase Agreement 1.5% | ||||||||
State Street Bank and Trust Co. 0.90%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $14,385,158 (Collateralized by a Federal Home Loan Bank Corp. security with a rate of 0.90% and a maturity date of 9/12/14, with a Principal Amount of $14,645,000 and a Market Value of $14,674,510) | $ | 14,385,154 | 14,385,154 | |||||
Total Short-Term Investment (Cost $14,385,154) | 14,385,154 | |||||||
Total Investments (Cost $900,004,433)(d) | 100.0 | % | 918,871,259 | |||||
Other Assets, Less Liabilities | (0.0 | )‡ | (309,239 | ) | ||||
Net Assets | 100.0 | % | $ | 918,562,020 | ||||
† | Percentages indicated are based on Fund net assets. |
u | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
64 MainStay ICAP International Fund | and should be read in conjunction with, the financial statements. |
‡ | Less than one-tenth of a percent. | |
(a) | Non-income producing security. | |
(b) | ADR—American Depositary Receipt. | |
(c) | GDR—Global Depositary Receipt. | |
(d) | At October 31, 2011, cost is $909,853,251 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 56,347,023 | ||
Gross unrealized depreciation | (47,329,015 | ) | ||
Net unrealized appreciation | $ | 9,018,008 | ||
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks (b) | $ | 99,333,186 | $ | 805,152,919 | $ | — | $ | 904,486,105 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 14,385,154 | — | 14,385,154 | ||||||||||||
Total Investments in Securities | $ | 99,333,186 | $ | 819,538,073 | $ | — | $ | 918,871,259 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | Level 2 assets represent the following international equities: Bridgestone Corp., Genting Berhad, Genting Singapore PLC, Nissan Motor Co., Ltd., Sands China, Ltd., Danone S.A., Pernod Ricard S.A., ENI S.p.A., Repsol YPF, S.A., Total S.A., Banco Bilbao Vizcaya Argentaria S.A., China Construction Bank Corp. Class H, Deutsche Boerse A.G., DnB NOR ASA, Muenchener Rueckversicherungs-Gesellschaft A.G. Registered, Standard Chartered PLC, Tokio Marine Holdings, Inc., Bayer A.G., GlaxoSmithKline PLC, Novartis A.G., Sanofi S.A., ABB, Ltd., China Communications Construction Co., Ltd. Class H, KOMATSU, Ltd., Mitsubishi Corp., Siemens A.G., TNT Express N.V., Samsung Electronics Co., Ltd., SAP A.G., Akzo Nobel N.V., Holcim, Ltd., JFE Holdings, Inc., Rio Tinto PLC, Koninklijke KPN N.V., Nippon Telegraph & Telephone Corp., Energias de Portugal S.A., and GDF Suez S.A. |
The Fund recognizes transfers between the levels as of the beginning of the period.
During the year ended October 31, 2011, certain foreign equity securities with a market value of $447,660,392 held by the Fund at October 31, 2010, transferred from Level 1 to Level 2 due to these securities being fair valued at period end by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 65 |
Portfolio of Investments October 31, 2011 (continued)
The table below sets forth the diversification of the MainStay ICAP International Fund investments by country.
Country Composition (Unaudited)
Value | Percent † | |||||||
Brazil | $ | 29,220,768 | 3.2 | % | ||||
Canada | 24,552,258 | 2.7 | ||||||
Cayman Islands | 7,542,813 | 0.8 | ||||||
China | 21,048,058 | 2.3 | ||||||
France | 146,794,288 | 16.0 | ||||||
Germany | 79,082,816 | 8.6 | ||||||
Italy | 36,116,021 | 3.9 | ||||||
Japan | 172,889,722 | 18.8 | ||||||
Malaysia | 10,627,601 | 1.1 | ||||||
Netherlands | 79,375,431 | 8.6 | ||||||
Norway | 27,621,966 | 3.0 | ||||||
Portugal | 7,265,336 | 0.8 | ||||||
Republic of Korea | 30,426,709 | 3.3 | ||||||
Spain | 33,791,907 | 3.7 | ||||||
Switzerland | 98,315,668 | 10.7 | ||||||
United Kingdom | 99,814,743 | 10.9 | ||||||
United States | 14,385,154 | 1.6 | ||||||
918,871,259 | 100.0 | |||||||
Other Assets, Less Liabilities | (309,239 | ) | (0.0 | )‡ | ||||
Net Assets | $ | 918,562,020 | 100.0 | % | ||||
† | Percentages indicated are based on Fund net assets. | |
‡ | Less than one-tenth of a percent. |
The notes to the financial statements are an integral part of,
66 MainStay ICAP International Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $900,004,433) | $ | 918,871,259 | ||
Cash denominated in foreign currencies (identified cost $25,849) | 26,347 | |||
Receivables: | ||||
Investment securities sold | 27,874,070 | |||
Dividends and interest | 2,797,894 | |||
Fund shares sold | 2,001,615 | |||
Other assets | 50,420 | |||
Total assets | 951,621,605 | |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 30,020,819 | |||
Fund shares redeemed | 2,013,128 | |||
Manager (See Note 3) | 562,082 | |||
Transfer agent (See Note 3) | 289,717 | |||
NYLIFE Distributors (See Note 3) | 60,015 | |||
Shareholder communication | 50,666 | |||
Professional fees | 43,563 | |||
Custodian | 14,624 | |||
Trustees | 3,546 | |||
Accrued expenses | 1,425 | |||
Total liabilities | 33,059,585 | |||
Net assets | $ | 918,562,020 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 33,365 | ||
Additional paid-in capital | 1,121,357,447 | |||
1,121,390,812 | ||||
Undistributed net investment income | 1,679,831 | |||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (223,244,056 | ) | ||
Net unrealized appreciation (depreciation) on investments | 18,866,826 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | (131,393 | ) | ||
Net assets | $ | 918,562,020 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 9,863,933 | ||
Shares of beneficial interest outstanding | 359,181 | |||
Net asset value per share outstanding | $ | 27.46 | ||
Maximum sales charge (5.50% of offering price) | 1.60 | |||
Maximum offering price per share outstanding | $ | 29.06 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 159,274,591 | ||
Shares of beneficial interest outstanding | 5,797,021 | |||
Net asset value per share outstanding | $ | 27.48 | ||
Maximum sales charge (5.50% of offering price) | 1.60 | |||
Maximum offering price per share outstanding | $ | 29.08 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 15,931,038 | ||
Shares of beneficial interest outstanding | 587,742 | |||
Net asset value and offering price per share outstanding | $ | 27.11 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 685,354,929 | ||
Shares of beneficial interest outstanding | 24,865,904 | |||
Net asset value and offering price per share outstanding | $ | 27.56 | ||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 480,001 | ||
Shares of beneficial interest outstanding | 17,442 | |||
Net asset value and offering price per share outstanding | $ | 27.52 | ||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 37,080,882 | ||
Shares of beneficial interest outstanding | 1,350,807 | |||
Net asset value and offering price per share outstanding | $ | 27.45 | ||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 10,576,646 | ||
Shares of beneficial interest outstanding | 387,234 | |||
Net asset value and offering price per share outstanding | $ | 27.31 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 67 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 29,235,544 | ||
Interest | 3,410 | |||
Total income | 29,238,954 | |||
Expenses | ||||
Manager (See Note 3) | 7,659,248 | |||
Transfer agent (See Note 3) | 1,685,900 | |||
Distribution/Service—Investor Class (See Note 3) | 25,728 | |||
Distribution/Service—Class A (See Note 3) | 498,796 | |||
Distribution/Service—Class C (See Note 3) | 171,696 | |||
Distribution/Service—Class R2 (See Note 3) | 99,181 | |||
Distribution/Service—Class R3 (See Note 3) | 55,164 | |||
Custodian | 206,613 | |||
Shareholder communication | 162,354 | |||
Professional fees | 139,710 | |||
Registration | 113,905 | |||
Shareholder service (See Note 3) | 51,306 | |||
Trustees | 26,485 | |||
Miscellaneous | 47,111 | |||
Total expenses before waiver/reimbursement | 10,943,197 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (646,969 | ) | ||
Net expenses | 10,296,228 | |||
Net investment income (loss) | 18,942,726 | |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Security transactions | 18,127,786 | |||
Foreign currency transactions | (783,741 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 17,344,045 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (79,352,950 | ) | ||
Translation of other assets and liabilities in foreign currencies | (215,480 | ) | ||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (79,568,430 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (62,224,385 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (43,281,659 | ) | |
(a) | Dividends recorded net of foreign withholding taxes in the amount of $3,127,940. |
The notes to the financial statements are an integral part of,
68 MainStay ICAP International Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 18,942,726 | $ | 11,878,834 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 17,344,045 | 15,525,711 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (79,568,430 | ) | 46,277,308 | |||||
Net increase (decrease) in net assets resulting from operations | (43,281,659 | ) | 73,681,853 | |||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (151,681 | ) | (101,486 | ) | ||||
Class A | (3,511,697 | ) | (2,132,770 | ) | ||||
Class C | (194,280 | ) | (99,591 | ) | ||||
Class I | (13,743,292 | ) | (7,860,592 | ) | ||||
Class R1 | (10,940 | ) | (11,721 | ) | ||||
Class R2 | (631,279 | ) | (372,208 | ) | ||||
Class R3 | (149,577 | ) | (85,219 | ) | ||||
Total dividends to shareholders | (18,392,746 | ) | (10,663,587 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 391,175,305 | 296,689,793 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 17,009,028 | 9,730,325 | ||||||
Cost of shares redeemed | (285,324,332 | ) | (202,136,391 | )(a) | ||||
Increase (decrease) in net assets derived from capital share transactions | 122,860,001 | 104,283,727 | ||||||
Net increase (decrease) in net assets | 61,185,596 | 167,301,993 | ||||||
Net Assets | ||||||||
Beginning of year | 857,376,424 | 690,074,431 | ||||||
End of year | $ | 918,562,020 | $ | 857,376,424 | ||||
Undistributed net investment income at end of year | $ | 1,679,831 | $ | 1,913,592 | ||||
(a) | Cost of shares redeemed net of redemption fees of $15,391 for the year ended October 31, 2010. (See Note 2(L)) |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 69 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
April 29, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 29.15 | $ | 27.05 | $ | 22.19 | $ | 36.83 | ||||||||||
Net investment income (loss) | 0.47 | 0.29 | (a) | 0.49 | (a) | 0.47 | (a) | |||||||||||
Net realized and unrealized gain (loss) on investments | (1.69 | ) | 2.09 | 5.13 | (14.56 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | ||||||||||
Total from investment operations | (1.25 | ) | 2.38 | 5.61 | (14.10 | ) | ||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.44 | ) | (0.28 | ) | (0.75 | ) | (0.54 | ) | ||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | |||||||||||
Net asset value at end of period | $ | 27.46 | $ | 29.15 | $ | 27.05 | $ | 22.19 | ||||||||||
Total investment return (c) | (4.44 | %) | 9.02 | % | 25.99 | % | (38.80 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.58 | % | 1.07 | % | 2.14 | % | 2.96 | % †† | ||||||||||
Net expenses | 1.44 | % | 1.55 | % | 1.38 | % | 1.24 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.44 | % | 1.55 | % | 1.62 | % | 1.49 | % †† | ||||||||||
Portfolio turnover rate | 62 | % | 80 | % | 96 | % | 79 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 9,864 | $ | 10,343 | $ | 10,373 | $ | 8,674 |
** | Commencement of operations. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. |
The notes to the financial statements are an integral part of,
70 MainStay ICAP International Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 29.18 | $ | 27.05 | $ | 22.19 | $ | 38.22 | $ | 39.09 | $ | 37.00 | ||||||||||||||
Net investment income (loss) | 0.50 | 0.37 | (a) | 0.50 | (a) | 0.77 | (a) | 0.57 | (a) | 0.00 | ‡(a) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.67 | ) | 2.07 | 5.19 | (16.22 | ) | 3.67 | 3.58 | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | — | — | ||||||||||||||||
Total from investment operations | (1.20 | ) | 2.44 | 5.68 | (15.46 | ) | 4.24 | 3.58 | ||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.50 | ) | (0.31 | ) | (0.82 | ) | (0.57 | ) | (0.69 | ) | (0.79 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (4.42 | ) | (0.70 | ) | ||||||||||||||||||
Total dividends and distributions | (0.50 | ) | (0.31 | ) | (0.82 | ) | (0.57 | ) | (5.11 | ) | (1.49 | ) | ||||||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | |||||||||||||||
Net asset value at end of period | $ | 27.48 | $ | 29.18 | $ | 27.05 | $ | 22.19 | $ | 38.22 | $ | 39.09 | ||||||||||||||
Total investment return (c) | (4.31 | %) | 9.30 | % | 26.36 | % | (40.97 | %)(d) | 11.20 | % | 9.74 | %(d)(e) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.77 | % | 1.36 | % | 2.13 | % | 2.78 | % †† | 1.36 | % | 0.04 | %†† | ||||||||||||||
Net expenses | 1.29 | % | 1.30 | % | 1.14 | % | 1.10 | % †† | 1.15 | % | 1.15 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.29 | % | 1.36 | % | 1.37 | % | 1.31 | % †† | 1.33 | % | 1.47 | %††(e) | ||||||||||||||
Portfolio turnover rate | 62 | % | 80 | % | 96 | % | 79 | % | 109 | % | 155 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 159,275 | $ | 193,508 | $ | 138,355 | $ | 73,122 | $ | 121,098 | $ | 20,516 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. | |
(e) | Includes nonrecurring reimbursements from affiliates for IRS interest charge. If these nonrecurring reimbursements had not been made, the total investment return would have been 9.71%, 9.41%, 24.23%, 9.76%, 9.69% and 9.58% for Class A, Class C, Class I, Class R1, Class R2 and Class R3 shares, respectively, for the period ending December 31, 2006. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 71 |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 28.87 | $ | 26.87 | $ | 22.02 | $ | 38.04 | $ | 39.03 | $ | 37.00 | ||||||||||||||
Net investment income (loss) | 0.27 | 0.08 | (a) | 0.29 | (a) | 0.54 | (a) | 0.25 | (a) | (0.09 | ) (a) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.69 | ) | 2.09 | 5.13 | (16.12 | ) | 3.66 | 3.56 | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | — | — | ||||||||||||||||
Total from investment operations | (1.45 | ) | 2.17 | 5.41 | (15.59 | ) | 3.91 | 3.47 | ||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.31 | ) | (0.17 | ) | (0.56 | ) | (0.43 | ) | (0.48 | ) | (0.74 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (4.42 | ) | (0.70 | ) | ||||||||||||||||||
Total dividends and distributions | (0.31 | ) | (0.17 | ) | (0.56 | ) | (0.43 | ) | (4.90 | ) | (1.44 | ) | ||||||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | |||||||||||||||
Net asset value at end of period | $ | 27.11 | $ | 28.87 | $ | 26.87 | $ | 22.02 | $ | 38.04 | $ | 39.03 | ||||||||||||||
Total investment return (c) | (5.16 | %) | 8.20 | % | 25.06 | % | (41.39 | %)(d) | 10.35 | % | 9.44 | %(d)(e) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.89 | % | 0.31 | % | 1.30 | % | 1.98 | % †† | 0.60 | % | (0.69 | %)†† | ||||||||||||||
Net expenses | 2.19 | % | 2.29 | % | 2.13 | % | 1.96 | % †† | 1.90 | % | 1.90 | % †† | ||||||||||||||
Expenses (before waiver/reimbursement) | 2.19 | % | 2.29 | % | 2.37 | % | 2.17 | % †† | 2.08 | % | 2.22 | % ††(e) | ||||||||||||||
Portfolio turnover rate | 62 | % | 80 | % | 96 | % | 79 | % | 109 | % | 155 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 15,931 | $ | 15,538 | $ | 19,244 | $ | 19,586 | $ | 32,652 | $ | 7,266 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. | |
(e) | Includes nonrecurring reimbursements from affiliates for IRS interest charge. If these nonrecurring reimbursements had not been made, the total investment return would have been 9.71%, 9.41%, 24.23%, 9.76%, 9.69% and 9.58% for Class A, Class C, Class I, Class R1, Class R2 and Class R3 shares, respectively, for the period ending December 31, 2006. |
The notes to the financial statements are an integral part of,
72 MainStay ICAP International Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||||||||
January 1, | ||||||||||||||||||||||||||||
2008*** | ||||||||||||||||||||||||||||
through | Year ended | |||||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | ||||||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||
Net asset value at beginning of period | $ | 29.26 | $ | 27.12 | $ | 22.25 | $ | 38.26 | $ | 39.10 | $ | 32.89 | ||||||||||||||||
Net investment income (loss) | 0.60 | 0.46 | (a) | 0.60 | (a) | 0.87 | (a) | 0.78 | (a) | 0.77 | (a) | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.67 | ) | 2.08 | 5.15 | (16.26 | ) | 3.59 | 7.16 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | — | — | ||||||||||||||||||
Total from investment operations | (1.10 | ) | 2.54 | 5.74 | (15.40 | ) | 4.37 | 7.93 | ||||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.60 | ) | (0.40 | ) | (0.87 | ) | (0.61 | ) | (0.79 | ) | (1.03 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | — | (4.42 | ) | (0.70 | ) | ||||||||||||||||||||
Total dividends and distributions | (0.60 | ) | (0.40 | ) | (0.87 | ) | (0.61 | ) | (5.21 | ) | (1.73 | ) | ||||||||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.01 | (a) | |||||||||||||||||
Net asset value at end of period | $ | 27.56 | $ | 29.26 | $ | 27.12 | $ | 22.25 | $ | 38.26 | $ | 39.10 | ||||||||||||||||
Total investment return (c) | (3.95 | %) | 9.62 | % | 26.71 | % | (40.81 | %)(d) | 11.52 | % | 24.30 | %(e) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.10 | % | 1.70 | % | 2.59 | % | 3.12 | % †† | 1.86 | % | 2.09 | % | ||||||||||||||||
Net expenses | 0.95 | % | 0.95 | % | 0.85 | % | 0.80 | % †† | 0.80 | % | 0.80 | % | ||||||||||||||||
Expenses (before reimbursement/waiver) | 1.04 | % | 1.11 | % | 1.13 | % | 1.01 | % †† | 0.98 | % | 1.01 | %(e) | ||||||||||||||||
Portfolio turnover rate | 62 | % | 80 | % | 96 | % | 79 | % | 109 | % | 155 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 685,355 | $ | 587,673 | $ | 487,411 | $ | 389,517 | $ | 753,984 | $ | 568,662 |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | Includes nonrecurring reimbursements from affiliates for IRS interest charge. If these nonrecurring reimbursements had not been made, the total investment return would have been 9.71%, 9.41%, 24.23%, 9.76%, 9.69% and 9.58% for Class A, Class C, Class I, Class R1, Class R2 and Class R3 shares, respectively, for the period ending December 31, 2006. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 73 |
Financial Highlights selected per share data and ratios
Class R1 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 29.22 | $ | 27.07 | $ | 22.22 | $ | 38.23 | $ | 39.08 | $ | 37.00 | ||||||||||||||
Net investment income (loss) | 0.54 | 0.40 | (a) | 0.59 | (a) | 0.82 | (a) | 0.47 | (a) | 0.13 | (a) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.64 | ) | 2.10 | 5.12 | (16.22 | ) | 3.86 | 3.46 | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | — | — | ||||||||||||||||
Total from investment operations | (1.13 | ) | 2.50 | 5.70 | (15.41 | ) | 4.33 | 3.59 | ||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.57 | ) | (0.35 | ) | (0.85 | ) | (0.60 | ) | (0.76 | ) | (0.81 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (4.42 | ) | (0.70 | ) | ||||||||||||||||||
Total dividends and distributions | (0.57 | ) | (0.35 | ) | (0.85 | ) | (0.60 | ) | (5.18 | ) | (1.51 | ) | ||||||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | |||||||||||||||
Net asset value at end of period | $ | 27.52 | $ | 29.22 | $ | 27.07 | $ | 22.22 | $ | 38.23 | $ | 39.08 | ||||||||||||||
Total investment return (c) | (4.09 | %) | 9.48 | % | 26.56 | % | (40.89 | %)(d) | 11.41 | % | 9.78 | %(d)(e) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.61 | % | 1.47 | % | 2.54 | % | 2.95 | % †† | 1.12 | % | 1.04 | %†† | ||||||||||||||
Net expenses | 1.05 | % | 1.10 | % | 0.99 | % | 0.90 | % †† | 0.90 | % | 0.90 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.14 | % | 1.21 | % | 1.22 | % | 1.11 | % †† | 1.08 | % | 1.22 | %††(e) | ||||||||||||||
Portfolio turnover rate | 62 | % | 80 | % | 96 | % | 79 | % | 109 | % | 155 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 480 | $ | 949 | $ | 675 | $ | 170 | $ | 418 | $ | 27 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
‡ | Less than one cent per share. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | Includes nonrecurring reimbursements from affiliates for IRS interest charge. If these nonrecurring reimbursements had not been made, the total investment return would have been 9.71%, 9.41%, 24.23%, 9.76%, 9.69% and 9.58% for Class A, Class C, Class I, Class R1, Class R2 and Class R3 shares, respectively, for the period ending December 31, 2006. |
The notes to the financial statements are an integral part of,
74 MainStay ICAP International Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R2 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 29.14 | $ | 27.05 | $ | 22.18 | $ | 38.20 | $ | 39.08 | $ | 37.00 | ||||||||||||||
Net investment income (loss) | 0.47 | 0.32 | (a) | 0.44 | (a) | 0.74 | (a) | 0.35 | (a) | (0.03 | ) (a) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.67 | ) | 2.07 | 5.23 | (16.20 | ) | 3.88 | 3.61 | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | — | — | ||||||||||||||||
Total from investment operations | (1.23 | ) | 2.39 | 5.66 | (15.47 | ) | 4.23 | 3.58 | ||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.46 | ) | (0.30 | ) | (0.79 | ) | (0.55 | ) | (0.69 | ) | (0.80 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (4.42 | ) | (0.70 | ) | ||||||||||||||||||
Total dividends and distributions | (0.46 | ) | (0.30 | ) | (0.79 | ) | (0.55 | ) | (5.11 | ) | (1.50 | ) | ||||||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | |||||||||||||||
Net asset value at end of period | $ | 27.45 | $ | 29.14 | $ | 27.05 | $ | 22.18 | $ | 38.20 | $ | 39.08 | ||||||||||||||
Total investment return (c) | (4.37 | %) | 9.06 | % | 26.27 | % | (41.00 | %)(d) | 11.16 | % | 9.72 | %(d)(e) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.63 | % | 1.17 | % | 1.84 | % | 2.72 | % †† | 0.83 | % | (0.20 | %)†† | ||||||||||||||
Net expenses | 1.40 | % | 1.46 | % | 1.27 | % | 1.15 | % †† | 1.15 | % | 1.15 | % †† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.40 | % | 1.46 | % | 1.47 | % | 1.36 | % †† | 1.33 | % | 1.47 | % ††(e) | ||||||||||||||
Portfolio turnover rate | 62 | % | 80 | % | 96 | % | 79 | % | 109 | % | 155 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 37,081 | $ | 39,156 | $ | 27,480 | $ | 9,445 | $ | 12,816 | $ | 2,533 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
†† | Annualized. | |
‡ | Less than one cent per share. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | Includes nonrecurring reimbursements from affiliates for IRS interest charge. If these nonrecurring reimbursements had not been made, the total investment return would have been 9.71%, 9.41%, 24.23%, 9.76%, 9.69% and 9.58% for Class A, Class C, Class I, Class R1, Class R2 and Class R3 shares, respectively, for the period ending December 31, 2006. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 75 |
Financial Highlights selected per share data and ratios
Class R3 | ||||||||||||||||||||||||||
January 1, | September 1, | |||||||||||||||||||||||||
2008*** | 2006** | |||||||||||||||||||||||||
through | Year ended | through | ||||||||||||||||||||||||
Year ended October 31, | October 31, | December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||
Net asset value at beginning of period | $ | 29.01 | $ | 26.95 | $ | 22.13 | $ | 38.13 | $ | 39.06 | $ | 37.00 | ||||||||||||||
Net investment income (loss) | 0.40 | 0.25 | (a) | 0.39 | (a) | 0.75 | (a) | 0.21 | (a) | 0.07 | (a) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.68 | ) | 2.08 | 5.19 | (16.24 | ) | 3.89 | 3.45 | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.03 | ) | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | — | — | ||||||||||||||||
Total from investment operations | (1.31 | ) | 2.33 | 5.57 | (15.50 | ) | 4.10 | 3.52 | ||||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.39 | ) | (0.27 | ) | (0.75 | ) | (0.50 | ) | (0.61 | ) | (0.76 | ) | ||||||||||||||
From net realized gain on investments | — | — | — | — | (4.42 | ) | (0.70 | ) | ||||||||||||||||||
Total dividends and distributions | (0.39 | ) | (0.27 | ) | (0.75 | ) | (0.50 | ) | (5.03 | ) | (1.46 | ) | ||||||||||||||
Redemption fee (b) | — | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | 0.00 | ‡(a) | — | ||||||||||||||||
Net asset value at end of period | $ | 27.31 | $ | 29.01 | $ | 26.95 | $ | 22.13 | $ | 38.13 | $ | 39.06 | ||||||||||||||
Total investment return (c) | (4.65 | %) | 8.85 | % | 25.87 | % | (41.11 | %)(d) | 10.82 | % | 9.60 | %(d)(e) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.37 | % | 0.91 | % | 1.60 | % | 2.77 | % †† | 0.49 | % | 0.55 | %†† | ||||||||||||||
Net expenses | 1.65 | % | 1.71 | % | 1.54 | % | 1.40 | % †† | 1.40 | % | 1.40 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.65 | % | 1.71 | % | 1.72 | % | 1.62 | % †† | 1.58 | % | 1.72 | %††(e) | ||||||||||||||
Portfolio turnover rate | 62 | % | 80 | % | 96 | % | 79 | % | 109 | % | 155 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 10,577 | $ | 10,208 | $ | 6,536 | $ | 1,112 | $ | 289 | $ | 27 |
** | Commencement of operations. | |
*** | The Fund changed its fiscal year end from December 31 to October 31. | |
‡ | Less than one cent per share. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The redemption fee was discontinued as of April 1, 2010. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | Includes nonrecurring reimbursements from affiliates for IRS interest charge. If these nonrecurring reimbursements had not been made, the total investment return would have been 9.71%, 9.41%, 24.23%, 9.76%, 9.69% and 9.58% for Class A, Class C, Class I, Class R1, Class R2 and Class R3 shares, respectively, for the period ending December 31, 2006. |
The notes to the financial statements are an integral part of,
76 MainStay ICAP International Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds” and each individually, referred to as a “Fund”). These financial statements and notes relate to the MainStay ICAP Equity Fund, MainStay ICAP Select Equity Fund, MainStay ICAP Global Fund and MainStay ICAP International Fund and (collectively referred to as the “ICAP Funds” and each individually referred to as an “ICAP Fund”). Each ICAP Fund is the successor of a series of ICAP Funds, Inc. with the same name (each a “Predecessor Fund”). The reorganization of the Predecessor Funds with and into the respective ICAP Funds occurred on February 26, 2010. All Information regarding and references to periods prior to February 26, 2010 relate to the respective Predecessor Funds.
The ICAP Funds commenced operations on the dates indicated below:
Commencement | ||
of Operations | Funds | |
April 30, 2008 | MainStay ICAP Global Fund | |
December 31,1997 | MainStay ICAP Select Equity Fund | |
MainStay ICAP International Fund | ||
December 31, 1994 | MainStay ICAP Equity Fund | |
The MainStay ICAP Equity Fund and MainStay ICAP International Fund offer seven classes of shares: Investor Class, Class A, Class C, Class I, Class R1, Class R2 and Class R3 shares. Each of these share classes, other than Investor Class and Class I shares, commenced operations on September 1, 2006. Class I shares commenced operations (under a former designation) on December 31,1994 for MainStay ICAP Equity Fund and on December 31, 1997 for MainStay ICAP International Fund. Investor Class shares commenced operations on April 29, 2008 for MainStay ICAP Equity Fund and MainStay ICAP International Fund.
The MainStay ICAP Global Fund offers four classes of shares: Investor Class, Class A, Class C and Class I shares. All share classes of the MainStay ICAP Global Fund commenced operations on April 30, 2008.
The MainStay ICAP Select Equity Fund offers eight classes of shares: Investor Class, Class A, Class B, Class C, Class I, Class R1, Class R2 and Class R3 shares. Each of these share classes other than Investor Class, Class B and Class I shares commenced operations on September 1, 2006. Class I shares commenced operations on December 31,1997 (under a former designation) and Investor Class shares commenced operations on April 29, 2008. Class B shares commenced operations on November 13, 2009.
Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class B and Class C shares are offered at NAV without an initial sales charge, although a declining CDSC may be imposed on redemptions made within six years of the date of purchase of Class B shares and a 1.00% CDSC may be imposed on redemptions made within one year of the day of purchase of Class C shares. Class I, Class R1, Class R2 and Class R3 shares are offered at NAV without imposition of a front-end sales charge or a CDSC. Depending upon eligibility, Class B shares convert to either Investor Class or Class A shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. Each class of shares has the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that the classes are subject to different distribution and/or service fee rates. Investor Class, Class B, Class A, Class C, Class R2 and Class R3 shares each bear distribution and/or service fee payments under distribution and service plans pursuant to Rule 12b-1 under the 1940 Act. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee. This is in addition to any fees paid under a distribution plan, where applicable. Class I and Class R1 shares are not subject to a distribution and/or service fee.
The ICAP Funds’ investment objectives are as follows:
The MainStay ICAP Equity Fund seeks a superior total return with only a moderate degree of risk.
The MainStay ICAP Select Equity Fund seeks a superior total return.
The MainStay ICAP Global Fund seeks a superior total return.
The MainStay ICAP international Fund seeks a superior total return with income as a secondary objective.
Note 2–Significant Accounting Policies
The ICAP Funds prepare their financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follow the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the ICAP Funds are open for business (“valuation date”).
“Fair value” is defined as the price that an ICAP Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the ICAP Funds. Unobservable inputs reflect each ICAP Fund’s own
mainstayinvestments.com 77
Notes to Financial Statements (continued)
assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the ICAP Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the ICAP Funds to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The ICAP Funds may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The ICAP Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the ICAP Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The ICAP Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for each ICAP Fund’s investments is included at the end of each ICAP Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the ICAP Funds’ Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 ICAP Funds’ Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the ICAP Funds did not hold any securities that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the ICAP Funds principally trade, and the time at which the ICAP Funds’ NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the ICAP Funds’ Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the ICAP Funds’ policies and procedures and are generally categorized as Level 2 in the hierarchy. At October 31, 2011, certain foreign equity securities held by the ICAP Funds were fair valued in such a manner.
(B) Income Taxes. Each of the ICAP Funds is treated as a separate entity for federal income tax purposes. The ICAP Funds’ policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of each ICAP Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Investment income received by the ICAP Funds from foreign sources may be subject to foreign income taxes. These foreign income taxes are generally withheld at the source.
78 MainStay ICAP Funds
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the ICAP Funds’ tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the ICAP Funds’ financial statements. The ICAP Funds’ federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. Dividends from net investment income are declared and paid quarterly for the MainStay ICAP Equity Fund and MainStay ICAP Select Equity Fund, to the extent that income is available. For the MainStay ICAP Global Fund and MainStay ICAP International Fund, income dividends are normally paid less frequently, typically on a semi-annual or annual basis. Effective January 1, 2012, MainStay ICAP Global Fund and MainStay ICAP International Fund will declare dividends annually. Distributions from net realized capital gains, if any, are declared and paid annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the respective ICAP Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The ICAP Funds record security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased, other than Short-Term Investments, for the ICAP Funds are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities or, in the case of a callable security, over the period to the first date of call. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the ICAP Funds are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual ICAP Funds in proportion to the net assets of the respective ICAP Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by each ICAP Fund, including those of related parties to the ICAP Funds, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Reclassification. Certain prior year amounts have been reclassified to conform with the current year presentation.
(H) Repurchase Agreements. The ICAP Funds may enter into repurchase agreements to earn income. The ICAP Funds may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the ICAP Funds’ Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the ICAP Funds invest in repurchase agreements, the ICAP Funds’ custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the ICAP Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the respective ICAP Fund.
(I) Foreign Currency Transactions. The books and records of the ICAP Funds are kept in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling exchange rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date, and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the ICAP Funds’ books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses. (See Note 5)
(J) Securities Lending. In order to realize additional income, the ICAP Funds may engage in securities lending, subject to the limitations
mainstayinvestments.com 79
Notes to Financial Statements (continued)
set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the ICAP Funds do engage in securities lending, the ICAP Funds will lend through their custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the ICAP Funds’ cash collateral in accordance with the Lending Agreement between the ICAP Funds and State Street, and indemnify the ICAP Funds’ portfolios against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The ICAP Funds may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The ICAP Funds may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The ICAP Funds will receive compensation for lending their securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The ICAP Funds also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the ICAP Funds.
Although the ICAP Funds and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the ICAP Funds and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The ICAP Funds had no portfolio securities on loan as of October 31, 2011.
(K) Rights and Warrants. A right is a certificate that permits the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. A warrant is an instrument that entitles the holder to buy an equity security at a specific price for a specific period of time. The ICAP Funds generally enter into rights and warrants when securities are acquired through a corporate action. With respect to warrants in international markets, the securities are only purchased when the underlying security cannot be purchased due to the many restrictions an industry and/or country might place on foreign investors. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The ICAP Funds could also lose the entire value of their investment in warrants if the warrant is not exercised by the date of its expiration. The securities are sold as soon as the opportunity becomes available. The ICAP Funds are exposed to risk until each sale is completed. At October 31, 2011 the ICAP Funds did not hold any rights or warrants.
(L) Redemption Fee. Prior to April 1, 2010, the MainStay ICAP Global Fund and MainStay ICAP International Fund imposed a 2.00% redemption fee on redemptions (including exchanges) of ICAP Fund shares made within 60 days of their date of purchase for any class. The redemption fee was designed to offset brokerage commissions and other costs associated with short-term trading and was not assessed on the shares acquired through the reinvestment of dividends or distributions paid by the ICAP Fund. The redemption fees are included in the Statement of Changes in Net Assets and were retained by the ICAP Funds for the fiscal year ended October 31, 2010.
(M) Concentration of Risk. The ICAP Funds may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets.
(N) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the ICAP Funds enter into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The ICAP Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the ICAP Funds that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the ICAP Funds.
(O) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures about the ICAP Funds’ derivative and hedging activities, including how such activities are accounted for and their effect on the ICAP Funds’ financial positions, performance and cash flows. These derivatives are not accounted for as hedging instruments.
MainStay ICAP Global Fund
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2011:
Change in Unrealized Appreciation (Depreciation)
Statement of | Equity | |||||||||
Operations | Contracts | |||||||||
Location | Risk | Total | ||||||||
Rights | Net change in unrealized appreciation (depreciation) on investments | $ | (10,597 | ) | $ | (10,597 | ) | |||
Total Change in Unrealized Appreciation (Depreciation) | $ | (10,597 | ) | $ | (10,597 | ) | ||||
80 MainStay ICAP Funds
Number of Contracts, Notional Amounts or Shares/Units (1)
Equity | ||||||||
Contracts | ||||||||
Risk | Total | |||||||
Rights (2) | 91,510 | 91,510 | ||||||
(1) | Amount disclosed represents the weighted average held during the year ended October 31, 2011. |
(2) | Amount(s) represent(s) number of contracts or number of shares/units. |
MainStay ICAP International Fund
Change in Unrealized Appreciation (Depreciation)
Statement of | Equity | |||||||||
Operations | Contracts | |||||||||
Location | Risk | Total | ||||||||
Rights | Net change in unrealized appreciation (depreciation) on security transactions | $ | (407,967 | ) | $ | (407,967 | ) | |||
Total Change in Unrealized Appreciation (Depreciation) | $ | (407,967 | ) | $ | (407,967 | ) | ||||
Number of Contracts, Notional Amounts or Shares/Units (1)
Equity | ||||||||
Contracts | ||||||||
Risk | Total | |||||||
Rights (2) | 3,198,964 | 3,198,964 | ||||||
(1) | Amount disclosed represents the weighted average held during the year ended October 31, 2011. |
(2) | Amount(s) represent(s) number of contracts or number of shares/units. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the ICAP Funds’ Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the ICAP Funds. Except for the portion of salaries and expenses that are the responsibility of the ICAP Funds, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the ICAP Funds which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the ICAP Funds and certain operational expenses of the ICAP Funds. Institutional Capital LLC (“ICAP” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the ICAP Funds and is responsible for the day-to-day portfolio management of the ICAP Funds. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and ICAP, New York Life Investments pays for the services of the Subadvisor.
Each ICAP Fund, with the exception of the MainStay ICAP Select Equity Fund, pays the Manager a monthly fee for the services performed and facilities furnished at an annual rate of 0.80% of the average daily net assets of that ICAP Fund. The MainStay ICAP Select Equity Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the average daily net assets as follows: 0.80% up to $5 billion and 0.775% in excess of $5 billion. The effective management fee rates (exclusive of any applicable waivers/reimbursements) for each of the ICAP Funds for the year ended October 31, 2011 were as follows:
Management | ||||
Funds | Fee Rate | |||
MainStay ICAP Equity Fund | 0.80 | % | ||
MainStay ICAP Select Equity Fund | 0.80 | |||
MainStay ICAP Global Fund | 0.80 | |||
MainStay ICAP International Fund | 0.80 | |||
In connection with the discussion below regarding expense limitation agreements, Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses.
MainStay ICAP Equity Fund
The Manager has contractually agreed to waive a portion of the MainStay ICAP Equity Fund’s management fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for Class I shares do not exceed 0.90% of its average daily net assets. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board.
Additionally, the Manager agreed to voluntarily waive fees and/or reimburse expenses of the appropriate class of the MainStay ICAP Equity Fund so that Total Annual Fund Operating Expenses of a class do not exceed the following percentages of average daily net assets: Investor Class, 1.85%; Class C, 2.60%; and Class R1, 0.99%. This voluntary waiver or reimbursement may be discontinued at any time without notice.
MainStay ICAP Select Equity Fund
The Manager has contractually agreed to waive a portion of the MainStay ICAP Select Equity Fund’s management fees and/or reimburse expenses so that Total Annual Fund Operating Expenses of a class do not exceed the following percentages of average daily net assets: Class A, 1.18% and Class I, 0.90%. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board.
Additionally, the Manager agreed to voluntarily waive fees and/or reimburse expenses of the appropriate class of the MainStay ICAP Select Equity Fund so that Total Annual Fund Operating Expenses of a class did not exceed the following percentages of average
mainstayinvestments.com 81
Notes to Financial Statements (continued)
net assets: Investor Class, 1.47%; Class B, 2.22%; Class C, 2.22%; Class R1, 1.14%; Class R2, 1.39%; and Class R3, 1.64%. This voluntary waiver or reimbursement expired on November 12, 2010.
MainStay ICAP Global Fund
The Manager has contractually agreed to waive a portion of the MainStay ICAP Global Fund’s management fees and/or reimburse expenses so that Total Annual Fund Operating Expenses of a class do not exceed the following percentages of average daily net assets: Investor Class, 1.20%; Class A, 1.15%; Class C, 1.95%; and Class I, 0.90%. This agreement expires February 28, 2012 and may only be amended or terminated prior to that date by action of the Board.
MainStay ICAP International Fund
The Manager has contractually agreed to waive a portion of the MainStay ICAP International Fund’s management fees and/or reimburse expenses so that Total Annual Fund Operating Expenses of a class do not exceed the following percentages of average daily net assets: Class A, 1.30% and Class I, 0.95%. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board.
Additionally, the Manager agreed to voluntarily waive fees and/or reimburse expenses of Class R1 shares of the MainStay ICAP International Fund so that Total Annual Fund Operating Expenses do not exceed 1.05% of its average daily net assets. This voluntary waiver or reimbursement may be discontinued at any time without notice.
For the year ended October 31, 2011, New York Life Investments earned fees from the ICAP Funds and waived its fees and/or reimbursed expenses as follows:
Fees | ||||||||
reimbursed/ | ||||||||
Fees earned | waived | |||||||
MainStay ICAP Equity Fund | $ | 6,358,601 | $ | 200,356 | ||||
MainStay ICAP Select Equity Fund | 26,989,361 | 1,711,037 | ||||||
MainStay ICAP Global Fund | 405,887 | 140,137 | ||||||
MainStay ICAP International Fund | 7,659,248 | 646,969 | ||||||
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the ICAP Funds pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the ICAP Funds, maintaining the general ledger and sub-ledger accounts for the calculation of the ICAP Funds’ respective NAVs, and assisting New York Life Investments in conducting various aspects of the ICAP Funds’ administrative operations. For providing these services to the ICAP Funds, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the ICAP Funds, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The ICAP Funds have adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class, Class A and Class R2 Plans, the Distributor receives a monthly distribution fee from the Investor Class, Class A and Class R2 shares, at an annual rate of 0.25% of the average daily net assets of the Investor Class, Class A and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I and Class R1 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and/or service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the ICAP Funds’ shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares of the ICAP Funds that offer these share classes. For its services, the Manager is entitled to a Shareholder Service Fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R1, Class R2 and Class R3 shares of the applicable ICAP Funds. This is in addition to any fees paid under a distribution plan, where applicable.
Shareholder Service Fees incurred by each ICAP Fund for the year ended October 31, 2011, were as follows:
MainStay ICAP Equity Fund | ||||
Class R1 | $ | 3,624 | ||
Class R2 | 5,568 | |||
Class R3 | 2,525 | |||
MainStay ICAP Select Equity Fund | ||||
Class R1 | $ | 19,874 | ||
Class R2 | 22,657 | |||
Class R3 | 14,224 | |||
MainStay ICAP International Fund | ||||
Class R1 | $ | 601 | ||
Class R2 | 39,672 | |||
Class R3 | 11,033 | |||
82 MainStay ICAP Funds
(C) Sales Charges. The ICAP Funds were advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares for the year ended October 31, 2011 were as follows:
MainStay ICAP Equity Fund | ||||
Investor Class | $ | 7,189 | ||
Class A | 8,696 | |||
MainStay ICAP Select Equity Fund | ||||
Investor Class | $ | 35,958 | ||
Class A | 54,833 | |||
MainStay ICAP Global Fund | ||||
Investor Class | $ | 1,262 | ||
Class A | 1,161 | |||
MainStay ICAP International Fund | ||||
Investor Class | $ | 6,775 | ||
Class A | 9,448 | |||
The ICAP Funds were also advised that the Distributor retained CDSCs on redemptions of Investor Class, Class A, Class B and Class C shares, for the year ended October 31, 2011 were as follows:
MainStay ICAP Equity Fund | ||||
Class A | $ | 1 | ||
Class C | 1,490 | |||
MainStay ICAP Select Equity Fund | ||||
Class A | $ | 3,394 | ||
Class B | 78,838 | |||
Class C | 17,073 | |||
Class I | 58 | |||
MainStay ICAP Global Fund | ||||
Class C | $ | 174 | ||
MainStay ICAP International Fund | ||||
Class A | $ | 364 | ||
Class C | 861 | |||
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the ICAP Funds’ transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the ICAP Funds for the year ended October 31, 2011, were as follows:
MainStay ICAP Equity Fund | Total | |||
Investor Class | $ | 44,069 | ||
Class A | 23,869 | |||
Class C | 28,715 | |||
Class I | 565,292 | |||
Class R1 | 2,801 | |||
Class R2 | 4,316 | |||
Class R3 | 1,951 | |||
MainStay ICAP Select Equity Fund | Total | |||
Investor Class | $ | 637,431 | ||
Class A | 689,990 | |||
Class B | 271,335 | |||
Class C | 354,476 | |||
Class I | 2,988,235 | |||
Class R1 | 24,691 | |||
Class R2 | 28,123 | |||
Class R3 | 17,558 | |||
MainStay ICAP Global Fund | Total | |||
Investor Class | $ | 1,089 | ||
Class A | 1,145 | |||
Class C | 612 | |||
Class I | 12,960 | |||
MainStay ICAP International Fund | Total | |||
Investor Class | $ | 32,129 | ||
Class A | 340,294 | |||
Class C | 53,599 | |||
Class I | 1,171,638 | |||
Class R1 | 1,023 | |||
Class R2 | 68,229 | |||
Class R3 | 18,988 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the ICAP Funds have implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
mainstayinvestments.com 83
Notes to Financial Statements (continued)
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the ICAP Funds with the following values and percentages of net assets as follows:
MainStay ICAP Equity Fund | ||||||||
Class A | $ | 28,444 | 0.1 | % | ||||
Class C | 25,929 | 0.3 | ||||||
Class I | 57,742,940 | 8.0 | ||||||
Class R1 | 26,229 | 0.7 | ||||||
Class R2 | 25,877 | 0.4 | ||||||
Class R3 | 25,554 | 0.9 | ||||||
MainStay ICAP Select Equity Fund | ||||||||
Class A | $ | 161,029 | 0.0 | %‡ | ||||
Class C | 25,755 | 0.0 | ‡ | |||||
Class I | 2,569 | 0.0 | ‡ | |||||
Class R1 | 29,265 | 0.1 | ||||||
Class R2 | 28,866 | 0.1 | ||||||
Class R3 | 26,047 | 0.2 | ||||||
‡ | Less than one-tenth of a percent. |
MainStay ICAP Global Fund | ||||||||
Class A | $ | 42,003 | 0.9 | % | ||||
Class C | 20,735 | 5.8 | ||||||
Class I | 39,712,565 | 88.5 | ||||||
MainStay ICAP International Fund | ||||||||||
Class A | $ | 23,795 | 0.0 | %‡ | ||||||
Class C | 22,711 | 0.1 | ||||||||
Class R1 | 24,018 | 5.0 | ||||||||
Class R2 | 23,689 | 0.1 | ||||||||
Class R3 | 23,364 | 0.2 | ||||||||
‡ | Less than one-tenth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the ICAP Funds by the Office of the General Counsel of New York Life Investments was payable directly by the ICAP Funds through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were as follows:
MainStay ICAP Equity Fund | $ | 10,785 | ||
MainStay ICAP Select Equity Fund | 45,108 | |||
MainStay ICAP Global Fund | 678 | |||
MainStay ICAP International Fund | 13,086 | |||
Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the ICAP Funds are no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||||
MainStay ICAP Equity Fund | $ | 424,398 | $ | (182,270,956 | ) | $ | — | $ | 81,464,092 | $ | (100,382,466 | ) | ||||||||
MainStay ICAP Select Equity Fund | 2,308,905 | (596,047,003 | ) | — | 276,316,200 | (317,421,898 | ) | |||||||||||||
MainStay ICAP Global Fund | 152,704 | (10,860,851 | ) | — | 1,758,873 | (8,949,274 | ) | |||||||||||||
MainStay ICAP International Fund | 1,679,831 | (213,972,241 | ) | — | 9,463,618 | (202,828,792 | ) | |||||||||||||
The difference between book-basis and tax basis unrealized depreciation is primarily due to wash sale deferrals, marking to market of foreign currency forward contracts and basis adjustments due to class action payments.
84 MainStay ICAP Funds
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||||
Undistributed | Net Realized | Additional | ||||||||||
Net Investment | Gain (Loss) on | Paid-in | ||||||||||
Income (Loss) | Investments | Capital | ||||||||||
MainStay ICAP Equity Fund | $ | 1,908 | $ | (17,655,072 | ) | $ | 17,653,164 | |||||
MainStay ICAP Select Equity Fund | — | — | — | |||||||||
MainStay ICAP Global Fund | (24,342 | ) | 24,342 | — | ||||||||
MainStay ICAP International Fund | (783,741 | ) | 783,741 | — | ||||||||
The reclassifications for the Funds are primarily due to foreign currency gain (loss), reversal of wash sale deferrals due to redemptions in-kind and gain (loss) from redemptions in-kind.
Under the Regulated Investment Company Modernization Act of 2010, the ICAP Funds will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
MainStay ICAP Equity Fund
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $182,270,956 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the MainStay ICAP Equity Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2017 | $ | 182,271 | ||||
The MainStay ICAP Equity Fund utilized $45,480,595 of capital loss carryforwards during the year ended October 31, 2011.
MainStay ICAP Select Equity Fund
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $596,047,003 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the MainStay ICAP Select Equity Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2016 | $ | 171,487 | ||||
2017 | 424,560 | |||||
Total | $ | 596,047 | ||||
The MainStay ICAP Select Equity Fund utilized $82,379,290 of capital loss carryforwards during the year ended October 31, 2011.
MainStay ICAP Global Fund
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $10,860,851 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the MainStay ICAP Global Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2016 | $ | 1,725 | ||||
2017 | 9,136 | |||||
Total | $ | 10,861 | ||||
The MainStay ICAP Global Fund utilized $898,867 of capital loss carryforwards during the year ended October 31, 2011.
MainStay ICAP International Fund
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $213,972,241 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the MainStay ICAP International Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
mainstayinvestments.com 85
Notes to Financial Statements (continued)
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2016 | $ | 67,705 | ||||
2017 | 146,267 | |||||
Total | $ | 213,972 | ||||
The MainStay ICAP International Fund utilized $12,023,240 of capital loss carryforwards during the year ended October 31, 2011.
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||||||||||||||||||
Tax Based | Tax Based | Tax Based | Tax Based | |||||||||||||||||||||
Distributions | Distributions | Distributions | Distributions | |||||||||||||||||||||
from Ordinary | from Long-Term | from Ordinary | from Long-Term | |||||||||||||||||||||
Income | Capital Gains | Total | Income | Capital Gains | Total | |||||||||||||||||||
MainStay ICAP Equity Fund | $ | 12,047,939 | $ | — | $ | 12,047,939 | $ | 10,987,035 | $ | — | $ | 10,987,035 | ||||||||||||
MainStay ICAP Select Equity Fund | 47,961,388 | — | 47,961,388 | 28,840,060 | — | 28,840,060 | ||||||||||||||||||
MainStay ICAP Global Fund | 846,071 | — | 846,071 | 566,010 | — | 566,010 | ||||||||||||||||||
MainStay ICAP International Fund | 18,392,746 | — | 18,392,746 | 10,663,587 | — | 10,663,587 | ||||||||||||||||||
Note 5–Foreign Currency Transactions
MainStay ICAP Global Fund
As of October 31, 2011, the Fund held the following foreign currencies:
Currency | Cost | Value | ||||||||||||
Japanese Yen | JPY | 6 | USD | 0 | (a | ) | USD | 0 | (a | ) | ||||
Malaysian Ringgit | MYR | 4,015 | 1,283 | 1,308 | ||||||||||
Total | USD | 1,283 | USD | 1,308 | ||||||||||
(a) | Less than one dollar. |
MainStay ICAP International Fund
As of October 31, 2011, the Fund held the following foreign currencies:
Currency | Cost | Value | ||||||||||
Euro | EUR | 185 | USD | 261 | USD | 255 | ||||||
Malaysian Ringgit | MYR | 80,051 | 25,588 | 26,092 | ||||||||
Total | USD | 25,849 | USD | 26,347 | ||||||||
Note 6–Custodian
State Street is the custodian of the cash and the securities of the ICAP Funds. Custodial fees are charged to the ICAP Funds based on the market value of securities in the ICAP Funds and the number of certain cash transactions incurred by the ICAP Funds.
Note 7–Line of Credit
The ICAP Funds and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the ICAP Funds on the amended credit agreement during the year ended October 31, 2011.
86 MainStay ICAP Funds
Note 8–Purchases and Sales of Securities (in 000’s)
For the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were as follows:
MainStay ICAP | MainStay ICAP Select | MainStay ICAP | ||||||||||||||||||||||||||||||
Equity Fund | Equity Fund | Global Fund | MainStay ICAP International Fund | |||||||||||||||||||||||||||||
Purchases | Sales | Purchases | Sales | Purchases | Sales | Purchases | Sales | |||||||||||||||||||||||||
U.S. Government securities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
All others | 570,640 | 574,743 | 2,991,090 | 2,314,074 | 44,762 | 38,045 | 760,809 | 628,125 | ||||||||||||||||||||||||
Total | $ | 570,640 | $ | 574,743 | $ | 2,991,090 | $ | 2,314,074 | $ | 44,762 | $ | 38,045 | $ | 760,809 | $ | 628,125 | ||||||||||||||||
Note 9–Capital Share Transactions
MainStay ICAP Equity Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 35,603 | $ | 1,302,972 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,222 | 116,783 | ||||||
Shares redeemed | (56,487 | ) | (2,032,673 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (17,662 | ) | (612,918 | ) | ||||
Shares converted into Investor Class (See Note 1) | 14,791 | 476,272 | ||||||
Shares converted from Investor Class (See Note 1) | (21,204 | ) | (773,318 | ) | ||||
Net increase (decrease) | (24,075 | ) | $ | (909,964 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 40,932 | $ | 1,324,767 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,914 | 92,763 | ||||||
Shares redeemed | (68,029 | ) | (2,186,907 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (24,183 | ) | (769,377 | ) | ||||
Shares converted into Investor Class (See Note 1) | 5,832 | 191,907 | ||||||
Shares converted from Investor Class (See Note 1) | (9,251 | ) | (301,591 | ) | ||||
Net increase (decrease) | (27,602 | ) | $ | (879,061 | ) | |||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 678,022 | $ | 25,350,681 | |||||
Shares issued to shareholders in reinvestment of dividends | 9,760 | 354,046 | ||||||
Shares redeemed | (598,102 | ) | (20,281,825 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 89,680 | 5,422,902 | ||||||
Shares converted into Class A (See Note 1) | 21,188 | 773,318 | ||||||
Shares converted from Class A (See Note 1) | (14,773 | ) | (476,272 | ) | ||||
Net increase (decrease) | 96,095 | $ | 5,719,948 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 202,284 | $ | 6,493,415 | |||||
Shares issued to shareholders in reinvestment of dividends | 8,502 | 271,045 | ||||||
Shares redeemed | (319,631 | ) | (10,331,561 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (108,845 | ) | (3,567,101 | ) | ||||
Shares converted into Class A (See Note 1) | 9,239 | 301,591 | ||||||
Shares converted from Class A (See Note 1) | (5,823 | ) | (191,907 | ) | ||||
Shares converted from Class A (a) | (26,387 | ) | (838,842 | ) | ||||
Net increase (decrease) | (131,816 | ) | $ | (4,296,259 | ) | |||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 70,362 | $ | 2,565,183 | |||||
Shares issued to shareholders in reinvestment of dividends | 476 | 17,673 | ||||||
Shares redeemed | (47,683 | ) | (1,691,031 | ) | ||||
Net increase (decrease) | 23,155 | $ | 891,825 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 77,565 | $ | 2,471,524 | |||||
Shares issued to shareholders in reinvestment of dividends | 501 | 15,874 | ||||||
Shares redeemed | (49,720 | ) | (1,561,637 | ) | ||||
Net increase (decrease) | 28,346 | $ | 925,761 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 6,504,717 | $ | 232,210,749 | |||||
Shares issued to shareholders in reinvestment of dividends | 305,757 | 11,029,842 | ||||||
Shares redeemed (b) | (9,806,507 | ) | (356,233,623 | ) | ||||
Net increase (decrease) | (2,996,033 | ) | $ | (112,993,032 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 7,946,252 | $ | 255,825,760 | |||||
Shares issued to shareholders in reinvestment of dividends | 321,960 | 10,272,232 | ||||||
Shares redeemed (c) | (8,217,257 | ) | (263,125,377 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 50,955 | 2,972,615 | ||||||
Shares converted into Class I (a) | 26,346 | 838,842 | ||||||
Net increase (decrease) | 77,301 | $ | 3,811,457 | |||||
mainstayinvestments.com 87
Notes to Financial Statements (continued)
Class R1 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 28,224 | $ | 988,528 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,440 | 52,014 | ||||||
Shares redeemed | (18,396 | ) | (659,969 | ) | ||||
Net increase (decrease) | 11,268 | $ | 380,573 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 41,374 | $ | 1,364,089 | |||||
Shares issued to shareholders in reinvestment of dividends | 959 | 30,631 | ||||||
Shares redeemed | (19,252 | ) | (620,028 | ) | ||||
Net increase (decrease) | 23,081 | $ | 774,692 | |||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 88,622 | $ | 3,266,573 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,691 | 61,009 | ||||||
Shares redeemed | (43,936 | ) | (1,592,603 | ) | ||||
Net increase (decrease) | 46,377 | $ | 1,734,979 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 72,214 | $ | 2,338,013 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,038 | 33,083 | ||||||
Shares redeemed | (14,418 | ) | (466,782 | ) | ||||
Net increase (decrease) | 58,834 | $ | 1,904,314 | |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 42,475 | $ | 1,506,784 | |||||
Shares issued to shareholders in reinvestment of dividends | 646 | 23,374 | ||||||
Shares redeemed | (28,143 | ) | (1,030,812 | ) | ||||
Net increase (decrease) | 14,978 | $ | 499,346 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 61,513 | $ | 2,028,531 | |||||
Shares issued to shareholders in reinvestment of dividends | 325 | 10,232 | ||||||
Shares redeemed | (7,268 | ) | (235,599 | ) | ||||
Net increase (decrease) | 54,570 | $ | 1,803,164 | |||||
(a) In addition to any automatic conversion features described above in Note 1 with respect to Investor Class and Class A shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class and Class A shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, they may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
(b) | Includes the redemption of 2,680,166 shares through an in-kind transfer of securities in the amount of $97,079,910. (See Note 11) |
(c) | Includes the redemption of 1,700,831 shares through an in-kind transfer of securities in the amount of $55,704,242. (See Note 11) |
MainStay ICAP Select Equity Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 228,584 | $ | 8,040,071 | |||||
Shares issued to shareholders in reinvestment of dividends | 53,549 | 1,879,423 | ||||||
Shares redeemed | (692,316 | ) | (24,186,923 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (410,183 | ) | (14,267,429 | ) | ||||
Shares converted into Investor Class (See Note 1) | 592,540 | 19,579,635 | ||||||
Shares converted from Investor Class (See Note 1) | (384,889 | ) | (13,643,517 | ) | ||||
Net increase (decrease) | (202,532 | ) | $ | (8,331,311 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 303,104 | $ | 9,469,237 | |||||
Shares issued in connection with the acquisition of MainStay Value Fund (See Note 10) | 4,410,690 | 132,367,008 | ||||||
Shares issued in connection with the acquisition of MainStay Mid Cap | ||||||||
Value Fund (See Note 10) | 1,165,123 | 35,331,544 | ||||||
Shares issued to shareholders in reinvestment of dividends | 32,389 | 967,222 | ||||||
Shares redeemed | (759,866 | ) | (23,653,109 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 5,151,440 | 154,481,902 | ||||||
Shares converted into Investor Class (See Note 1) | 449,260 | 13,947,056 | ||||||
Shares converted from Investor Class (See Note 1) | (321,415 | ) | (10,049,320 | ) | ||||
Net increase (decrease) | 5,279,285 | $ | 158,379,638 | |||||
88 MainStay ICAP Funds
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 6,008,651 | $ | 209,346,869 | |||||
Shares issued to shareholders in reinvestment of dividends | 172,593 | 6,041,862 | ||||||
Shares redeemed | (4,702,851 | ) | (162,416,910 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,478,393 | 52,971,821 | ||||||
Shares converted into Class A (See Note 1) | 560,430 | 19,764,517 | ||||||
Shares converted from Class A (See Note 1) | (274,612 | ) | (8,546,934 | ) | ||||
Net increase (decrease) | 1,764,211 | $ | 64,189,404 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 4,333,980 | $ | 134,553,598 | |||||
Shares issued in connection with the acquisition of MainStay Value Fund (See Note 10) | 4,823,914 | 144,765,185 | ||||||
Shares issued in connection with the acquisition of MainStay Mid Cap | ||||||||
Value Fund (See Note 10) | 1,763,625 | 53,479,447 | ||||||
Shares issued to shareholders in reinvestment of dividends | 111,180 | 3,367,130 | ||||||
Shares redeemed | (3,106,110 | ) | (96,458,131 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 7,926,589 | 239,707,229 | ||||||
Shares converted into Class A (See Note 1) | 627,535 | 19,594,504 | ||||||
Shares converted from Class A (See Note 1) | (50,013 | ) | (1,608,020 | ) | ||||
Shares converted from Class A (a) | (692,144 | ) | (21,241,909 | ) | ||||
Net increase (decrease) | 7,811,967 | $ | 236,451,804 | |||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 195,986 | $ | 6,830,401 | |||||
Shares issued to shareholders in reinvestment of dividends | 7,796 | 279,818 | ||||||
Shares redeemed | (373,987 | ) | (12,970,899 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (170,205 | ) | (5,860,680 | ) | ||||
Shares converted from Class B (See Note 1) | (497,296 | ) | (17,153,701 | ) | ||||
Net increase (decrease) | (667,501 | ) | $ | (23,014,381 | ) | |||
Period ended October 31, 2010 (b): | ||||||||
Shares sold | 230,022 | $ | 7,120,086 | |||||
Shares issued in connection with the acquisition of MainStay Value Fund (See Note 10) | 1,913,939 | 57,278,639 | ||||||
Shares issued in connection with the acquisition of MainStay Mid Cap | ||||||||
Value Fund (See Note 10) | 1,701,453 | 51,439,350 | ||||||
Shares issued to shareholders in reinvestment of dividends | 6,361 | 185,155 | ||||||
Shares redeemed | (524,373 | ) | (16,167,716 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 3,327,402 | 99,855,514 | ||||||
Shares converted from Class B (See Note 1) | (709,725 | ) | (21,884,220 | ) | ||||
Net increase (decrease) | 2,617,677 | $ | 77,971,294 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 716,310 | $ | 25,204,667 | |||||
Shares issued to shareholders in reinvestment of dividends | 6,589 | 236,471 | ||||||
Shares redeemed | (730,687 | ) | (25,160,254 | ) | ||||
Net increase (decrease) | (7,788 | ) | $ | 280,884 | ||||
Year ended October 31, 2010: | ||||||||
Shares sold | 991,125 | $ | 30,746,805 | |||||
Shares issued in connection with the acquisition of MainStay Value Fund (See Note 10) | 181,117 | 5,420,299 | ||||||
Shares issued in connection with the acquisition of MainStay Mid Cap | ||||||||
Value Fund (See Note 10) | 382,905 | 11,576,242 | ||||||
Shares issued to shareholders in reinvestment of dividends | 3,696 | 107,602 | ||||||
Shares redeemed | (613,585 | ) | (18,956,078 | ) | ||||
Net increase (decrease) | 945,258 | $ | 28,894,870 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 37,283,106 | $ | 1,258,879,547 | |||||
Shares issued to shareholders in reinvestment of dividends | 940,522 | 32,751,160 | ||||||
Shares redeemed | (19,137,742 | ) | (666,912,192 | ) | ||||
Net increase (decrease) | 19,085,886 | $ | 624,718,515 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 22,005,072 | $ | 690,897,460 | |||||
Shares issued in connection with the acquisition of MainStay Value Fund (See Note 10) | 472,783 | 14,204,015 | ||||||
Shares issued in connection with the acquisition of MainStay Mid Cap | ||||||||
Value Fund (See Note 10) | 9,175 | 278,552 | ||||||
Shares issued to shareholders in reinvestment of dividends | 676,694 | 20,607,983 | ||||||
Shares redeemed | (12,807,985 | ) | (396,788,295 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 10,355,739 | 329,199,715 | ||||||
Shares converted into Class I (a) | 690,793 | 21,241,909 | ||||||
Net increase (decrease) | 11,046,532 | $ | 350,441,624 | |||||
Class R1 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 237,874 | $ | 8,440,959 | |||||
Shares issued to shareholders in reinvestment of dividends | 7,642 | 267,589 | ||||||
Shares redeemed | (113,847 | ) | (3,985,549 | ) | ||||
Net increase (decrease) | 131,669 | $ | 4,722,999 | |||||
mainstayinvestments.com 89
Notes to Financial Statements (continued)
Class R1 | Shares | Amount | ||||||
Year ended October 31, 2010: | ||||||||
Shares sold | 92,759 | $ | 2,923,523 | |||||
Shares issued in connection with the acquisition of MainStay Value Fund (See Note 10) | 36 | 1,080 | ||||||
Shares issued in connection with the acquisition of MainStay Mid Cap | ||||||||
Value Fund (See Note 10) | 577 | 17,519 | ||||||
Shares issued to shareholders in reinvestment of dividends | 5,288 | 160,826 | ||||||
Shares redeemed | (102,375 | ) | (3,211,431 | ) | ||||
Net increase (decrease) | (3,715 | ) | $ | (108,483 | ) | |||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 253,908 | $ | 9,066,519 | |||||
Shares issued to shareholders in reinvestment of dividends | 7,138 | 250,291 | ||||||
Shares redeemed | (353,955 | ) | (12,246,558 | ) | ||||
Net increase (decrease) | (92,909 | ) | $ | (2,929,748 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 493,708 | $ | 15,113,228 | |||||
Shares issued in connection with the acquisition of MainStay Value Fund | ||||||||
(Note 10) | 1,563 | 46,926 | ||||||
Shares issued in connection with the acquisition of MainStay Mid Cap | ||||||||
Value Fund (See Note 10) | 4,702 | 142,610 | ||||||
Shares issued to shareholders in reinvestment of dividends | 5,799 | 174,935 | ||||||
Shares redeemed | (143,346 | ) | (4,457,333 | ) | ||||
Net increase (decrease) | 362,426 | $ | 11,020,366 | |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 159,364 | $ | 5,649,570 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,466 | 122,022 | ||||||
Shares redeemed | (127,780 | ) | (4,488,623 | ) | ||||
Net increase (decrease) | 35,050 | $ | 1,282,969 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 240,452 | $ | 7,248,813 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,272 | 38,382 | ||||||
Shares redeemed | (37,572 | ) | (1,172,622 | ) | ||||
Net increase (decrease) | 204,152 | $ | 6,114,573 | |||||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class, Class A and Class B shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion; and | |
• | All Class B shares are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class, Class A and Class B shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, they may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
(b) | Class B shares for MainStay ICAP Select Equity Fund were first offered on November 11, 2009. |
MainStay ICAP Global Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 28,167 | $ | 251,717 | |||||
Shares issued to shareholders in reinvestment of dividends | 797 | 7,201 | ||||||
Shares redeemed | (11,842 | ) | (103,251 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 17,122 | 155,667 | ||||||
Shares converted into Investor Class (See Note 1) | 7,109 | 53,531 | ||||||
Net increase (decrease) | 24,231 | $ | 209,198 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 35,120 | $ | 279,326 | |||||
Shares issued to shareholders in reinvestment of dividends | 510 | 3,744 | ||||||
Shares redeemed | (14,751 | ) | (113,234 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 20,879 | 169,836 | ||||||
Shares converted into Investor Class (See Note 1) | 2,013 | 16,428 | ||||||
Shares converted from Investor Class (See Note 1) | (6,839 | ) | (55,325 | ) | ||||
Net increase (decrease) | 16,053 | $ | 130,939 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 441,804 | $ | 4,071,438 | |||||
Shares issued to shareholders in reinvestment of dividends | 7,678 | 69,681 | ||||||
Shares redeemed | (170,222 | ) | (1,481,488 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 279,260 | 2,659,631 | ||||||
Shares converted from Class A (See Note 1) | (7,100 | ) | (53,531 | ) | ||||
Net increase (decrease) | 272,160 | $ | 2,606,100 | |||||
90 MainStay ICAP Funds
Class A | Shares | Amount | ||||||
Year ended October 31, 2010: | ||||||||
Shares sold | 232,320 | $ | 1,869,828 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,648 | 19,329 | ||||||
Shares redeemed | (62,505 | ) | (488,488 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 172,463 | 1,400,669 | ||||||
Shares converted into Class A (See Note 1) | 6,830 | 55,325 | ||||||
Shares converted from Class A (See Note 1) | (2,011 | ) | (16,428 | ) | ||||
Net increase (decrease) | 177,282 | $ | 1,439,566 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 28,872 | $ | 253,815 | |||||
Shares issued to shareholders in reinvestment of dividends | 217 | 1,969 | ||||||
Shares redeemed | (5,959 | ) | (49,063 | ) | ||||
Net increase (decrease) | 23,130 | $ | 206,721 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 12,377 | $ | 100,369 | |||||
Shares issued to shareholders in reinvestment of dividends | 83 | 595 | ||||||
Shares redeemed | (10,763 | ) | (83,336 | ) | ||||
Net increase (decrease) | 1,697 | $ | 17,628 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 349,239 | $ | 3,067,271 | |||||
Shares issued to shareholders in reinvestment of dividends | 84,532 | 763,081 | ||||||
Shares redeemed | (51,648 | ) | (453,796 | ) | ||||
Net increase (decrease) | 382,123 | $ | 3,376,556 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 136,247 | $ | 1,084,148 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,424 | 25,322 | ||||||
Shares redeemed | (13,303 | ) | (105,694 | ) | ||||
Net increase (decrease) | 126,368 | $ | 1,003,776 | |||||
MainStay ICAP International Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 48,559 | $ | 1,458,743 | |||||
Shares issued to shareholders in reinvestment of dividends | 4,938 | 150,761 | ||||||
Shares redeemed | (64,512 | ) | (1,895,804 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (11,015 | ) | (286,300 | ) | ||||
Shares converted into Investor Class (See Note 1) | 26,039 | 659,600 | ||||||
Shares converted from Investor Class (See Note 1) | (10,669 | ) | (317,179 | ) | ||||
Net increase (decrease) | 4,355 | $ | 56,121 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 48,109 | $ | 1,322,673 | |||||
Shares issued to shareholders in reinvestment of dividends | 4,222 | 100,539 | ||||||
Shares redeemed | (71,118 | ) | (1,907,805 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (18,787 | ) | (484,593 | ) | ||||
Shares converted into Investor Class (See Note 1) | 4,893 | 137,141 | ||||||
Shares converted from Investor Class (See Note 1) | (14,742 | ) | (411,624 | ) | ||||
Net increase (decrease) | (28,636 | ) | $ | (759,076 | ) | |||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,373,364 | $ | 70,071,230 | |||||
Shares issued to shareholders in reinvestment of dividends | 105,581 | 3,214,484 | ||||||
Shares redeemed | (3,298,474 | ) | (93,512,634 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (819,529 | ) | (20,226,920 | ) | ||||
Shares converted into Class A (See Note 1) | 10,664 | 317,179 | ||||||
Shares converted from Class A (See Note 1) | (26,028 | ) | (659,600 | ) | ||||
Net increase (decrease) | (834,893 | ) | $ | (20,569,341 | ) | |||
Year ended October 31,2010: | ||||||||
Shares sold | 3,453,875 | $ | 93,612,111 | |||||
Shares issued to shareholders in reinvestment of dividends | 82,484 | 1,963,948 | ||||||
Shares redeemed | (1,877,367 | ) | (50,279,433 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,658,992 | 45,296,626 | ||||||
Shares converted into Class A (See Note 1) | 14,734 | 411,624 | ||||||
Shares converted from Class A (See Note 1) | (4,890 | ) | (137,141 | ) | ||||
Shares converted from Class A (a) | (151,149 | ) | (3,999,406 | ) | ||||
Net increase (decrease) | 1,517,687 | $ | 41,571,703 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 244,527 | $ | 7,310,735 | |||||
Shares issued to shareholders in reinvestment of dividends | 5,399 | 163,372 | ||||||
Shares redeemed | (200,425 | ) | (5,803,322 | ) | ||||
Net increase (decrease) | 49,501 | $ | 1,670,785 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 88,892 | $ | 2,420,476 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,242 | 76,646 | ||||||
Shares redeemed | (270,019 | ) | (7,197,777 | ) | ||||
Net increase (decrease) | (177,885 | ) | $ | (4,700,655 | ) | |||
mainstayinvestments.com 91
Notes to Financial Statements (continued)
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 9,853,742 | $ | 290,968,279 | |||||
Shares issued to shareholders in reinvestment of dividends | 419,259 | 12,764,647 | ||||||
Shares redeemed | (5,490,785 | ) | (163,031,995 | ) | ||||
Net increase (decrease) | 4,782,216 | $ | 140,700,931 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 6,491,218 | $ | 174,262,039 | |||||
Shares issued to shareholders in reinvestment of dividends | 296,469 | 7,176,712 | ||||||
Shares redeemed | (4,824,653 | ) | (129,472,349 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,963,034 | 51,966,402 | ||||||
Shares converted into Class I (a) | 150,807 | 3,999,406 | ||||||
Net increase (decrease) | 2,113,841 | $ | 55,965,808 | |||||
Class R1 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 5,618 | $ | 169,059 | |||||
Shares issued to shareholders in reinvestment of dividends | 304 | 9,178 | ||||||
Shares redeemed | (20,971 | ) | (627,012 | ) | ||||
Net increase (decrease) | (15,049 | ) | $ | (448,775 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 25,629 | $ | 696,644 | |||||
Shares issued to shareholders in reinvestment of dividends | 456 | 10,929 | ||||||
Shares redeemed | (18,529 | ) | (494,056 | ) | ||||
Net increase (decrease) | 7,556 | $ | 213,517 | |||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 548,717 | $ | 16,377,120 | |||||
Shares issued to shareholders in reinvestment of dividends | 19,309 | 588,454 | ||||||
Shares redeemed | (560,775 | ) | (16,561,439 | ) | ||||
Net increase (decrease) | 7,251 | $ | 404,135 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 674,626 | $ | 18,581,048 | |||||
Shares issued to shareholders in reinvestment of dividends | 14,358 | 341,721 | ||||||
Shares redeemed | (361,520 | ) | (9,865,876 | ) | ||||
Net increase (decrease) | 327,464 | $ | 9,056,893 | |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 161,656 | $ | 4,820,139 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,881 | 118,132 | ||||||
Shares redeemed | (130,256 | ) | (3,892,126 | ) | ||||
Net increase (decrease) | 35,281 | $ | 1,046,145 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 214,704 | $ | 5,794,802 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,524 | 59,830 | ||||||
Shares redeemed | (107,775 | ) | (2,919,095 | ) | ||||
Net increase (decrease) | 109,453 | $ | 2,935,537 | |||||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class and Class A shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class and Class A shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, they may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
Note 10–Fund Acquisitions
At a meeting held on June 23, 2009, the Board approved a plan of reorganization whereby the MainStay ICAP Select Equity Fund would acquire the assets, including the investments, and assume the liabilities of MainStay Value Fund, a series of The MainStay Funds. Shareholders of the MainStay Value Fund approved this reorganization on November 5, 2009, which was completed on November 12, 2009. The aggregate net assets of the MainStay ICAP Select Equity Fund immediately before the acquisition were $1,835,281,477 and the combined net assets after the acquisition were $2,189,364,629.
The acquisition was accomplished by a tax-free exchange of the following:
Shares | Value | |||||||
MainStay Value Fund | ||||||||
Investor Class | 9,297,917 | $ | 132,367,008 | |||||
Class A | 10,189,206 | 144,765,185 | ||||||
Class B | 4,043,817 | 57,278,639 | ||||||
Class C | 382,552 | 5,420,299 | ||||||
Class I | 993,600 | 14,204,015 | ||||||
Class R1 | 75 | 1,080 | ||||||
Class R2 | 3,285 | 46,926 | ||||||
92 MainStay ICAP Funds
In exchange for the MainStay Value Fund shares and net assets, the MainStay ICAP Select Equity Fund issued 4,410,690 Investor Class Shares; 4,823,914 Class A shares; 1,913,939 Class B shares; 181,117 Class C shares; 472,783 Class I shares; 36 Class R1 shares; and 1,563 Class R2 shares.
MainStay Value Fund’s net assets at the acquisition date were as follows, which include the following amounts of capital stock, unrealized appreciation, accumulated net realized loss and undistributed net investment loss:
Total Net | Capital | Unrealized | Accumulated Net | Undistributed Net | ||||||||||||||||
Assets | Stock | Appreciation | Realized Loss | Investment Loss | ||||||||||||||||
MainStay Value Fund | $ | 354,083,152 | $ | 425,289,747 | $ | 43,388,960 | $ | (114,594,547 | ) | $ | (1,008 | ) | ||||||||
Also at the meeting held on June 23, 2009, the Board approved a plan of reorganization whereby the MainStay ICAP Select Equity Fund would acquire the assets, including the investments, and assume the liabilities of MainStay Mid Cap Value Fund, a series of The MainStay Funds. Shareholders of the MainStay Mid Cap Value Fund approved this reorganization on November 16, 2009, which was completed on November 24, 2009. The aggregate net assets of the MainStay ICAP Select Equity Fund immediately before the acquisition were $2,229,459,923 and the combined net assets after the acquisition were $2,381,725,187.
The acquisition was accomplished by a tax-free exchange of the following:
Shares | Value | |||||||
MainStay Mid Cap Value Fund | ||||||||
Investor Class | 3,220,243 | $ | 35,331,544 | |||||
Class A | 4,870,845 | 53,479,447 | ||||||
Class B | 4,924,594 | 51,439,350 | ||||||
Class C | 1,108,485 | 11,576,242 | ||||||
Class I | 25,005 | 278,552 | ||||||
Class R1 | 1,568 | 17,519 | ||||||
Class R2 | 12,937 | 142,610 | ||||||
In exchange for the MainStay Mid Cap Value Fund shares and net assets, the MainStay ICAP Select Equity Fund issued 1,165,123 Investor Class Shares; 1,763,625 Class A shares; 1,701,453 Class B shares; 382,905 Class C shares; 9,175 Class I shares; 577 Class R1 shares; and 4,702 Class R2 shares.
MainStay Mid Cap Value Fund’s net assets at the acquisition date were as follows, which include the following amounts of capital stock, unrealized depreciation, accumulated net realized loss and undistributed net investment income:
Total Net | Capital | Unrealized | Accumulated Net | Undistributed | ||||||||||||||||
Assets | Stock | Depreciation | Realized Loss | Net Investment | ||||||||||||||||
MainStay Mid Cap Value Fund | $ | 152,265,264 | $ | 191,861,774 | $ | (359,014 | ) | $ | (39,237,794 | ) | $ | 298 | ||||||||
For financial reporting purposes, assets received and shares issued by the MainStay ICAP Select Equity Fund were recorded at fair value; however, the cost basis of the investments received from MainStay Mid Cap Value Fund and MainStay Value Fund were carried forward to align ongoing reporting of the MainStay ICAP Select Equity Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
Note 11–In-Kind Transfer of Securities
During the year ended October 31, 2011, the MainStay ICAP Equity Fund redeemed shares of beneficial interest in exchange for securities. The securities were transferred at their current value on the date of transaction.
Transaction Date | Shares | Redeemed Value | Gain (Loss) | |||||||||
12/31/10 | 2,680,166 | $ | 97,079,910 | $ | 21,152,510 | |||||||
During the year ended October 31, 2010, the MainStay ICAP Equity Fund redeemed shares of beneficial interest in exchange for securities. The securities were transferred at their current value on the date of transaction.
Transaction Date | Shares | Redeemed Value | Gain (Loss) | |||||||||
9/30/10 | 1,700,831 | $ | 55,704,242 | $ | 7,782,475 | |||||||
mainstayinvestments.com 93
Notes to Financial Statements (continued)
Note 12–Subsequent Events
In connection with the preparation of the financial statements of the ICAP Funds as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the ICAP Funds’ management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
94 MainStay ICAP Funds
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the MainStay ICAP Equity Fund, MainStay ICAP Select Equity Fund, MainStay ICAP Global Fund and MainStay ICAP International Fund (each a “Fund” and collectively, the “Funds”), four of the funds constituting MainStay Funds Trust, as of October 31, 2011 and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the three-year period ended October 31, 2011, the period ended October 31, 2008, and each of the years in the two-year period ended December 31, 2007. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay ICAP Equity Fund, MainStay ICAP Select Equity Fund, MainStay ICAP Global Fund and MainStay ICAP International Fund of MainStay Funds Trust as of October 31, 2011, the results of their operations for the year ended October 31, 2010, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the three-year period ended October 31, 2011, the period ended October 31, 2008, and each of the years in the two-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
mainstayinvestments.com 95
Federal Income Tax Information (Unaudited)
The ICAP Funds are required under the Internal Revenue Code to advise shareholders within 60 days of the Funds’ fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the ICAP Funds during such fiscal years.
For the fiscal year ended October 31, 2011, the ICAP Funds designated approximately the following amounts under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates:
MainStay ICAP Equity Fund | $ | 19,413,098 | ||
MainStay ICAP Select Equity Fund | $ | 84,598,779 | ||
MainStay ICAP Global Fund | $ | 1,424,936 | ||
MainStay ICAP International Fund | $ | 31,701,797 | ||
The dividends paid by the following ICAP Funds during the fiscal year ended October 31, 2011 should be multiplied by the following percentage to arrive at the amount eligible for the corporate dividend received deduction.
DRD% | ||||
MainStay ICAP Equity Fund | 100.0 | % | ||
MainStay ICAP Select Equity Fund | 100.0 | % | ||
MainStay ICAP Global Fund | 50.4 | % | ||
MainStay ICAP International Fund | — | % | ||
In February 2012, shareholders will receive IRS From 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the ICAP Funds’ fiscal year end October 31, 2011.
In accordance with federal tax law, the MainStay ICAP Global Fund elects to provide each shareholder with their portion of the Fund’s foreign taxes paid and the income sourced from foreign countries. Accordingly, the Fund made the following designations regarding its fiscal year ended October 31, 2011:
• | the total amount of taxes paid to foreign countries was $91,126. |
• | the total amount of income sourced from foreign countries was $968,488. |
In accordance with federal tax law, the MainStay ICAP International Fund elects to provide each shareholder with their portion of the Fund’s foreign taxes paid and the income sourced from foreign countries. Accordingly, the Fund made the following designations regarding its fiscal year ended October 31, 2011:
• | the total amount of taxes paid to foreign countries was $3,127,940. |
As required by federal tax law rules, shareholders will receive notification of their proportionate share of foreign taxes paid and foreign sourced income for the 2011 calendar year with form 1099-DIV, which will be mailed during February 2012.
Proxy Voting Policies and
Procedures and Proxy Voting Record
Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the ICAP Funds’ securities is available without charge, upon request, (i) by visiting the MainStay Funds’ website at mainstayinvestments.com; and (ii) on the SEC’s website at www.sec.gov.
The ICAP Funds are required to file with the SEC their proxy voting records for each ICAP Fund for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or relevant ICAP Fund proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
Each ICAP Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. Each ICAP Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
96 MainStay ICAP Funds
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
mainstayinvestments.com 97
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
98 MainStay ICAP Funds
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
mainstayinvestments.com 99
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
100 MainStay ICAP Funds
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
mainstayinvestments.com 101
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24867 MS248-11 | MSIC11-12/11 |
NE1
MainStay Indexed Bond Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 10 | |
Financial Statements | 27 | |
Notes to Financial Statements | 33 | |
Report of Independent Registered Public Accounting Firm | 39 | |
Federal Income Tax Information | 40 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 40 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 40 | |
Board Members and Officers | 41 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||||
Expense | ||||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 3% Initial Sales Charge | With sales charges | 0 | .77% | 5 | .29% | 4 | .52% | 1 | .15% | ||||||||||
Excluding sales charges | 3 | .88 | 5 | .93 | 4 | .84 | 1 | .15 | ||||||||||||
Class A Shares4 | Maximum 3% Initial Sales Charge | With sales charges | 0 | .92 | 5 | .38 | 4 | .57 | 0 | .80 | ||||||||||
Excluding sales charges | 4 | .05 | 6 | .02 | 4 | .89 | 0 | .80 | ||||||||||||
Class I Shares | No Sales Charge | 4 | .41 | 6 | .44 | 5 | .24 | 0 | .55 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Performance figures for Class A shares, first offered on January 2, 2004, include the historical performance of Class I shares through January 1, 2004, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class A shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
Barclays Capital U.S. Aggregate Bond Index5 | 5 | .00% | 6 | .41% | 5 | .46% | ||||||
Average Lipper Intermediate Investment Grade Debt Fund6 | 3 | .94 | 5 | .57 | 4 | .87 | ||||||
5. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. The Barclays Capital U.S. Aggregate Bond Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an Index. |
6. | The average Lipper intermediate investment grade debt fund is representative of funds that invest primarily in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of five to ten years. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Indexed Bond Fund
Cost in Dollars of a $1,000 Investment in MainStay Indexed Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,044.00 | $ | 4.74 | $ | 1,020.60 | $ | 4.69 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,045.00 | $ | 3.97 | $ | 1,021.30 | $ | 3.92 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,046.70 | $ | 2.22 | $ | 1,023.00 | $ | 2.19 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.92% for Investor Class, 0.77% for Class A and 0.43% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Portfolio Composition as of October 31, 2011 (Unaudited)
U.S. Government & Federal Agencies | 72.1 | |||
Corporate Bonds | 16.8 | |||
Yankee Bonds | 5.2 | |||
Short-Term Investment | 3.0 | |||
Mortgage-Backed Securities | 2.1 | |||
Foreign Government Bonds | 2.0 | |||
Municipal Bonds | 0.6 | |||
Asset-Backed Securities | 0.4 | |||
Other Assets, Less Liabilities | (2.2 | ) |
See Portfolio of Investments beginning on page 10 for specific holdings within these categories.
Top Ten Issuers Held as of October 31, 2011 (excluding short-term investment)
1. | United States Treasury Notes, 0.125%–3.375%, due 7/31/13–8/15/21 | |
2. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 2.969%–8.00%, due 11/1/11–2/1/51 | |
3. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 3.50%–8.00%, due 11/1/11–4/1/41 | |
4. | Government National Mortgage Association (Mortgage Pass-Through Securities), 4.00%–8.50%, due 11/15/24–7/20/41 | |
5. | United States Treasury Bonds, 3.75%–6.75%, due 8/15/26–8/15/41 | |
6. | Federal National Mortgage Association, 0.60%–6.21%, due 2/22/13–8/6/38 | |
7. | Federal Home Loan Mortgage Corporation, 2.125%–5.125%, due 9/21/12–3/27/19 | |
8. | Morgan Stanley Capital I, 5.178%–5.895%, due 9/15/42–10/15/42 | |
9. | Federal Home Loan Bank, 3.625%, due 10/18/13 | |
10. | Federal Republic of Brazil, 6.00%, due 1/17/17 |
8 MainStay Indexed Bond Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Donald F. Serek and Thomas J. Girard of New York Life Investments,1 the Fund’s Manager.
How did MainStay Indexed Bond Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Indexed Bond Fund returned 3.88% for Investor Class shares and 4.05% for Class A shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 4.41%. Investor Class shares underperformed—and Class A and Class I shares outperformed—the 3.94% return of the average Lipper2 intermediate investment grade debt fund for the 12 months ended October 31, 2011. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index3 for the reporting period. The Barclays Capital U.S. Aggregate Bond Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund employs a strategy that attempts to replicate the return of its benchmark. Because the Fund incurs operating expenses that the Barclays Capital U.S. Aggregate Bond Index does not, the Fund’s performance will typically lag that of the Index.
During the reporting period, which credit-rating categories were strong performers and which credit-rating categories were weak?
During the reporting period, bonds with higher levels of risk generally underperformed bonds with lower levels of risk. As a result, bonds rated AAA4 were the best-performing rating category in the Barclays Capital U.S. Aggregate Bond Index, followed by bonds rated A and bonds rated BBB. The worst-performing rating category during the reporting period was bonds rated AA.
Which market sectors provided the strongest contributions to the Fund’s performance and which market sectors detracted the most?
All broad sectors in the Barclays Capital U.S. Aggregate Bond Index generated positive total returns during the reporting period, because yields declined. Corporate bonds were the best-performing sector in the market. U.S. Treasury securities were the next-best-performing component of the Barclays Capital U.S. Aggregate Bond Index. Over the last several months of the reporting period, systemic risk emanating from Europe led to a flight to quality (or a movement to securities perceived to have lower risk). This increased demand for U.S. government securities. For the reporting period overall, commercial mortgage-backed securities (CMBS) and mortgage-backed securities lagged investment-grade corporate bonds. Even so, these asset classes still had positive total returns for the 12 months ended October 31, 2011.
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the Barclays Capital U.S. Aggregate Bond Index.
4. An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s (“S&P”), and in the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is extremely strong. An obligation rated ‘AA’ by S&P is deemed by S&P to differ from the highest-rated issues only to a small degree. In the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is very strong. An obligation rated ‘A’ by S&P is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. In the opinion of S&P, however, the obligor’s capacity to meet its financial commitment on the obligation is still strong. An obligation rated ‘BBB’ by S&P is deemed by S&P to exhibit adequate protection parameters. It is the opinion of S&P, however, that adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
Portfolio of Investments†††October 31, 2011
Principal | ||||||||
Amount | Value | |||||||
Long-Term Bonds 99.2%† Asset-Backed Securities 0.4% | ||||||||
Automobile 0.2% | ||||||||
Nissan Auto Lease Trust Series 2010-B, Class A3 1.12%, due 12/15/13 | $ | 1,000,000 | $ | 1,004,249 | ||||
Home Equity 0.1% | ||||||||
Equity One ABS, Inc. Series 2003-4, Class AF6 4.833%, due 10/25/34 (a) | 211,522 | 212,458 | ||||||
Residential Asset Mortgage Products, Inc. Series 2003-RZ5, Class A7 4.97%, due 9/25/33 (a) | 125,766 | 125,806 | ||||||
Saxon Asset Securities Trust Series 2003-1, Class AF5 5.455%, due 6/25/33 (a) | 96,707 | 86,731 | ||||||
424,995 | ||||||||
Student Loans 0.1% | ||||||||
JP Morgan Mortgage Acquisition Corp. Series 2007-HE1, Class AF3 5.465%, due 3/25/47 (a)(b) | 500,000 | 252,243 | ||||||
Total Asset-Backed Securities (Cost $1,925,807) | 1,681,487 | |||||||
Corporate Bonds 16.8% | ||||||||
Aerospace & Defense 0.3% | ||||||||
Boeing Co. (The) 6.125%, due 2/15/33 | 250,000 | 309,933 | ||||||
Goodrich Corp. 7.00%, due 4/15/38 | 50,000 | 68,433 | ||||||
L-3 Communications Corp. 5.20%, due 10/15/19 | 100,000 | 101,788 | ||||||
Lockheed Martin Corp. 4.25%, due 11/15/19 | 250,000 | 268,006 | ||||||
Northrop Grumman Corp. 5.05%, due 8/1/19 | 100,000 | 112,779 | ||||||
United Technologies Corp. 4.50%, due 4/15/20 | 250,000 | 277,311 | ||||||
6.125%, due 2/1/19 | 125,000 | 152,579 | ||||||
1,290,829 | ||||||||
Agriculture 0.2% | ||||||||
Archer-Daniels-Midland Co. 4.535%, due 3/26/42 (c) | 216,000 | 227,165 | ||||||
Bunge, Ltd. Finance Corp. 5.35%, due 4/15/14 | 100,000 | 105,444 | ||||||
Philip Morris International, Inc. 5.65%, due 5/16/18 | 325,000 | 385,837 | ||||||
718,446 | ||||||||
Airlines 0.0%‡ | ||||||||
Continental Airlines, Inc. Series 1992-2, Class A1 7.256%, due 3/15/20 | 54,230 | 56,399 | ||||||
Apparel 0.0%‡ | ||||||||
VF Corp. 6.45%, due 11/1/37 | 50,000 | 62,779 | ||||||
Auto Manufacturers 0.0%‡ | ||||||||
DaimlerChrysler N.A. Holding Corp. 8.50%, due 1/18/31 | 150,000 | 214,766 | ||||||
Auto Parts & Equipment 0.0%‡ | ||||||||
Johnson Controls, Inc. 5.50%, due 1/15/16 | 50,000 | 55,965 | ||||||
6.00%, due 1/15/36 | 50,000 | 58,521 | ||||||
114,486 | ||||||||
Banks 3.4% | ||||||||
Bank of America Corp. 3.625%, due 3/17/16 | 600,000 | 572,239 | ||||||
4.75%, due 8/1/15 | 250,000 | 249,898 | ||||||
5.25%, due 12/1/15 | 200,000 | 197,398 | ||||||
5.42%, due 3/15/17 | 1,100,000 | 1,034,472 | ||||||
Bank of New York Mellon Corp. (The) 2.95%, due 6/18/15 | 250,000 | 260,042 | ||||||
BB&T Corp. 3.375%, due 9/25/13 | 650,000 | 675,128 | ||||||
Citigroup, Inc. 4.70%, due 5/29/15 | 300,000 | 308,024 | ||||||
4.875%, due 5/7/15 | 350,000 | 352,635 | ||||||
5.50%, due 10/15/14 | 750,000 | 798,897 | ||||||
5.875%, due 2/22/33 | 450,000 | 428,654 | ||||||
6.125%, due 11/21/17 | 500,000 | 550,658 | ||||||
Fifth Third Bank 4.75%, due 2/1/15 | 250,000 | 261,212 | ||||||
Goldman Sachs Group, Inc. (The) 5.35%, due 1/15/16 | 350,000 | 370,717 | ||||||
5.95%, due 1/18/18 | 1,000,000 | 1,051,442 | ||||||
6.00%, due 6/15/20 | 500,000 | 526,576 | ||||||
6.25%, due 9/1/17 | 350,000 | 378,459 | ||||||
HSBC Bank USA N.A. 4.625%, due 4/1/14 | 925,000 | 957,898 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest issuers held, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
10 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Banks (continued) | ||||||||
JPMorgan Chase & Co. 4.40%, due 7/22/20 | $ | 625,000 | $ | 632,873 | ||||
5.15%, due 10/1/15 | 500,000 | 531,023 | ||||||
JPMorgan Chase Bank N.A. 6.00%, due 10/1/17 | 785,000 | 845,485 | ||||||
KeyBank N.A. 5.80%, due 7/1/14 | 375,000 | 403,970 | ||||||
Marshall & Ilsley Bank 5.00%, due 1/17/17 | 150,000 | 158,348 | ||||||
Mercantile Bankshares Corp. Series B 4.625%, due 4/15/13 | 100,000 | 103,724 | ||||||
Morgan Stanley 5.50%, due 7/24/20 | 1,100,000 | 1,094,258 | ||||||
6.25%, due 8/28/17 | 310,000 | 322,040 | ||||||
Northern Trust Corp. 3.45%, due 11/4/20 | 100,000 | 101,355 | ||||||
PNC Bank N.A. 5.25%, due 1/15/17 | 175,000 | 186,521 | ||||||
PNC Funding Corp. 3.625%, due 2/8/15 | 150,000 | 158,490 | ||||||
5.125%, due 2/8/20 | 100,000 | 110,548 | ||||||
State Street Bank & Trust Co. 5.25%, due 10/15/18 | 100,000 | 110,624 | ||||||
SunTrust Banks, Inc. 5.40%, due 4/1/20 | 15,000 | 15,537 | ||||||
U.S. Bancorp 2.875%, due 11/20/14 | 300,000 | 312,086 | ||||||
U.S. Bank N.A. 4.80%, due 4/15/15 | 100,000 | 109,330 | ||||||
UBS A.G. 7.75%, due 9/1/26 | 100,000 | 120,604 | ||||||
Wachovia Bank N.A. 4.875%, due 2/1/15 | 575,000 | 608,800 | ||||||
5.60%, due 3/15/16 | 200,000 | 219,836 | ||||||
Wachovia Corp. 5.25%, due 8/1/14 | 100,000 | 106,651 | ||||||
5.50%, due 8/1/35 | 125,000 | 125,965 | ||||||
Wells Fargo & Co. 3.75%, due 10/1/14 | 250,000 | 266,574 | ||||||
Wells Fargo Bank N.A. 5.95%, due 8/26/36 | 150,000 | 159,678 | ||||||
15,778,669 | ||||||||
Beverages 0.3% | ||||||||
Anheuser-Busch Cos., Inc. 6.45%, due 9/1/37 | 250,000 | 331,379 | ||||||
Coca-Cola Co. (The) 3.15%, due 11/15/20 | 275,000 | 286,542 | ||||||
Fortune Brands, Inc. 5.375%, due 1/15/16 | 18,000 | 19,299 | ||||||
Pepsi Bottling Group, Inc. 7.00%, due 3/1/29 | 60,000 | 83,443 | ||||||
PepsiCo., Inc. 5.00%, due 6/1/18 | 500,000 | 581,135 | ||||||
1,301,798 | ||||||||
Biotechnology 0.2% | ||||||||
Amgen, Inc. 3.45%, due 10/1/20 | 150,000 | 155,419 | ||||||
4.85%, due 11/18/14 | 100,000 | 111,579 | ||||||
5.85%, due 6/1/17 | 150,000 | 178,936 | ||||||
6.40%, due 2/1/39 | 100,000 | 131,540 | ||||||
Genentech, Inc. 4.75%, due 7/15/15 | 100,000 | 111,729 | ||||||
689,203 | ||||||||
Building Materials 0.0%‡ | ||||||||
CRH America, Inc. 4.125%, due 1/15/16 | 100,000 | 100,052 | ||||||
6.00%, due 9/30/16 | 100,000 | 107,355 | ||||||
207,407 | ||||||||
Chemicals 0.3% | ||||||||
Air Products & Chemicals, Inc. 4.15%, due 2/1/13 | 100,000 | 104,379 | ||||||
Dow Chemical Co. (The) 2.50%, due 2/15/16 | 250,000 | 250,906 | ||||||
E.I. du Pont de Nemours & Co. 3.625%, due 1/15/21 | 50,000 | 53,136 | ||||||
4.625%, due 1/15/20 | 200,000 | 230,286 | ||||||
Eastman Chemical Co. 4.50%, due 1/15/21 | 50,000 | 52,594 | ||||||
Lubrizol Corp. 5.50%, due 10/1/14 | 100,000 | 111,907 | ||||||
PPG Industries, Inc. 5.75%, due 3/15/13 | 100,000 | 106,124 | ||||||
Praxair, Inc. 3.95%, due 6/1/13 | 200,000 | 210,387 | ||||||
Rohm & Haas Co. 7.85%, due 7/15/29 | 100,000 | 125,952 | ||||||
Valspar Corp. 5.625%, due 5/1/12 | 250,000 | 255,169 | ||||||
1,500,840 | ||||||||
Commercial Services 0.0%‡ | ||||||||
R.R. Donnelley & Sons Co. 5.50%, due 5/15/15 | 19,000 | 18,050 | ||||||
Western Union Co. (The) 5.93%, due 10/1/16 | 130,000 | 145,317 | ||||||
163,367 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments†††October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Computers 0.3% | ||||||||
Dell, Inc. 4.70%, due 4/15/13 | $ | 175,000 | $ | 184,657 | ||||
Electronic Data Systems Corp. Series B 6.00%, due 8/1/13 | 100,000 | 107,876 | ||||||
Hewlett-Packard Co. 2.20%, due 12/1/15 | 150,000 | 150,465 | ||||||
International Business Machines Corp. 5.70%, due 9/14/17 | 400,000 | 484,947 | ||||||
5.875%, due 11/29/32 | 100,000 | 126,343 | ||||||
6.50%, due 1/15/28 | 100,000 | 134,308 | ||||||
7.50%, due 6/15/13 | 100,000 | 110,633 | ||||||
1,299,229 | ||||||||
Cosmetics & Personal Care 0.1% | ||||||||
Colgate-Palmolive Co. 3.15%, due 8/5/15 | 100,000 | 106,738 | ||||||
Procter & Gamble Co. (The) 4.70%, due 2/15/19 | 125,000 | 145,692 | ||||||
5.55%, due 3/5/37 | 100,000 | 128,864 | ||||||
381,294 | ||||||||
Diversified Financial Services 0.4% | ||||||||
General Electric Capital Corp. | ||||||||
2.10%, due 1/7/14 | 100,000 | 101,136 | ||||||
5.875%, due 1/14/38 | 525,000 | 563,472 | ||||||
Series A 6.75%, due 3/15/32 | 650,000 | 760,125 | ||||||
Toyota Motor Credit Corp. 2.80%, due 1/11/16 | 200,000 | 207,868 | ||||||
1,632,601 | ||||||||
Electric 1.6% | ||||||||
Alliant Energy Corp. 4.00%, due 10/15/14 | 100,000 | 104,045 | ||||||
Appalachian Power Co. Series H 5.95%, due 5/15/33 | 100,000 | 111,998 | ||||||
CenterPoint Energy Houston Electric LLC 5.70%, due 3/15/13 | 75,000 | 79,389 | ||||||
Series K2 6.95%, due 3/15/33 | 100,000 | 131,240 | ||||||
Commonwealth Edison Co. 6.15%, due 9/15/17 | 150,000 | 178,256 | ||||||
Consolidated Edison Co. of New York, Inc. 6.30%, due 8/15/37 | 225,000 | 295,495 | ||||||
Constellation Energy Group, Inc. 7.60%, due 4/1/32 | 100,000 | 120,268 | ||||||
Consumers Energy Co. Series B 5.375%, due 4/15/13 | 300,000 | 317,894 | ||||||
Detroit Edison Co. (The) 6.40%, due 10/1/13 | 275,000 | 301,593 | ||||||
Duke Energy Carolinas LLC 5.30%, due 2/15/40 | 150,000 | 180,789 | ||||||
Entergy Gulf States Louisiana LLC 3.95%, due 10/1/20 | 250,000 | 255,178 | ||||||
Entergy Mississippi, Inc. 5.15%, due 2/1/13 | 75,000 | 78,302 | ||||||
FirstEnergy Corp. | ||||||||
Series B 6.45%, due 11/15/11 | 11,000 | 11,018 | ||||||
Series C 7.375%, due 11/15/31 | 200,000 | 251,386 | ||||||
Florida Power & Light Co. 5.55%, due 11/1/17 | 100,000 | 120,524 | ||||||
5.95%, due 10/1/33 | 100,000 | 126,895 | ||||||
Florida Power Corp. 6.35%, due 9/15/37 | 150,000 | 196,833 | ||||||
Georgia Power Co. 4.75%, due 9/1/40 | 150,000 | 164,213 | ||||||
Jersey Central Power & Light Co. 7.35%, due 2/1/19 | 35,000 | 44,259 | ||||||
Kansas City Power & Light Co. 6.50%, due 11/15/11 | 50,000 | 50,087 | ||||||
Kentucky Utilities Co. 1.625%, due 11/1/15 | 100,000 | 99,865 | ||||||
Nevada Power Co. 6.50%, due 4/15/12 | 50,000 | 51,217 | ||||||
6.50%, due 8/1/18 | 150,000 | 178,852 | ||||||
NextEra Energy Capital Holdings, Inc. 2.60%, due 9/1/15 | 300,000 | 300,974 | ||||||
NiSource Finance Corp. 6.15%, due 3/1/13 | 175,000 | 185,506 | ||||||
Ohio Power Co. Series G 6.60%, due 2/15/33 | 150,000 | 186,177 | ||||||
Oncor Electric Delivery Co. LLC 7.00%, due 9/1/22 | 100,000 | 127,414 | ||||||
Pacific Gas & Electric Co. 5.625%, due 11/30/17 | 500,000 | 591,879 | ||||||
PacifiCorp 6.25%, due 10/15/37 | 300,000 | 392,006 | ||||||
Peco Energy Co. 5.95%, due 10/1/36 | 100,000 | 121,909 | ||||||
Pepco Holdings, Inc. 2.70%, due 10/1/15 | 200,000 | 202,524 | ||||||
PPL Energy Supply LLC 5.40%, due 8/15/14 | 100,000 | 108,260 | ||||||
Progress Energy, Inc. 5.625%, due 1/15/16 | 125,000 | 142,837 |
The notes to the financial statements are an integral part of,
12 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Electric (continued) | ||||||||
PSE&G Power LLC 5.125%, due 4/15/20 | $ | 80,000 | $ | 86,846 | ||||
8.625%, due 4/15/31 | 50,000 | 70,944 | ||||||
PSI Energy, Inc. 5.00%, due 9/15/13 | 100,000 | 106,720 | ||||||
Public Service Electric & Gas Co. Series D 5.25%, due 7/1/35 | 50,000 | 57,979 | ||||||
Puget Sound Energy, Inc. 6.274%, due 3/15/37 | 100,000 | 128,810 | ||||||
San Diego Gas & Electric Co. 5.35%, due 5/15/35 | 175,000 | 212,895 | ||||||
South Carolina Electric & Gas Co. 6.05%, due 1/15/38 | 100,000 | 124,940 | ||||||
Southern California Edison Co. 4.50%, due 9/1/40 | 175,000 | 187,972 | ||||||
Union Electric Co. 4.65%, due 10/1/13 | 100,000 | 106,083 | ||||||
5.40%, due 2/1/16 | 100,000 | 112,637 | ||||||
Virginia Electric and Power Co. 6.00%, due 1/15/36 | 100,000 | 125,740 | ||||||
6.00%, due 5/15/37 | 125,000 | 158,171 | ||||||
Xcel Energy, Inc. 6.50%, due 7/1/36 | 150,000 | 190,951 | ||||||
7,479,770 | ||||||||
Electrical Components & Equipment 0.1% | ||||||||
Cooper Industries, Inc. 5.25%, due 11/15/12 | 50,000 | 52,178 | ||||||
Emerson Electric Co. 4.25%, due 11/15/20 | 200,000 | 218,906 | ||||||
271,084 | ||||||||
Electronics 0.1% | ||||||||
Honeywell International, Inc. 5.70%, due 3/15/37 | 100,000 | 125,062 | ||||||
Thermo Fisher Scientific, Inc. 3.20%, due 3/1/16 | 100,000 | 106,188 | ||||||
231,250 | ||||||||
Environmental Controls 0.1% | ||||||||
Republic Services, Inc. 5.00%, due 3/1/20 | 300,000 | 333,510 | ||||||
Waste Management, Inc. 5.00%, due 3/15/14 | 50,000 | 54,254 | ||||||
7.125%, due 12/15/17 | 100,000 | 120,349 | ||||||
7.75%, due 5/15/32 | 75,000 | 105,031 | ||||||
613,144 | ||||||||
Finance—Consumer Loans 0.3% | ||||||||
American General Finance Corp. Series I 5.40%, due 12/1/15 | 350,000 | 273,000 | ||||||
HSBC Finance Corp. 6.676%, due 1/15/21 | 951,000 | 967,268 | ||||||
SLM Corp. 5.625%, due 8/1/33 | 250,000 | 201,250 | ||||||
1,441,518 | ||||||||
Finance—Credit Card 0.3% | ||||||||
American Express Co. 5.50%, due 9/12/16 | 75,000 | 84,754 | ||||||
6.15%, due 8/28/17 | 525,000 | 603,906 | ||||||
Capital One Bank USA N.A. 8.80%, due 7/15/19 | 500,000 | 593,906 | ||||||
Capital One Financial Corp. 5.25%, due 2/21/17 | 100,000 | 107,641 | ||||||
1,390,207 | ||||||||
Finance—Investment Banker/Broker 0.4% | ||||||||
Bear Stearns Cos., Inc. (The) 7.25%, due 2/1/18 | 400,000 | 471,052 | ||||||
Credit Suisse First Boston USA, Inc. 4.875%, due 1/15/15 | 875,000 | 920,293 | ||||||
Merrill Lynch & Co., Inc. 5.70%, due 5/2/17 | 100,000 | 96,306 | ||||||
6.40%, due 8/28/17 | 400,000 | 405,566 | ||||||
1,893,217 | ||||||||
Finance—Other Services 0.1% | ||||||||
Mellon Funding Corp. 5.00%, due 12/1/14 | 250,000 | 267,961 | ||||||
National Rural Utilities Cooperative Finance Corp. 5.45%, due 2/1/18 | 150,000 | 171,007 | ||||||
8.00%, due 3/1/32 | 75,000 | 104,936 | ||||||
543,904 | ||||||||
Food 0.5% | ||||||||
ConAgra Foods, Inc. 7.00%, due 10/1/28 | 100,000 | 114,799 | ||||||
Corn Products International, Inc. 4.625%, due 11/1/20 | 50,000 | 52,631 | ||||||
General Mills, Inc. 5.70%, due 2/15/17 | 250,000 | 291,238 | ||||||
Hershey Co. (The) 5.45%, due 9/1/16 | 100,000 | 116,500 | ||||||
Kellogg Co. Series B 7.45%, due 4/1/31 | 75,000 | 106,742 | ||||||
Kraft Foods, Inc. | ||||||||
5.375%, due 2/10/20 | 250,000 | 288,141 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments†††October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Food (continued) | ||||||||
Kraft Foods, Inc. (continued) | ||||||||
6.125%, due 2/1/18 | $ | 250,000 | $ | 294,874 | ||||
6.50%, due 8/11/17 | 225,000 | 268,943 | ||||||
Kroger Co. (The) 5.50%, due 2/1/13 | 250,000 | 262,297 | ||||||
6.40%, due 8/15/17 | 175,000 | 207,489 | ||||||
Safeway, Inc. 5.00%, due 8/15/19 | 100,000 | 109,035 | ||||||
6.35%, due 8/15/17 | 100,000 | 116,448 | ||||||
Sysco Corp. 5.375%, due 9/21/35 | 100,000 | 121,004 | ||||||
Unilever Capital Corp. 5.90%, due 11/15/32 | 100,000 | 131,766 | ||||||
2,481,907 | ||||||||
Forest Products & Paper 0.1% | ||||||||
International Paper Co. 5.25%, due 4/1/16 | 100,000 | 107,771 | ||||||
5.30%, due 4/1/15 | 250,000 | 267,511 | ||||||
375,282 | ||||||||
Gas 0.0%‡ | ||||||||
AGL Capital Corp. 4.45%, due 4/15/13 | 100,000 | 104,477 | ||||||
Hand & Machine Tools 0.0%‡ | ||||||||
Black & Decker Corp. 4.75%, due 11/1/14 | 50,000 | 54,484 | ||||||
Health Care—Products 0.2% | ||||||||
Baxter International, Inc. 4.625%, due 3/15/15 | 50,000 | 55,528 | ||||||
5.90%, due 9/1/16 | 100,000 | 119,590 | ||||||
CareFusion Corp. 5.125%, due 8/1/14 | 100,000 | 108,649 | ||||||
Johnson & Johnson 5.15%, due 7/15/18 | 250,000 | 299,230 | ||||||
6.95%, due 9/1/29 | 100,000 | 142,616 | ||||||
Medtronic, Inc. 4.45%, due 3/15/20 | 100,000 | 112,586 | ||||||
Series B 4.75%, due 9/15/15 | 50,000 | 55,921 | ||||||
St. Jude Medical, Inc. 3.75%, due 7/15/14 | 150,000 | 159,699 | ||||||
1,053,819 | ||||||||
Health Care—Services 0.3% | ||||||||
Aetna, Inc. 6.00%, due 6/15/16 | 175,000 | 202,288 | ||||||
CIGNA Corp. 5.125%, due 6/15/20 | 150,000 | 162,589 | ||||||
Laboratory Corp. of America Holdings 4.625%, due 11/15/20 | 100,000 | 106,849 | ||||||
Quest Diagnostics, Inc. 4.75%, due 1/30/20 | 100,000 | 107,579 | ||||||
UnitedHealth Group, Inc. 5.375%, due 3/15/16 | 100,000 | 115,310 | ||||||
6.00%, due 6/15/17 | 330,000 | 380,810 | ||||||
WellPoint, Inc. 5.95%, due 12/15/34 | 250,000 | 292,545 | ||||||
1,367,970 | ||||||||
Home Builders 0.0%‡ | ||||||||
MDC Holdings, Inc. 5.375%, due 7/1/15 | 50,000 | 50,185 | ||||||
Toll Brothers Finance Corp. 5.15%, due 5/15/15 | 50,000 | 51,198 | ||||||
101,383 | ||||||||
Household Products & Wares 0.0%‡ | ||||||||
Kimberly-Clark Corp. 6.375%, due 1/1/28 | 100,000 | 125,894 | ||||||
Housewares 0.0%‡ | ||||||||
Newell Rubbermaid, Inc. 6.75%, due 3/15/12 | 50,000 | 51,006 | ||||||
Insurance 0.9% | ||||||||
ACE INA Holdings, Inc. 2.60%, due 11/23/15 | 100,000 | 102,286 | ||||||
5.70%, due 2/15/17 | 60,000 | 68,456 | ||||||
5.875%, due 6/15/14 | 105,000 | 116,122 | ||||||
Aegon Funding Corp. 5.75%, due 12/15/20 | 100,000 | 108,286 | ||||||
Allstate Corp. (The) 5.00%, due 8/15/14 | 425,000 | 467,019 | ||||||
American International Group, Inc. 5.85%, due 1/16/18 | 300,000 | 301,905 | ||||||
6.25%, due 5/1/36 | 200,000 | 195,564 | ||||||
Assurant, Inc. 5.625%, due 2/15/14 | 100,000 | 104,134 | ||||||
Berkshire Hathaway Finance Corp. 5.00%, due 8/15/13 | 250,000 | 268,960 | ||||||
Chubb Corp. 5.20%, due 4/1/13 | 100,000 | 105,244 | ||||||
5.75%, due 5/15/18 | 100,000 | 117,664 | ||||||
Genworth Financial, Inc. Class A 4.95%, due 10/1/15 | 75,000 | 73,691 | ||||||
5.75%, due 6/15/14 | 50,000 | 49,952 |
The notes to the financial statements are an integral part of,
14 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Insurance (continued) | ||||||||
Hartford Financial Services Group, Inc. (The) 5.50%, due 3/30/20 | $ | 150,000 | $ | 153,796 | ||||
Lincoln National Corp. 4.75%, due 2/15/14 | 150,000 | 158,255 | ||||||
4.85%, due 6/24/21 | 25,000 | 24,667 | ||||||
Marsh & McLennan Cos., Inc. 5.375%, due 7/15/14 | 100,000 | 108,551 | ||||||
MetLife, Inc. 4.75%, due 2/8/21 | 300,000 | 325,112 | ||||||
5.70%, due 6/15/35 | 100,000 | 114,464 | ||||||
Metropolitan Life Global Funding I 3.125%, due 1/11/16 (c) | 100,000 | 101,234 | ||||||
5.125%, due 6/10/14 (c) | 220,000 | 237,831 | ||||||
Nationwide Financial Services, Inc. 5.10%, due 10/1/15 | 25,000 | 25,885 | ||||||
Principal Financial Group, Inc. 6.05%, due 10/15/36 | 100,000 | 106,974 | ||||||
Progressive Corp. (The) 6.25%, due 12/1/32 | 50,000 | 59,314 | ||||||
Protective Life Corp. 4.875%, due 11/1/14 | 100,000 | 107,059 | ||||||
Prudential Financial, Inc. Series B 5.10%, due 9/20/14 | 250,000 | 269,128 | ||||||
5.70%, due 12/14/36 | 200,000 | 210,423 | ||||||
St. Paul Travelers Cos., Inc. (The) 5.50%, due 12/1/15 | 100,000 | 113,849 | ||||||
6.75%, due 6/20/36 | 75,000 | 96,884 | ||||||
Travelers Property Casualty Corp. 5.00%, due 3/15/13 | 100,000 | 104,950 | ||||||
4,397,659 | ||||||||
Internet 0.0%‡ | ||||||||
Symantec Corp. 2.75%, due 9/15/15 | 50,000 | 50,531 | ||||||
Iron & Steel 0.0%‡ | ||||||||
Nucor Corp. 4.125%, due 9/15/22 | 50,000 | 52,687 | ||||||
Lodging 0.0%‡ | ||||||||
Marriott International, Inc. 5.625%, due 2/15/13 | 50,000 | 51,855 | ||||||
Wyndham Worldwide Corp. 6.00%, due 12/1/16 | 50,000 | 52,881 | ||||||
104,736 | ||||||||
Machinery—Construction & Mining 0.1% | ||||||||
Caterpillar, Inc. 6.05%, due 8/15/36 | 200,000 | 261,399 | ||||||
Machinery—Diversified 0.1% | ||||||||
Deere & Co. 4.375%, due 10/16/19 | 100,000 | 112,869 | ||||||
7.125%, due 3/3/31 | 125,000 | 173,870 | ||||||
286,739 | ||||||||
Media 1.0% | ||||||||
Comcast Corp. 4.95%, due 6/15/16 | 100,000 | 111,403 | ||||||
5.65%, due 6/15/35 | 200,000 | 216,693 | ||||||
6.45%, due 3/15/37 | 250,000 | 298,878 | ||||||
Cox Communications, Inc. 5.45%, due 12/15/14 | 100,000 | 111,505 | ||||||
DIRECTV Holdings LLC 5.20%, due 3/15/20 | 250,000 | 275,532 | ||||||
Discovery Communications LLC 3.70%, due 6/1/15 | 100,000 | 105,557 | ||||||
6.35%, due 6/1/40 | 105,000 | 127,147 | ||||||
Historic TW, Inc. 6.625%, due 5/15/29 | 250,000 | 292,842 | ||||||
NBC Universal Media LLC 5.15%, due 4/30/20 | 500,000 | 561,910 | ||||||
News America, Inc. 5.30%, due 12/15/14 | 300,000 | 329,409 | ||||||
6.40%, due 12/15/35 | 175,000 | 196,871 | ||||||
7.25%, due 5/18/18 | 100,000 | 118,195 | ||||||
Time Warner Cable, Inc. 6.20%, due 7/1/13 | 500,000 | 540,622 | ||||||
6.55%, due 5/1/37 | 275,000 | 323,584 | ||||||
6.75%, due 7/1/18 | 250,000 | 297,807 | ||||||
Time Warner, Inc. 7.625%, due 4/15/31 | 375,000 | 482,117 | ||||||
Viacom, Inc. 5.625%, due 8/15/12 | 18,000 | 18,624 | ||||||
6.875%, due 4/30/36 | 250,000 | 319,087 | ||||||
4,727,783 | ||||||||
Mining 0.1% | ||||||||
Alcoa, Inc. 5.72%, due 2/23/19 | 187,000 | 187,480 | ||||||
5.95%, due 2/1/37 | 100,000 | 95,825 | ||||||
Newmont Mining Corp. 5.125%, due 10/1/19 | 150,000 | 165,893 | ||||||
Vulcan Materials Co. 6.30%, due 6/15/13 | 150,000 | 149,625 | ||||||
598,823 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Portfolio of Investments†††October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Miscellaneous—Manufacturing 0.2% | ||||||||
3M Co. 5.70%, due 3/15/37 | $ | 150,000 | $ | 195,807 | ||||
Cooper US, Inc. 2.375%, due 1/15/16 | 125,000 | 127,334 | ||||||
Danaher Corp. 3.90%, due 6/23/21 | 50,000 | 53,849 | ||||||
5.625%, due 1/15/18 | 100,000 | 118,630 | ||||||
Dover Corp. 5.45%, due 3/15/18 | 100,000 | 117,100 | ||||||
General Electric Co. 5.25%, due 12/6/17 | 150,000 | 170,897 | ||||||
783,617 | ||||||||
Office Equipment/Supplies 0.1% | ||||||||
Pitney Bowes, Inc. 5.75%, due 9/15/17 | 100,000 | 107,389 | ||||||
Xerox Corp. 6.35%, due 5/15/18 | 100,000 | 114,163 | ||||||
6.40%, due 3/15/16 | 160,000 | 179,525 | ||||||
401,077 | ||||||||
Oil & Gas 0.7% | ||||||||
Amerada Hess Corp. 7.30%, due 8/15/31 | 100,000 | 131,220 | ||||||
Anadarko Petroleum Corp. 5.95%, due 9/15/16 | 325,000 | 373,495 | ||||||
6.45%, due 9/15/36 | 150,000 | 173,878 | ||||||
Burlington Resources, Inc. 7.375%, due 3/1/29 | 104,000 | 136,262 | ||||||
Chevron Corp. 4.95%, due 3/3/19 | 250,000 | 294,557 | ||||||
ConocoPhillips 5.90%, due 10/15/32 | 250,000 | 303,652 | ||||||
Devon Energy Corp. | ||||||||
5.625%, due 1/15/14 | 100,000 | 110,010 | ||||||
7.95%, due 4/15/32 | 50,000 | 71,782 | ||||||
EOG Resources, Inc. 4.10%, due 2/1/21 | 200,000 | 217,218 | ||||||
Marathon Oil Corp. 6.80%, due 3/15/32 | 100,000 | 123,841 | ||||||
Marathon Petroleum Corp. 3.50%, due 3/1/16 (c) | 50,000 | 51,293 | ||||||
Occidental Petroleum Corp. 4.125%, due 6/1/16 | 250,000 | 277,638 | ||||||
Pemex Project Funding Master Trust 6.625%, due 6/15/35 | 425,000 | 463,250 | ||||||
Valero Energy Corp. 4.50%, due 2/1/15 | 175,000 | 188,902 | ||||||
6.625%, due 6/15/37 | 100,000 | 109,214 | ||||||
7.50%, due 4/15/32 | 100,000 | 121,831 | ||||||
XTO Energy, Inc. 4.90%, due 2/1/14 | 75,000 | 81,848 | ||||||
3,229,891 | ||||||||
Oil & Gas Services 0.2% | ||||||||
Baker Hughes, Inc. 5.125%, due 9/15/40 | 200,000 | 237,117 | ||||||
Halliburton Co. 6.15%, due 9/15/19 | 250,000 | 308,258 | ||||||
Weatherford International, Inc. 6.35%, due 6/15/17 | 225,000 | 256,692 | ||||||
802,067 | ||||||||
Pharmaceuticals 0.6% | ||||||||
Abbott Laboratories 5.875%, due 5/15/16 | 100,000 | 117,663 | ||||||
6.15%, due 11/30/37 | 225,000 | 287,323 | ||||||
Allergan, Inc. 5.75%, due 4/1/16 | 50,000 | 57,855 | ||||||
Bristol-Myers Squibb Co. 5.875%, due 11/15/36 | 75,000 | 95,285 | ||||||
7.15%, due 6/15/23 | 50,000 | 67,834 | ||||||
Cardinal Health, Inc. 4.00%, due 6/15/15 | 150,000 | 160,903 | ||||||
5.50%, due 6/15/13 | 50,000 | 53,463 | ||||||
Eli Lilly & Co. 4.50%, due 3/15/18 | 100,000 | 112,485 | ||||||
7.125%, due 6/1/25 | 100,000 | 134,059 | ||||||
GlaxoSmithKline Capital, Inc. 6.375%, due 5/15/38 | 125,000 | 168,959 | ||||||
McKesson Corp. 5.70%, due 3/1/17 | 50,000 | 58,449 | ||||||
Mead Johnson Nutrition Co. 3.50%, due 11/1/14 | 250,000 | 261,686 | ||||||
Medco Health Solutions, Inc. 2.75%, due 9/15/15 | 200,000 | 201,755 | ||||||
Merck & Co., Inc. 4.75%, due 3/1/15 | 100,000 | 112,047 | ||||||
5.00%, due 6/30/19 | 250,000 | 293,023 | ||||||
Pfizer, Inc. 6.20%, due 3/15/19 | 150,000 | 187,985 | ||||||
Schering-Plough Corp. 6.50%, due 12/1/33 | 100,000 | 136,769 | ||||||
Wyeth 5.50%, due 3/15/13 | 100,000 | 106,563 | ||||||
6.00%, due 2/15/36 | 200,000 | 255,141 | ||||||
6.45%, due 2/1/24 | 100,000 | 127,158 | ||||||
2,996,405 | ||||||||
Pipelines 0.5% | ||||||||
Duke Capital LLC 6.75%, due 2/15/32 | 125,000 | 146,813 |
The notes to the financial statements are an integral part of,
16 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Pipelines (continued) | ||||||||
Energy Transfer Partners, L.P. 5.95%, due 2/1/15 | $ | 130,000 | $ | 140,885 | ||||
6.70%, due 7/1/18 | 100,000 | 111,468 | ||||||
Enterprise Products Operating, L.P. Series B 6.875%, due 3/1/33 | 200,000 | 243,407 | ||||||
Kinder Morgan Energy Partners, L.P. 5.00%, due 12/15/13 | 150,000 | 160,174 | ||||||
5.80%, due 3/15/35 | 250,000 | 262,111 | ||||||
ONEOK Partners, L.P. 6.15%, due 10/1/16 | 200,000 | 230,934 | ||||||
Plains All American Pipeline, L.P./PAA Finance Corp. 6.65%, due 1/15/37 | 65,000 | 74,527 | ||||||
Spectra Energy Capital LLC 6.20%, due 4/15/18 | 50,000 | 56,304 | ||||||
Tennessee Gas Pipeline Co. 7.50%, due 4/1/17 | 300,000 | 358,512 | ||||||
Williams Cos., Inc. 8.75%, due 3/15/32 | 185,000 | 251,876 | ||||||
Williams Partners, L.P. 3.80%, due 2/15/15 | 300,000 | 314,533 | ||||||
2,351,544 | ||||||||
Real Estate 0.1% | ||||||||
ERP Operating, L.P. 5.125%, due 3/15/16 | 50,000 | 54,402 | ||||||
5.375%, due 8/1/16 | 50,000 | 55,026 | ||||||
ProLogis, L.P. 6.625%, due 5/15/18 | 50,000 | 54,451 | ||||||
Regency Centers, L.P. 5.25%, due 8/1/15 | 100,000 | 107,541 | ||||||
271,420 | ||||||||
Real Estate Investment Trusts 0.2% | ||||||||
AvalonBay Communities, Inc. 4.95%, due 3/15/13 | 100,000 | 104,215 | ||||||
Boston Properties, Inc. 6.25%, due 1/15/13 | 24,000 | 25,184 | ||||||
Boston Properties, L.P. 4.125%, due 5/15/21 | 50,000 | 49,033 | ||||||
Camden Property Trust 5.00%, due 6/15/15 | 100,000 | 106,591 | ||||||
Hospitality Properties Trust 5.125%, due 2/15/15 | 50,000 | 51,002 | ||||||
Kimco Realty Corp. 5.783%, due 3/15/16 | 50,000 | 54,352 | ||||||
Liberty Property, L.P. 5.125%, due 3/2/15 | 100,000 | 106,688 | ||||||
Simon Property Group, L.P. 5.25%, due 12/1/16 | 450,000 | 494,321 | ||||||
Weyerhaeuser Co. 7.375%, due 3/15/32 | 100,000 | 99,924 | ||||||
1,091,310 | ||||||||
Retail 0.7% | ||||||||
Costco Wholesale Corp. 5.50%, due 3/15/17 | 100,000 | 119,353 | ||||||
CVS Caremark Corp. 4.75%, due 5/18/20 | 150,000 | 166,485 | ||||||
4.875%, due 9/15/14 | 50,000 | 55,361 | ||||||
6.25%, due 6/1/27 | 175,000 | 210,536 | ||||||
Home Depot, Inc. 5.40%, due 3/1/16 | 200,000 | 228,230 | ||||||
5.875%, due 12/16/36 | 250,000 | 295,462 | ||||||
Lowe’s Cos., Inc. 6.65%, due 9/15/37 | 100,000 | 129,347 | ||||||
6.875%, due 2/15/28 | 100,000 | 128,128 | ||||||
McDonald’s Corp. 5.80%, due 10/15/17 | 310,000 | 375,574 | ||||||
Target Corp. 6.50%, due 10/15/37 | 150,000 | 198,984 | ||||||
Wal-Mart Stores, Inc. 1.50%, due 10/25/15 | 250,000 | 253,686 | ||||||
5.00%, due 10/25/40 | 225,000 | 255,785 | ||||||
5.375%, due 4/5/17 | 350,000 | 417,953 | ||||||
6.50%, due 8/15/37 | 175,000 | 234,257 | ||||||
Yum! Brands, Inc. 6.25%, due 3/15/18 | 130,000 | 152,220 | ||||||
3,221,361 | ||||||||
Software 0.3% | ||||||||
Microsoft Corp. 3.00%, due 10/1/20 | 200,000 | 209,491 | ||||||
4.20%, due 6/1/19 | 250,000 | 282,392 | ||||||
Oracle Corp. 5.00%, due 7/8/19 | 250,000 | 291,616 | ||||||
5.25%, due 1/15/16 | 650,000 | 755,758 | ||||||
1,539,257 | ||||||||
Telecommunications 0.9% | ||||||||
AT&T, Inc. 6.30%, due 1/15/38 | 300,000 | 360,519 | ||||||
BellSouth Corp. 6.00%, due 11/15/34 | 100,000 | 113,126 | ||||||
6.875%, due 10/15/31 | 250,000 | 309,429 | ||||||
Cisco Systems, Inc. 4.45%, due 1/15/20 | 250,000 | 281,295 | ||||||
5.50%, due 2/22/16 | 425,000 | 493,066 | ||||||
Embarq Corp. 7.995%, due 6/1/36 | 200,000 | 211,462 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Portfolio of Investments†††October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Telecommunications (continued) | ||||||||
Harris Corp. 5.00%, due 10/1/15 | $ | 50,000 | $ | 55,396 | ||||
Motorola, Inc. 7.50%, due 5/15/25 | 100,000 | 116,558 | ||||||
New Cingular Wireless Services, Inc. 8.75%, due 3/1/31 | 100,000 | 148,044 | ||||||
Qwest Corp. 6.75%, due 12/1/21 | 100,000 | 106,250 | ||||||
SBC Communications, Inc. 5.10%, due 9/15/14 | 700,000 | 777,804 | ||||||
6.15%, due 9/15/34 | 250,000 | 291,876 | ||||||
Verizon Communications, Inc. 5.85%, due 9/15/35 | 300,000 | 358,816 | ||||||
6.40%, due 2/15/38 | 175,000 | 218,965 | ||||||
Verizon Global Funding Corp. 7.75%, due 12/1/30 | 100,000 | 140,018 | ||||||
3,982,624 | ||||||||
Textiles 0.0%‡ | ||||||||
Cintas Corp. 6.00%, due 6/1/12 | 100,000 | 102,790 | ||||||
Transportation 0.5% | ||||||||
Burlington Northern Santa Fe LLC 4.70%, due 10/1/19 | 200,000 | 220,449 | ||||||
5.75%, due 5/1/40 | 300,000 | 355,494 | ||||||
6.15%, due 5/1/37 | 175,000 | 218,192 | ||||||
6.20%, due 8/15/36 | 50,000 | 62,087 | ||||||
CSX Corp. 5.60%, due 5/1/17 | 100,000 | 114,661 | ||||||
CSX Transportation, Inc. 7.875%, due 5/15/43 | 100,000 | 145,784 | ||||||
FedEx Corp. 8.00%, due 1/15/19 | 50,000 | 64,929 | ||||||
Norfolk Southern Corp. 4.837%, due 10/1/41 (c) | 128,000 | 135,457 | ||||||
7.25%, due 2/15/31 | 83,000 | 111,806 | ||||||
Southwest Airlines Co. 5.25%, due 10/1/14 | 75,000 | 80,281 | ||||||
Union Pacific Corp. 4.163%, due 7/15/22 | 209,000 | 221,128 | ||||||
United Parcel Service, Inc. 5.50%, due 1/15/18 | 100,000 | 118,865 | ||||||
6.20%, due 1/15/38 | 200,000 | 265,840 | ||||||
2,114,973 | ||||||||
Trucking & Leasing 0.0%‡ | ||||||||
TTX Co. 5.00%, due 4/1/12 (c) | 100,000 | 101,149 | ||||||
Water 0.0%‡ | ||||||||
American Water Capital Corp. 6.085%, due 10/15/17 | 100,000 | 116,635 | ||||||
Total Corporate Bonds (Cost $71,687,912) | 78,578,906 | |||||||
Foreign Government Bonds 2.0% | ||||||||
Foreign Governments 2.0% | ||||||||
Export Development Canada 3.125%, due 4/24/14 | 250,000 | 265,670 | ||||||
X Federal Republic of Brazil 6.00%, due 1/17/17 | 2,200,000 | 2,563,000 | ||||||
Mexico Government International Bond 5.125%, due 1/15/20 | 1,500,000 | 1,671,000 | ||||||
Poland Government International Bond 5.125%, due 4/21/21 | 200,000 | 204,000 | ||||||
Province of British Columbia Canada 4.30%, due 5/30/13 | 250,000 | 264,944 | ||||||
Province of Manitoba Canada 2.125%, due 4/22/13 | 250,000 | 255,812 | ||||||
Province of Nova Scotia 2.375%, due 7/21/15 | 100,000 | 103,952 | ||||||
Province of Ontario 2.95%, due 2/5/15 | 250,000 | 263,621 | ||||||
4.00%, due 10/7/19 | 225,000 | 245,746 | ||||||
4.10%, due 6/16/14 | 350,000 | 379,148 | ||||||
4.95%, due 11/28/16 | 300,000 | 344,003 | ||||||
Province of Quebec 5.125%, due 11/14/16 | 285,000 | 330,473 | ||||||
Series NJ 7.50%, due 7/15/23 | 302,000 | 426,976 | ||||||
Republic of Chile 5.50%, due 1/15/13 | 100,000 | 105,130 | ||||||
Republic of Italy 6.875%, due 9/27/23 | 750,000 | 743,163 | ||||||
Republic of Korea 5.75%, due 4/16/14 | 500,000 | 545,763 | ||||||
Republic of Poland 5.25%, due 1/15/14 | 100,000 | 105,500 | ||||||
Republic of South Africa 7.375%, due 4/25/12 | 100,000 | 102,625 | ||||||
United Mexican States 5.625%, due 1/15/17 | 400,000 | 456,000 | ||||||
Total Foreign Government Bonds (Cost $8,787,355) | 9,376,526 | |||||||
The notes to the financial statements are an integral part of,
18 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Mortgage-Backed Securities 2.1% | ||||||||
Commercial Mortgage Loans (Collateralized Mortgage Obligations) 2.1% | ||||||||
Banc of America Commercial Mortgage, Inc. Series 2005-4, Class A3 4.891%, due 7/10/45 | $ | 1,286,000 | $ | 1,316,921 | ||||
Bear Stearns Commercial Mortgage Securities Series 2007-PW15, Class AAB 5.315%, due 2/11/44 | 1,350,000 | 1,421,755 | ||||||
Greenwich Capital Commercial Funding Corp. | ||||||||
Series 2005-GG5, Class A5 5.224%, due 4/10/37 (d) | 1,000,000 | 1,068,299 | ||||||
Series 2006-GG7, Class A4 6.073%, due 7/10/38 (d) | 1,000,000 | 1,100,192 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||||||
Series 2003-CB7, Class A4 4.879%, due 1/12/38 (d) | 490,099 | 516,793 | ||||||
Series 2007-CB18, Class A4 5.44%, due 6/12/47 | 1,245,000 | 1,311,640 | ||||||
X Morgan Stanley Capital I | ||||||||
Series 2005-IQ10, Class AAB 5.178%, due 9/15/42 (b) | 1,630,407 | 1,694,797 | ||||||
Series 2006-IQ11, Class A4 5.895%, due 10/15/42 (d) | 1,400,000 | 1,550,867 | ||||||
Total Mortgage-Backed Securities (Cost $6,969,431) | 9,981,264 | |||||||
Municipal Bonds 0.6% | ||||||||
Arizona 0.3% | ||||||||
Salt River Project Agricultural Improvement and Power District Electric System Revenue 4.839%, due 1/1/41 | 1,000,000 | 1,083,800 | ||||||
Connecticut 0.1% | ||||||||
State of Connecticut, Transportation & Infrastructure Revenue 5.459%, due 11/1/30 | 500,000 | 558,760 | ||||||
Kansas 0.2% | ||||||||
Kansas State Department of Transportation, Highway Revenue 4.596%, due 9/1/35 | 1,000,000 | 1,037,580 | ||||||
Total Municipal Bonds (Cost $2,523,209) | 2,680,140 | |||||||
U.S. Government & Federal Agencies 72.1% | ||||||||
X Federal Home Loan Bank 0.7% | ||||||||
3.625%, due 10/18/13 | 3,000,000 | 3,185,139 | ||||||
X Federal Home Loan Mortgage Corporation 2.2% | ||||||||
2.125%, due 9/21/12 | 1,500,000 | 1,524,821 | ||||||
3.75%, due 3/27/19 | 1,100,000 | 1,236,204 | ||||||
4.50%, due 1/15/15 | 2,000,000 | 2,233,816 | ||||||
4.75%, due 1/19/16 | 2,000,000 | 2,303,514 | ||||||
5.125%, due 10/18/16 | 2,430,000 | 2,875,489 | ||||||
10,173,844 | ||||||||
X Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities) 10.2% | ||||||||
3.50%, due 4/1/26 | 1,000,000 | 1,038,625 | ||||||
3.50%, due 5/1/26 | 500,000 | 519,313 | ||||||
3.50%, due 4/1/41 | 336,105 | 341,291 | ||||||
4.00%, due 7/1/23 | 942,154 | 990,115 | ||||||
4.00%, due 6/1/24 | 655,521 | 688,277 | ||||||
4.00%, due 4/1/26 | 472,929 | 496,709 | ||||||
4.00%, due 2/1/31 | 488,851 | 512,673 | ||||||
4.00%, due 7/1/39 | 1,899,045 | 1,973,189 | ||||||
4.00%, due 8/1/40 | 100,001 | 103,905 | ||||||
4.00%, due 9/1/40 | 2,000,002 | 2,078,088 | ||||||
4.50%, due 4/1/20 | 914,005 | 978,080 | ||||||
4.50%, due 10/1/24 | 454,708 | 483,317 | ||||||
4.50%, due 5/1/25 | 558,458 | 593,245 | ||||||
4.50%, due 7/1/30 | 514,506 | 545,547 | ||||||
4.50%, due 6/1/34 | 286,662 | 304,338 | ||||||
4.50%, due 6/1/35 | 404,034 | 428,568 | ||||||
4.50%, due 8/1/35 | 431,391 | 457,586 | ||||||
4.50%, due 2/1/39 | 425,633 | 449,450 | ||||||
4.50%, due 6/1/39 | 6,402,838 | 6,761,122 | ||||||
4.50%, due 7/1/39 | 36,861 | 38,924 | ||||||
4.50%, due 1/1/40 | 1,632,721 | 1,724,083 | ||||||
5.00%, due 1/1/25 | 1,315,522 | 1,412,322 | ||||||
5.00%, due 8/1/30 | 424,121 | 455,226 | ||||||
5.00%, due 8/1/35 | 3,417,179 | 3,673,134 | ||||||
5.00%, due 6/1/37 | 2,713,788 | 2,913,240 | ||||||
5.00%, due 11/1/37 | 244,831 | 262,825 | ||||||
5.00%, due 3/1/40 | 621,211 | 666,965 | ||||||
5.005%, due 3/1/39 (b) | 461,839 | 493,285 | ||||||
5.171%, due 4/1/39 (b) | 350,217 | 375,153 | ||||||
5.50%, due 2/1/18 | 186,039 | 200,688 | ||||||
5.50%, due 1/1/22 | 287,231 | 310,835 | ||||||
5.50%, due 3/1/23 | 96,054 | 103,557 | ||||||
5.50%, due 6/1/23 | 226,744 | 244,456 | ||||||
5.50%, due 11/1/27 | 404,462 | 437,522 | ||||||
5.50%, due 9/1/35 | 435,443 | 472,805 | ||||||
5.50%, due 4/1/37 | 3,944,608 | 4,268,267 | ||||||
5.50%, due 7/1/37 | 218,785 | 236,736 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Portfolio of Investments†††October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities) (continued) | ||||||||
5.50%, due 11/1/37 | $ | 356,263 | $ | 385,495 | ||||
5.50%, due 8/1/38 | 514,949 | 557,040 | ||||||
5.812%, due 10/1/37 (b) | 1,422,614 | 1,531,275 | ||||||
6.00%, due 8/1/17 | 150,723 | 163,053 | ||||||
6.00%, due 6/1/21 | 74,860 | 81,311 | ||||||
6.00%, due 9/1/21 | 119,183 | 129,454 | ||||||
6.00%, due 11/1/22 | 109,319 | 118,535 | ||||||
6.00%, due 4/1/36 | 455,408 | 499,322 | ||||||
6.00%, due 8/1/36 | 210,275 | 230,551 | ||||||
6.00%, due 2/1/37 | 728,876 | 799,158 | ||||||
6.00%, due 11/1/37 | 1,257,044 | 1,375,506 | ||||||
6.00%, due 12/1/39 | 695,250 | 760,769 | ||||||
6.158%, due 10/1/36 (b) | 565,548 | 613,437 | ||||||
6.50%, due 6/1/14 | 4,150 | 4,379 | ||||||
6.50%, due 4/1/17 | 5,957 | 6,523 | ||||||
6.50%, due 5/1/17 | 22,595 | 24,743 | ||||||
6.50%, due 11/1/25 | 16,615 | 18,448 | ||||||
6.50%, due 5/1/26 | 2,459 | 2,756 | ||||||
6.50%, due 3/1/27 | 7,280 | 8,261 | ||||||
6.50%, due 5/1/31 | 9,571 | 10,825 | ||||||
6.50%, due 8/1/31 | 7,546 | 8,534 | ||||||
6.50%, due 1/1/32 | 60,922 | 68,900 | ||||||
6.50%, due 3/1/32 | 42,761 | 48,254 | ||||||
6.50%, due 4/1/32 | 23,334 | 26,331 | ||||||
6.50%, due 7/1/32 | 28,796 | 32,495 | ||||||
6.50%, due 1/1/34 | 39,534 | 44,451 | ||||||
6.50%, due 1/1/37 | 281,171 | 313,775 | ||||||
6.50%, due 9/1/37 | 573,814 | 638,200 | ||||||
7.00%, due 11/1/11 | 8 | 8 | ||||||
7.00%, due 4/1/26 | 6,426 | 7,377 | ||||||
7.00%, due 7/1/26 | 693 | 795 | ||||||
7.00%, due 12/1/27 | 10,480 | 12,049 | ||||||
7.00%, due 1/1/30 | 5,251 | 6,058 | ||||||
7.00%, due 3/1/31 | 32,121 | 37,110 | ||||||
7.00%, due 10/1/31 | 12,796 | 14,784 | ||||||
7.00%, due 3/1/32 | 52,370 | 60,504 | ||||||
7.00%, due 9/1/33 | 233,731 | 270,387 | ||||||
7.00%, due 11/1/36 | 97,127 | 111,448 | ||||||
7.00%, due 12/1/37 | 236,396 | 271,101 | ||||||
7.50%, due 1/1/16 | 3,265 | 3,522 | ||||||
7.50%, due 1/1/26 | 1,893 | 2,189 | ||||||
7.50%, due 2/1/32 | 30,200 | 35,245 | ||||||
8.00%, due 7/1/26 | 3,284 | 3,889 | ||||||
47,371,708 | ||||||||
X Federal National Mortgage Association 3.3% | ||||||||
0.60%, due 10/25/13 | 3,000,000 | 2,999,418 | ||||||
1.05%, due 10/22/13 | 1,000,000 | 1,011,669 | ||||||
1.75%, due 2/22/13 | 2,000,000 | 2,036,740 | ||||||
2.625%, due 11/20/14 | 2,000,000 | 2,118,648 | ||||||
2.75%, due 3/13/14 | 1,000,000 | 1,053,361 | ||||||
3.00%, due 9/16/14 | 3,000,000 | 3,205,743 | ||||||
5.375%, due 6/12/17 | 2,100,000 | 2,526,678 | ||||||
6.21%, due 8/6/38 | 475,000 | 657,463 | ||||||
15,609,720 | ||||||||
X Federal National Mortgage Association (Mortgage Pass-Through Securities) 14.8% | ||||||||
2.969%, due 2/1/51 (b) | 990,174 | 1,030,706 | ||||||
3.168%, due 2/1/41 (b) | 600,000 | 620,773 | ||||||
3.50%, due 11/1/25 TBA (e) | 2,600,000 | 2,701,156 | ||||||
3.50%, due 1/1/41 | 485,861 | 494,355 | ||||||
3.50%, due 2/1/41 | 493,804 | 502,436 | ||||||
3.517%, due 8/1/40 (b) | 803,703 | 839,288 | ||||||
4.00%, due 3/1/22 | 257,732 | 271,928 | ||||||
4.00%, due 2/1/25 | 2,886,954 | 3,035,601 | ||||||
4.00%, due 6/1/30 | 258,790 | 271,562 | ||||||
4.00%, due 1/1/31 | 475,347 | 498,808 | ||||||
4.00%, due 1/1/40 TBA (e) | 500,000 | 518,437 | ||||||
4.00%, due 7/1/40 | 935,937 | 973,748 | ||||||
4.00%, due 9/1/40 | 4,626,473 | 4,815,056 | ||||||
4.00%, due 12/1/40 | 948,699 | 987,370 | ||||||
4.00%, due 1/1/41 | 1,922,672 | 2,001,043 | ||||||
4.50%, due 2/1/23 | 133,821 | 142,716 | ||||||
4.50%, due 3/1/23 | 114,735 | 122,361 | ||||||
4.50%, due 8/1/23 | 429,641 | 458,199 | ||||||
4.50%, due 4/1/24 | 761,040 | 810,912 | ||||||
4.50%, due 3/1/30 | 657,794 | 697,056 | ||||||
4.50%, due 4/1/39 | 12,072,756 | 12,782,031 | ||||||
4.50%, due 12/1/39 | 422,747 | 447,584 | ||||||
4.50%, due 11/1/40 | 471,230 | 498,915 | ||||||
4.50%, due 12/1/41 TBA (e) | 500,000 | 527,578 | ||||||
5.00%, due 3/1/21 | 23,611 | 25,465 | ||||||
5.00%, due 6/1/22 | 283,388 | 304,931 | ||||||
5.00%, due 4/1/23 | 160,713 | 172,629 | ||||||
5.00%, due 7/1/23 | 276,609 | 297,118 | ||||||
5.00%, due 8/1/23 | 406,973 | 438,293 | ||||||
5.00%, due 1/1/24 | 225,811 | 242,554 | ||||||
5.00%, due 11/1/29 | 426,086 | 458,775 | ||||||
5.00%, due 7/1/30 | 303,291 | 326,559 | ||||||
5.00%, due 1/1/38 | 1,905,026 | 2,054,154 | ||||||
5.00%, due 4/1/39 | 368,183 | 396,602 | ||||||
5.00%, due 6/1/39 | 1,776,826 | 1,913,974 | ||||||
5.00%, due 7/1/39 | 3,103,407 | 3,342,951 | ||||||
5.00%, due 12/1/39 | 2,605,406 | 2,806,104 | ||||||
5.00%, due 9/1/40 | 259,100 | 279,140 | ||||||
5.50%, due 8/1/17 | 23,049 | 25,030 | ||||||
5.50%, due 7/1/22 | 346,430 | 375,800 | ||||||
5.50%, due 11/1/23 | 115,987 | 125,820 | ||||||
5.50%, due 4/1/30 | 438,219 | 475,399 |
The notes to the financial statements are an integral part of,
20 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
Federal National Mortgage Association (Mortgage Pass-Through Securities) (continued) | ||||||||
5.50%, due 5/1/35 | $ | 250,620 | $ | 273,489 | ||||
5.50%, due 6/1/35 | 147,287 | 160,726 | ||||||
5.50%, due 7/1/35 | 584,831 | 638,197 | ||||||
5.50%, due 8/1/35 | 121,565 | 132,658 | ||||||
5.50%, due 9/1/35 | 343,081 | 374,387 | ||||||
5.50%, due 4/1/36 | 336,654 | 367,374 | ||||||
5.50%, due 6/1/36 | 247,320 | 268,999 | ||||||
5.50%, due 1/1/37 | 404,097 | 440,781 | ||||||
5.50%, due 3/1/37 | 1,323,663 | 1,438,036 | ||||||
5.50%, due 4/1/37 | 148,103 | 160,901 | ||||||
5.50%, due 3/1/38 | 4,611,602 | 5,008,632 | ||||||
5.50%, due 6/1/38 | 349,066 | 379,118 | ||||||
5.50%, due 10/1/38 | 225,684 | 245,114 | ||||||
6.00%, due 6/1/16 | 22,602 | 24,540 | ||||||
6.00%, due 7/1/16 | 13,652 | 14,822 | ||||||
6.00%, due 9/1/16 | 13,022 | 14,138 | ||||||
6.00%, due 9/1/17 | 6,492 | 7,056 | ||||||
6.00%, due 7/1/36 | 906,681 | 997,066 | ||||||
6.00%, due 8/1/36 | 44,581 | 49,025 | ||||||
6.00%, due 9/1/36 | 244,087 | 268,419 | ||||||
6.00%, due 11/1/36 | 256,222 | 281,764 | ||||||
6.00%, due 12/1/36 | 187,521 | 206,214 | ||||||
6.00%, due 4/1/37 | 528,589 | 581,282 | ||||||
6.00%, due 7/1/37 | 1,164,914 | 1,279,585 | ||||||
6.00%, due 8/1/37 | 283,654 | 311,576 | ||||||
6.00%, due 12/1/37 | 622,397 | 683,664 | ||||||
6.00%, due 2/1/38 | 1,012,818 | 1,112,518 | ||||||
6.00%, due 5/1/38 | 522,118 | 573,188 | ||||||
6.50%, due 6/1/15 | 12,822 | 13,377 | ||||||
6.50%, due 2/1/28 | 5,886 | 6,666 | ||||||
6.50%, due 7/1/32 | 8,259 | 9,290 | ||||||
6.50%, due 8/1/32 | 122,199 | 137,466 | ||||||
6.50%, due 8/1/35 | 230,136 | 257,164 | ||||||
6.50%, due 9/1/35 | 5,873 | 6,563 | ||||||
6.50%, due 7/1/36 | 417,067 | 463,963 | ||||||
6.50%, due 8/1/36 | 134,324 | 149,428 | ||||||
6.50%, due 9/1/36 | 239,860 | 266,830 | ||||||
6.50%, due 10/1/36 | 86,224 | 96,395 | ||||||
6.50%, due 11/1/36 | 140,474 | 156,269 | ||||||
6.50%, due 8/1/37 | 5,798 | 6,505 | ||||||
6.50%, due 10/1/37 | 16,025 | 17,767 | ||||||
6.50%, due 11/1/37 | 116,097 | 128,715 | ||||||
6.50%, due 12/1/37 | 144,733 | 160,464 | ||||||
6.50%, due 2/1/38 | 346,927 | 384,634 | ||||||
7.00%, due 11/1/11 | 18 | 19 | ||||||
7.00%, due 9/1/37 | 57,423 | 65,876 | ||||||
7.00%, due 10/1/37 | 8,569 | 9,830 | ||||||
7.00%, due 11/1/37 | 262,044 | 300,616 | ||||||
7.50%, due 7/1/30 | 9,902 | 11,579 | ||||||
7.50%, due 7/1/31 | 37,647 | 44,080 | ||||||
7.50%, due 8/1/31 | 483 | 566 | ||||||
8.00%, due 11/1/11 | 26 | 26 | ||||||
8.00%, due 1/1/25 | 192 | 223 | ||||||
8.00%, due 6/1/25 | 230 | 268 | ||||||
8.00%, due 9/1/25 | 1,047 | 1,221 | ||||||
8.00%, due 9/1/26 | 6,231 | 7,282 | ||||||
8.00%, due 10/1/26 | 936 | 1,093 | ||||||
8.00%, due 11/1/26 | 1,472 | 1,720 | ||||||
8.00%, due 4/1/27 | 2,012 | 2,348 | ||||||
8.00%, due 6/1/27 | 18,700 | 21,828 | ||||||
8.00%, due 12/1/27 | 4,287 | 4,404 | ||||||
8.00%, due 1/1/28 | 30,110 | 35,147 | ||||||
69,173,808 | ||||||||
X Government National Mortgage Association (Mortgage Pass-Through Securities) 7.2% | ||||||||
4.00%, due 9/15/25 | 463,038 | 495,562 | ||||||
4.00%, due 5/15/39 | 445,144 | 475,687 | ||||||
4.00%, due 8/1/40 TBA (e) | 1,500,000 | 1,599,844 | ||||||
4.00%, due 9/20/40 | 474,029 | 506,110 | ||||||
4.00%, due 12/1/40 TBA (e) | 900,000 | 956,390 | ||||||
4.00%, due 2/20/41 | 971,970 | 1,037,749 | ||||||
4.00%, due 3/20/41 | 486,446 | 519,367 | ||||||
4.50%, due 11/15/24 | 450,916 | 486,454 | ||||||
4.50%, due 3/20/39 | 3,470,479 | 3,770,791 | ||||||
4.50%, due 8/1/39 TBA (e) | 2,800,000 | 3,043,250 | ||||||
4.50%, due 10/20/39 | 454,062 | 493,354 | ||||||
4.50%, due 3/15/40 | 894,843 | 974,234 | ||||||
4.50%, due 5/1/40 TBA (e) | 500,000 | 540,625 | ||||||
4.50%, due 6/20/40 | 475,845 | 516,723 | ||||||
4.50%, due 9/15/40 | 1,313,460 | 1,433,275 | ||||||
4.50%, due 10/20/40 | 456,298 | 495,497 | ||||||
4.50%, due 7/20/41 | 792,100 | 860,148 | ||||||
5.00%, due 4/20/33 | 163,823 | 181,780 | ||||||
5.00%, due 8/15/33 | 87,172 | 96,382 | ||||||
5.00%, due 2/15/36 | 365,411 | 402,305 | ||||||
5.00%, due 6/20/36 | 16,811 | 18,587 | ||||||
5.00%, due 9/15/37 | 82,169 | 90,427 | ||||||
5.00%, due 1/15/39 | 283,983 | 312,478 | ||||||
5.00%, due 5/15/39 | 682,269 | 750,738 | ||||||
5.00%, due 5/20/39 | 221,509 | 244,220 | ||||||
5.00%, due 8/15/39 | 830,846 | 918,888 | ||||||
5.00%, due 9/15/39 | 365,314 | 401,971 | ||||||
5.00%, due 9/20/40 | 4,238,754 | 4,670,702 | ||||||
5.50%, due 3/15/33 | 1,132,589 | 1,264,530 | ||||||
5.50%, due 7/15/34 | 285,641 | 318,872 | ||||||
5.50%, due 7/20/34 | 152,389 | 169,246 | ||||||
5.50%, due 9/15/35 | 360,708 | 401,939 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 21 |
Portfolio of Investments†††October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
Government National Mortgage Association (Mortgage Pass-Through Securities) (continued) | ||||||||
5.50%, due 12/20/35 | $ | 354,469 | $ | 395,946 | ||||
5.50%, due 1/20/39 | 862,514 | 958,856 | ||||||
6.00%, due 3/20/29 | 38,564 | 43,343 | ||||||
6.00%, due 1/15/32 | 72,478 | 81,385 | ||||||
6.00%, due 12/15/32 | 24,752 | 27,794 | ||||||
6.00%, due 3/20/33 | 199,981 | 224,412 | ||||||
6.00%, due 2/15/34 | 172,206 | 193,155 | ||||||
6.00%, due 1/20/35 | 106,949 | 120,015 | ||||||
6.00%, due 6/15/35 | 105,563 | 118,338 | ||||||
6.00%, due 9/15/35 | 239,377 | 269,620 | ||||||
6.00%, due 9/20/40 | 1,030,908 | 1,154,919 | ||||||
6.50%, due 3/20/31 | 25,074 | 28,593 | ||||||
6.50%, due 1/15/32 | 33,310 | 38,150 | ||||||
6.50%, due 6/15/35 | 2,284 | 2,581 | ||||||
6.50%, due 12/15/35 | 32,618 | 37,318 | ||||||
6.50%, due 1/15/36 | 228,189 | 257,330 | ||||||
6.50%, due 9/15/36 | 80,475 | 90,870 | ||||||
6.50%, due 9/15/37 | 94,699 | 106,863 | ||||||
6.50%, due 10/15/37 | 126,931 | 142,858 | ||||||
6.50%, due 11/15/38 | 387,283 | 436,267 | ||||||
7.00%, due 2/15/26 | 605 | 703 | ||||||
7.00%, due 6/15/29 | 574 | 671 | ||||||
7.00%, due 12/15/29 | 4,389 | 5,116 | ||||||
7.00%, due 5/15/31 | 2,483 | 2,918 | ||||||
7.00%, due 8/15/31 | 11,735 | 13,788 | ||||||
7.00%, due 8/20/31 | 33,919 | 39,726 | ||||||
7.00%, due 8/15/32 | 52,747 | 61,789 | ||||||
7.50%, due 3/15/26 | 4,665 | 5,445 | ||||||
7.50%, due 10/15/26 | 9,165 | 10,699 | ||||||
7.50%, due 11/15/26 | 1,319 | 1,540 | ||||||
7.50%, due 1/15/30 | 15,096 | 17,184 | ||||||
7.50%, due 10/15/30 | 7,375 | 8,669 | ||||||
7.50%, due 3/15/32 | 27,808 | 32,627 | ||||||
8.00%, due 6/15/26 | 241 | 285 | ||||||
8.00%, due 9/15/26 | 1,603 | 1,894 | ||||||
8.00%, due 10/15/26 | 384 | 453 | ||||||
8.00%, due 11/15/26 | 1,836 | 2,119 | ||||||
8.00%, due 5/15/27 | 135 | 158 | ||||||
8.00%, due 7/15/27 | 935 | 1,104 | ||||||
8.00%, due 9/15/27 | 469 | 555 | ||||||
8.00%, due 11/15/30 | 29,893 | 35,558 | ||||||
8.50%, due 7/15/26 | 1,084 | 1,307 | ||||||
8.50%, due 11/15/26 | 6,023 | 7,257 | ||||||
33,428,303 | ||||||||
X United States Treasury Bonds 5.1% | ||||||||
3.75%, due 8/15/41 | 1,860,000 | 2,055,300 | ||||||
4.25%, due 11/15/40 | 2,000,000 | 2,402,812 | ||||||
4.375%, due 5/15/41 | 4,070,000 | 4,995,925 | ||||||
4.75%, due 2/15/37 | 1,900,000 | 2,444,766 | ||||||
4.75%, due 2/15/41 | 4,455,000 | 5,791,500 | ||||||
5.25%, due 11/15/28 | 3,500,000 | 4,624,375 | ||||||
6.75%, due 8/15/26 | 1,000,000 | 1,492,969 | ||||||
23,807,647 | ||||||||
X United States Treasury Notes 28.6% | ||||||||
0.125%, due 8/31/13 | 4,505,000 | 4,494,792 | ||||||
0.125%, due 9/30/13 | 4,555,000 | 4,543,430 | ||||||
0.25%, due 10/31/13 | 8,300,000 | 8,299,751 | ||||||
0.25%, due 9/15/14 | 5,160,000 | 5,137,451 | ||||||
0.375%, due 7/31/13 | 9,015,000 | 9,035,076 | ||||||
0.50%, due 8/15/14 | 4,405,000 | 4,418,435 | ||||||
0.50%, due 10/15/14 | 6,500,000 | 6,515,730 | ||||||
0.625%, due 7/15/14 | 7,890,000 | 7,941,758 | ||||||
0.75%, due 8/15/13 | 7,500,000 | 7,566,210 | ||||||
1.00%, due 8/31/16 | 3,280,000 | 3,286,166 | ||||||
1.00%, due 9/30/16 | 1,100,000 | 1,100,770 | ||||||
1.00%, due 10/31/16 | 95,000 | 94,955 | ||||||
1.25%, due 9/30/15 | 6,695,000 | 6,845,638 | ||||||
1.375%, due 9/30/18 | 3,750,000 | 3,696,094 | ||||||
1.50%, due 6/30/16 | 1,695,000 | 1,740,562 | ||||||
1.50%, due 7/31/16 | 4,800,000 | 4,926,000 | ||||||
1.50%, due 8/31/18 | 600,000 | 597,281 | ||||||
1.75%, due 10/31/18 | 2,000,000 | 2,018,438 | ||||||
1.875%, due 9/30/17 | 3,000,000 | 3,096,564 | ||||||
2.125%, due 12/31/15 | 11,860,000 | 12,537,313 | ||||||
2.125%, due 8/15/21 | 3,690,000 | 3,673,875 | ||||||
2.25%, due 7/31/18 | 2,000,000 | 2,091,250 | ||||||
2.625%, due 8/15/20 | 2,500,000 | 2,630,273 | ||||||
2.625%, due 11/15/20 | 4,236,000 | 4,443,496 | ||||||
2.75%, due 2/28/18 | 1,000,000 | 1,081,875 | ||||||
3.00%, due 9/30/16 | 900,000 | 987,258 | ||||||
3.125%, due 1/31/17 | 8,700,000 | 9,601,946 | ||||||
3.125%, due 5/15/21 | 2,090,000 | 2,272,060 | ||||||
3.25%, due 3/31/17 | 2,000,000 | 2,221,250 | ||||||
3.375%, due 11/15/19 | 5,855,000 | 6,540,673 | ||||||
133,436,370 | ||||||||
Total U.S. Government & Federal Agencies (Cost $324,556,500) | 336,186,539 | |||||||
Yankee Bonds 5.2% (f) | ||||||||
Banks 1.6% | ||||||||
Abbey National Treasury Services PLC 4.00%, due 4/27/16 | 75,000 | 71,557 | ||||||
Bank of Nova Scotia 2.375%, due 12/17/13 | 250,000 | 258,043 | ||||||
3.40%, due 1/22/15 | 175,000 | 185,466 | ||||||
Barclays Bank PLC 5.125%, due 1/8/20 | 415,000 | 431,840 |
The notes to the financial statements are an integral part of,
22 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Yankee Bonds (continued) | ||||||||
Banks (continued) | ||||||||
Canadian Imperial Bank of Commerce 2.35%, due 12/11/15 | $ | 100,000 | $ | 101,017 | ||||
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. 4.50%, due 1/11/21 | 100,000 | 109,649 | ||||||
Credit Suisse New York 5.50%, due 5/1/14 | 500,000 | 533,216 | ||||||
Deutsche Bank A.G. 6.00%, due 9/1/17 | 325,000 | 368,580 | ||||||
Eksportfinans ASA 5.50%, due 5/25/16 | 100,000 | 115,372 | ||||||
Export-Import Bank of Korea 5.875%, due 1/14/15 | 350,000 | 376,674 | ||||||
Inter-American Development Bank 6.80%, due 10/15/25 | 604,000 | 843,236 | ||||||
Korea Development Bank 4.375%, due 8/10/15 | 200,000 | 208,285 | ||||||
5.30%, due 1/17/13 | 125,000 | 129,335 | ||||||
Kreditanstalt fuer Wiederaufbau 4.50%, due 7/16/18 | 850,000 | 984,970 | ||||||
Series G 4.875%, due 1/17/17 | 1,000,000 | 1,164,838 | ||||||
Landwirtschaftliche Rentenbank 3.125%, due 7/15/15 | 300,000 | 321,885 | ||||||
5.125%, due 2/1/17 | 375,000 | 441,274 | ||||||
Royal Bank of Scotland Group PLC | ||||||||
5.00%, due 11/12/13 | 100,000 | 96,417 | ||||||
5.05%, due 1/8/15 | 100,000 | 91,978 | ||||||
UBS A.G. 5.875%, due 7/15/16 | 125,000 | 129,130 | ||||||
5.875%, due 12/20/17 | 200,000 | 218,947 | ||||||
Westpac Banking Corp. 3.00%, due 12/9/15 | 300,000 | 304,985 | ||||||
4.625%, due 6/1/18 | 50,000 | 52,010 | ||||||
7,538,704 | ||||||||
Building Materials 0.0%‡ | ||||||||
Lafarge S.A. 6.50%, due 7/15/16 | 50,000 | 51,603 | ||||||
7.125%, due 7/15/36 | 50,000 | 43,717 | ||||||
95,320 | ||||||||
Chemicals 0.0%‡ | ||||||||
Potash Corp. of Saskatchewan, Inc. 4.875%, due 3/30/20 | 150,000 | 171,780 | ||||||
Electric 0.0%‡ | ||||||||
Scottish Power PLC 5.375%, due 3/15/15 | 100,000 | 106,196 | ||||||
Electronics 0.0%‡ | ||||||||
Koninklijke Philips Electronics N.V. 6.875%, due 3/11/38 | 100,000 | 127,793 | ||||||
Finance—Investment Banker/Broker 0.1% | ||||||||
BNP Paribas Home Loan Covered Bonds S.A. 2.20%, due 11/2/15 (c) | 250,000 | 240,491 | ||||||
Forest Products & Paper 0.0%‡ | ||||||||
Celulosa Arauco y Constitucion S.A. 5.625%, due 4/20/15 | 50,000 | 53,758 | ||||||
Health Care—Products 0.1% | ||||||||
Covidien International Finance S.A. 6.00%, due 10/15/17 | 150,000 | 180,326 | ||||||
Insurance 0.0%‡ | ||||||||
AXA S.A. 8.60%, due 12/15/30 | 105,000 | 112,921 | ||||||
Iron & Steel 0.1% | ||||||||
ArcelorMittal 5.375%, due 6/1/13 | 200,000 | 208,483 | ||||||
6.125%, due 6/1/18 | 300,000 | 308,136 | ||||||
516,619 | ||||||||
Media 0.1% | ||||||||
Thomson Corp. (The) 5.70%, due 10/1/14 | 50,000 | 55,676 | ||||||
Thomson Reuters Corp. 5.85%, due 4/15/40 | 105,000 | 119,671 | ||||||
175,347 | ||||||||
Mining 0.4% | ||||||||
Alcan, Inc. 5.00%, due 6/1/15 | 100,000 | 109,365 | ||||||
5.75%, due 6/1/35 | 50,000 | 57,581 | ||||||
Barrick Australia Finance Property, Ltd. 5.95%, due 10/15/39 | 150,000 | 174,821 | ||||||
Barrick Gold Finance Co. 4.875%, due 11/15/14 | 50,000 | 54,415 | ||||||
Inco, Ltd. 5.70%, due 10/15/15 | 100,000 | 110,137 | ||||||
Rio Tinto Finance USA, Ltd. 1.875%, due 11/2/15 | 650,000 | 654,127 | ||||||
Vale Overseas, Ltd. 6.25%, due 1/23/17 | 600,000 | 672,750 | ||||||
Xstrata Canada Corp. 5.50%, due 6/15/17 | 50,000 | 54,103 | ||||||
1,887,299 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 23 |
Portfolio of Investments†††October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Yankee Bonds (continued) | ||||||||
Miscellaneous—Manufacturing 0.0%‡ | ||||||||
Ingersoll-Rand Co. 4.75%, due 5/15/15 | $ | 150,000 | $ | 162,614 | ||||
Multi-National 0.8% | ||||||||
European Investment Bank 2.25%, due 3/15/16 | 1,250,000 | 1,303,494 | ||||||
2.75%, due 3/23/15 | 500,000 | 529,477 | ||||||
2.875%, due 9/15/20 | 500,000 | 517,661 | ||||||
International Bank for Reconstruction & Development (zero coupon), due 3/11/31 | 504,000 | 241,901 | ||||||
2.125%, due 3/15/16 | 1,000,000 | 1,042,301 | ||||||
3,634,834 | ||||||||
Oil & Gas 0.8% | ||||||||
Apache Finance Canada Corp. 4.375%, due 5/15/15 | 100,000 | 109,950 | ||||||
BP Capital Markets PLC 4.50%, due 10/1/20 | 50,000 | 54,902 | ||||||
5.25%, due 11/7/13 | 250,000 | 270,361 | ||||||
Canadian Natural Resources, Ltd. 5.85%, due 2/1/35 | 105,000 | 122,268 | ||||||
6.50%, due 2/15/37 | 75,000 | 95,222 | ||||||
Cenovus Energy, Inc. 6.75%, due 11/15/39 | 100,000 | 131,168 | ||||||
EnCana Corp. 6.50%, due 8/15/34 | 85,000 | 101,810 | ||||||
6.50%, due 2/1/38 | 125,000 | 151,579 | ||||||
Norsk Hydro ASA 7.75%, due 6/15/23 | 125,000 | 168,554 | ||||||
Petro-Canada 4.00%, due 7/15/13 | 100,000 | 104,210 | ||||||
6.05%, due 5/15/18 | 225,000 | 265,219 | ||||||
Petrobras International Finance Co. 5.875%, due 3/1/18 | 475,000 | 508,250 | ||||||
7.75%, due 9/15/14 | 250,000 | 283,750 | ||||||
Shell International Finance B.V. 4.30%, due 9/22/19 | 125,000 | 139,824 | ||||||
5.50%, due 3/25/40 | 200,000 | 249,014 | ||||||
Suncor Energy, Inc. 6.10%, due 6/1/18 | 100,000 | 118,345 | ||||||
6.50%, due 6/15/38 | 100,000 | 123,973 | ||||||
Talisman Energy, Inc. 5.125%, due 5/15/15 | 50,000 | 54,623 | ||||||
6.25%, due 2/1/38 | 55,000 | 65,155 | ||||||
Total Capital S.A. 2.30%, due 3/15/16 | 300,000 | 309,333 | ||||||
Transocean, Inc. 6.00%, due 3/15/18 | 125,000 | 132,890 | ||||||
7.375%, due 4/15/18 | 100,000 | 112,280 | ||||||
3,672,680 | ||||||||
Oil & Gas Services 0.0%‡ | ||||||||
Weatherford International, Inc. 4.95%, due 10/15/13 | 100,000 | 105,650 | ||||||
Pharmaceuticals 0.2% | ||||||||
AstraZeneca PLC 6.45%, due 9/15/37 | 100,000 | 134,876 | ||||||
Novartis Securities Investment, Ltd. 5.125%, due 2/10/19 | 450,000 | 528,874 | ||||||
Teva Pharmaceutical Finance LLC 3.00%, due 6/15/15 | 105,000 | 110,107 | ||||||
773,857 | ||||||||
Pipelines 0.1% | ||||||||
TransCanada Pipelines, Ltd. 4.875%, due 1/15/15 | 380,000 | 416,541 | ||||||
5.85%, due 3/15/36 | 100,000 | 121,180 | ||||||
537,721 | ||||||||
Sovereign 0.1% | ||||||||
Svensk Exportkredit AB 3.25%, due 9/16/14 | 250,000 | 265,527 | ||||||
5.125%, due 3/1/17 | 200,000 | 230,230 | ||||||
495,757 | ||||||||
Telecommunications 0.7% | ||||||||
America Movil S.A. de C.V. 5.75%, due 1/15/15 | 675,000 | 748,406 | ||||||
British Telecommunications PLC 9.875%, due 12/15/30 | 100,000 | 146,382 | ||||||
Deutsche Telekom International Finance B.V. 5.25%, due 7/22/13 | 100,000 | 105,704 | ||||||
5.75%, due 3/23/16 | 200,000 | 223,237 | ||||||
6.00%, due 7/8/19 | 250,000 | 290,390 | ||||||
France Telecom S.A. 8.50%, due 3/1/31 | 250,000 | 364,778 | ||||||
Rogers Communications, Inc. 6.80%, due 8/15/18 | 225,000 | 273,643 | ||||||
Telecom Italia Capital S.A. 4.95%, due 9/30/14 | 150,000 | 147,736 | ||||||
6.00%, due 9/30/34 | 100,000 | 85,817 | ||||||
6.375%, due 11/15/33 | 175,000 | 155,972 | ||||||
Telefonica Emisones S.A.U. 7.045%, due 6/20/36 | 100,000 | 109,501 | ||||||
Telefonica Europe B.V. 8.25%, due 9/15/30 | 200,000 | 243,150 |
The notes to the financial statements are an integral part of,
24 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Yankee Bonds (continued) | ||||||||
Telecommunications (continued) | ||||||||
Vodafone Group PLC 6.15%, due 2/27/37 | $ | 125,000 | $ | 157,495 | ||||
7.875%, due 2/15/30 | 100,000 | 144,435 | ||||||
3,196,646 | ||||||||
Transportation 0.1% | ||||||||
Canadian National Railway Co. 6.20%, due 6/1/36 | 100,000 | 127,738 | ||||||
Canadian Pacific Railway Co. 7.25%, due 5/15/19 | 125,000 | 153,249 | ||||||
280,987 | ||||||||
Water 0.0%‡ | ||||||||
United Utilities PLC 5.375%, due 2/1/19 | 100,000 | 105,320 | ||||||
Total Yankee Bonds (Cost $22,254,002) | 24,172,620 | |||||||
Total Long-Term Bonds (Cost $438,704,216) | 462,657,482 | |||||||
Short-Term Investment 3.0% | ||||||||
Other Commercial Paper 3.0% | ||||||||
McCormick & Co. (zero coupon), due 11/1/11 (c) | 13,865,000 | 13,865,000 | ||||||
Total Short-Term Investment (Cost $13,865,000) | 13,865,000 | |||||||
Total Investments (Cost $452,569,216) (g) | 102.2 | % | 476,522,482 | |||||
Other Assets, Less Liabilities | (2.2 | ) | (10,266,872 | ) | ||||
Net Assets | 100.0 | % | $ | 466,255,610 | ||||
††† | On a daily basis New York Life Investments confirms that the value of the Fund’s liquid assets (liquid portfolio securities and cash) is sufficient to cover its potential senior securities (e.g., futures, swaps, options). | |
‡ | Less than one-tenth of a percent. | |
(a) | Subprime mortgage investment and other asset-backed securities. The total market value of these securities at October 31, 2011 is $677,238, which represents 0.1% of the Fund’s net assets. | |
(b) | Floating rate—Rate shown is the rate in effect at October 31, 2011. | |
(c) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(2) of the Securities Act of 1933, as amended. | |
(d) | Collateral strip rate—Bond whose interest is based on the weighted net interest rate of the collateral. Coupon rate adjusts periodically based on a predetermined schedule. Rate shown is the rate in effect at October 31, 2011. | |
(e) | TBA—Securities purchased on a forward commitment basis with an approximate principal amount and maturity date. The actual principal amount and maturity date will be determined upon settlement. The market value of these securities at October 31, 2011 is $9,887,280, which represents 2.1% of the Fund’s net assets. All or a portion of these securities were acquired under a mortgage dollar roll agreement. | |
(f) | Yankee Bond—dollar-denominated bond issued in the United States by a foreign bank or corporation. | |
(g) | At October 31, 2011, cost is $452,632,659 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 24,774,935 | ||
Gross unrealized depreciation | (885,112 | ) | ||
Net unrealized appreciation | $ | 23,889,823 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 25 |
Portfolio of Investments†††October 31, 2011 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 1,681,487 | $ | — | $ | 1,681,487 | ||||||||
Corporate Bonds | — | 78,578,906 | — | 78,578,906 | ||||||||||||
Foreign Government Bonds | — | 9,376,526 | — | 9,376,526 | ||||||||||||
Mortgage-Backed Securities | — | 9,981,264 | — | 9,981,264 | ||||||||||||
Municipal Bonds | — | 2,680,140 | — | 2,680,140 | ||||||||||||
U.S. Government & Federal Agencies | — | 336,186,539 | — | 336,186,539 | ||||||||||||
Yankee Bonds | — | 24,172,620 | — | 24,172,620 | ||||||||||||
Total Long-Term Bonds | — | 462,657,482 | — | 462,657,482 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Other Commercial Paper | — | 13,865,000 | — | 13,865,000 | ||||||||||||
Total Investments in Securities | $ | — | $ | 476,522,482 | $ | — | $ | 476,522,482 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
26 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $452,569,216) | $ | 476,522,482 | ||
Cash | 709 | |||
Receivables: | ||||
Investment securities sold | 24,994,859 | |||
Interest | 2,895,219 | |||
Fund shares sold | 786,187 | |||
Other assets | 19,248 | |||
Total assets | 505,218,704 | |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 37,900,790 | |||
Fund shares redeemed | 675,712 | |||
Manager (See Note 3) | 120,795 | |||
Transfer agent (See Note 3) | 103,456 | |||
Professional fees | 37,071 | |||
Shareholder communication | 35,288 | |||
NYLIFE Distributors (See Note 3) | 18,827 | |||
Custodian | 7,876 | |||
Trustees | 2,028 | |||
Accrued expenses | 4,637 | |||
Dividend payable | 56,614 | |||
Total liabilities | 38,963,094 | |||
Net assets | $ | 466,255,610 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 39,952 | ||
Additional paid-in capital | 428,913,772 | |||
428,953,724 | ||||
Undistributed net investment income | 129,201 | |||
Accumulated net realized gain (loss) on investments | 13,219,419 | |||
Net unrealized appreciation (depreciation) on investments | 23,953,266 | |||
Net assets | $ | 466,255,610 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 6,325,802 | ||
Shares of beneficial interest outstanding | 540,168 | |||
Net asset value per share outstanding | $ | 11.71 | ||
Maximum sales charge (3.00% of offering price) | 0.36 | |||
Maximum offering price per share outstanding | $ | 12.07 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 82,180,329 | ||
Shares of beneficial interest outstanding | 7,047,372 | |||
Net asset value per share outstanding | $ | 11.66 | ||
Maximum sales charge (3.00% of offering price) | 0.36 | |||
Maximum offering price per share outstanding | $ | 12.02 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 377,749,479 | ||
Shares of beneficial interest outstanding | 32,364,333 | |||
Net asset value and offering price per share outstanding | $ | 11.67 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 27 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Interest (a) | $ | 18,530,202 | ||
Expenses | ||||
Manager (See Note 3) | 1,958,729 | |||
Transfer agent (See Note 3) | 674,651 | |||
Distribution/Service—Investor Class (See Note 3) | 14,446 | |||
Distribution/Service—Class A (See Note 3) | 196,716 | |||
Custodian | 92,254 | |||
Professional fees | 89,400 | |||
Shareholder communication | 69,905 | |||
Registration | 66,477 | |||
Trustees | 14,873 | |||
Miscellaneous | 23,871 | |||
Total expenses before waiver/reimbursement | 3,201,322 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (490,540 | ) | ||
Net expenses | 2,710,782 | |||
Net investment income (loss) | 15,819,420 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 13,446,478 | |||
Net change in unrealized appreciation (depreciation) on investments | (7,141,595 | ) | ||
Net realized and unrealized gain (loss) on investments | 6,304,883 | |||
Net increase (decrease) in net assets resulting from operations | $ | 22,124,303 | ||
(a) | Interest recorded net of foreign withholding taxes in the amount of $1,440. |
The notes to the financial statements are an integral part of,
28 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 15,819,420 | $ | 19,199,592 | ||||
Net realized gain (loss) on investments | 13,446,478 | 13,645,281 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (7,141,595 | ) | 9,685,940 | |||||
Net increase (decrease) in net assets resulting from operations | 22,124,303 | 42,530,813 | ||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (141,927 | ) | (144,231 | ) | ||||
Class A | (2,037,380 | ) | (2,505,556 | ) | ||||
Class I | (14,005,150 | ) | (16,548,311 | ) | ||||
(16,184,457 | ) | (19,198,098 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (128,316 | ) | (6,059 | ) | ||||
Class A | (1,810,224 | ) | (111,528 | ) | ||||
Class I | (11,260,357 | ) | (667,928 | ) | ||||
(13,198,897 | ) | (785,515 | ) | |||||
Total dividends and distributions to shareholders | (29,383,354 | ) | (19,983,613 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 173,793,304 | 213,604,394 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 28,225,481 | 19,405,315 | ||||||
Cost of shares redeemed | (345,289,145 | ) | (189,285,237 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | (143,270,360 | ) | 43,724,472 | |||||
Net increase (decrease) in net assets | (150,529,411 | ) | 66,271,672 | |||||
Net Assets | ||||||||
Beginning of year | 616,785,021 | 550,513,349 | ||||||
End of year | $ | 466,255,610 | $ | 616,785,021 | ||||
Undistributed net investment income at end of year | $ | 129,201 | $ | 315,578 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 29 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 11.81 | $ | 11.38 | $ | 10.37 | $ | 10.97 | ||||||||||
Net investment income (loss) | 0.28 | 0.32 | 0.40 | 0.30 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.15 | 0.45 | 1.02 | (0.60 | ) | |||||||||||||
Total from investment operations | 0.43 | 0.77 | 1.42 | (0.30 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.28 | ) | (0.32 | ) | (0.41 | ) | (0.30 | ) | ||||||||||
From net realized gain on investments | (0.25 | ) | (0.02 | ) | — | — | ||||||||||||
Total dividends and distributions | (0.53 | ) | (0.34 | ) | (0.41 | ) | (0.30 | ) | ||||||||||
Net asset value at end of period | $ | 11.71 | $ | 11.81 | $ | 11.38 | $ | 10.37 | ||||||||||
Total investment return (a) | 3.88 | % | 6.88 | % | 13.87 | % | (2.76 | %)(b) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 2.39 | % | 2.81 | % | 3.66 | % | 4.26 | % †† | ||||||||||
Net expenses | 0.92 | % | 0.92 | % | 0.92 | % | 0.92 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.10 | % | 1.15 | % | 1.28 | % | 1.27 | % †† | ||||||||||
Portfolio turnover rate (c) | 106 | % | 115 | % | 61 | % | 66 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 6,326 | $ | 5,985 | $ | 4,279 | $ | 2,874 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(b) | Total investment return is not annualized. | |
(c) | The portfolio turnover rates not including mortgage dollar rolls are 95%, 105%, 56% and 62% for the years ended October 31, 2011, 2010, 2009 and 2008, respectively. |
The notes to the financial statements are an integral part of,
30 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 11.76 | $ | 11.33 | $ | 10.33 | $ | 10.70 | $ | 10.69 | ||||||||||||
Net investment income (loss) | 0.29 | 0.34 | 0.41 | 0.47 | 0.47 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.16 | 0.45 | 1.01 | (0.36 | ) | 0.02 | ||||||||||||||||
Total from investment operations | 0.45 | 0.79 | 1.42 | 0.11 | 0.49 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.30 | ) | (0.34 | ) | (0.42 | ) | (0.48 | ) | (0.48 | ) | ||||||||||||
From net realized gain on investments | (0.25 | ) | (0.02 | ) | — | — | — | |||||||||||||||
Total dividends and distributions | (0.55 | ) | (0.36 | ) | (0.42 | ) | (0.48 | ) | (0.48 | ) | ||||||||||||
Net asset value at end of year | $ | 11.66 | $ | 11.76 | $ | 11.33 | $ | 10.33 | $ | 10.70 | ||||||||||||
Total investment return (a) | 4.05 | % | 7.04 | % | 13.93 | % | 0.88 | % | 4.66 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.53 | % | 2.94 | % | 3.76 | % | 4.35 | % | 4.40 | % | ||||||||||||
Net expenses | 0.78 | % | 0.80 | % | 0.82 | % | 0.82 | % | 0.82 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.78 | % | 0.80 | % | 0.88 | % | 0.88 | % | 0.93 | % | ||||||||||||
Portfolio turnover rate (b) | 106 | % | 115 | % | 61 | % | 66 | % | 121 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 82,180 | $ | 87,750 | $ | 77,595 | $ | 61,775 | $ | 57,604 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(b) | The portfolio turnover rates not including mortgage dollar rolls are 95%, 105%, 56%, 62% and 116% for the years ended October 31, 2011, 2010, 2009, 2008 and 2007, respectively. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 31 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 11.77 | $ | 11.34 | $ | 10.33 | $ | 10.70 | $ | 10.69 | ||||||||||||
Net investment income (loss) | 0.33 | 0.38 | 0.46 | 0.51 | 0.51 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.16 | 0.45 | 1.01 | (0.37 | ) | 0.02 | ||||||||||||||||
Total from investment operations | 0.49 | 0.83 | 1.47 | 0.14 | 0.53 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.34 | ) | (0.38 | ) | (0.46 | ) | (0.51 | ) | (0.52 | ) | ||||||||||||
From net realized gain on investments | (0.25 | ) | (0.02 | ) | — | — | — | |||||||||||||||
Total dividends and distributions | (0.59 | ) | (0.40 | ) | (0.46 | ) | (0.51 | ) | (0.52 | ) | ||||||||||||
Net asset value at end of year | $ | 11.67 | $ | 11.77 | $ | 11.34 | $ | 10.33 | $ | 10.70 | ||||||||||||
Total investment return (a) | 4.41 | % | 7.43 | % | 14.47 | % | 1.25 | % | 5.07 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.88 | % | 3.31 | % | 4.15 | % | 4.74 | % | 4.79 | % | ||||||||||||
Net expenses | 0.43 | % | 0.43 | % | 0.43 | % | 0.43 | % | 0.43 | % | ||||||||||||
Expenses (before reimbursement/waiver) | 0.53 | % | 0.55 | % | 0.63 | % | 0.56 | % | 0.53 | % | ||||||||||||
Portfolio turnover rate (b) | 106 | % | 115 | % | 61 | % | 66 | % | 121 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 377,749 | $ | 523,050 | $ | 468,639 | $ | 381,086 | $ | 398,047 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(b) | The portfolio turnover rates not including mortgage dollar rolls are 95%, 105%, 56%, 62% and 116% for the years ended October 31, 2011, 2010, 2009, 2008 and 2007, respectively. |
The notes to the financial statements are an integral part of,
32 MainStay Indexed Bond Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Indexed Bond Fund (the “Fund”), a diversified fund. The Fund is the successor of the MainStay Indexed Bond Fund, a series of Eclipse Funds Inc. (the “Predecessor Fund”). The reorganization of the Predecessor Fund with and into the Fund occurred on February 26, 2010. All information and references to periods prior to February 26, 2010 relate to the Predecessor Fund.
The Fund currently offers three classes of shares. Class I shares commenced operations on January 2, 1991. Class A shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The three classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Investor Class and Class A shares are subject to a distribution and/or service fee. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek to provide investment results that correspond to the total return performance of fixed-income securities in the aggregate, as represented by the Fund’s primary benchmark index.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Debt securities are valued at the evaluated bid prices supplied by a pricing agent or brokers selected by the Fund’s Manager (as defined in Note 3(A)) whose prices reflect broker/dealer supplied valuations and electronic data processing techniques, if such prices are deemed by the Fund’s Manager to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, Yankee bonds,
mainstayinvestments.com 33
Notes to Financial Statements (continued)
convertible bonds, asset-backed securities, and mortgage-backed securities, are generally categorized as Level 2 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund did not hold any securities that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. As of October 31, 2011, the Fund did not hold any foreign equity securities.
Generally, a security is considered illiquid if it cannot be sold or disposed of in the ordinary course of business at approximately the price at which it is valued. Its illiquidity might prevent the sale of such security at a time when the Manager might wish to sell, and these securities could have the effect of decreasing the overall level of a Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in determining value, which could vary from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager determines the liquidity of the Fund’s investments; in doing so, the Manager may consider various factors, including (i) the frequency of trades and quotations, (ii) the number of dealers and prospective purchasers, (iii) dealer undertakings to make a market, and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities generally will be valued in such manner as the Board in good faith deems appropriate to reflect their fair market value.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income monthly and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method and include gains and losses from repayments of principal on mortgage-backed securities. Interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased, other than Short-Term Investments, for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities or, in the case of a callable security, over the period to the first date of call. Discounts and
34 MainStay Indexed Bond Fund
premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method. Income from payment-in-kind securities is recorded daily based on the effective interest method of accrual.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Mortgage Dollar Rolls. The Fund may enter into mortgage dollar roll (“MDR”) transactions in which it sells mortgage-backed securities (“MBS”) from its portfolio to a counterparty from whom it simultaneously agrees to buy a similar security on a delayed delivery basis. The MDR transactions of the Fund are classified as purchase and sale transactions. The securities sold in connection with the MDRs are removed from the portfolio and a realized gain or loss is recognized. The securities the Fund has agreed to acquire are included at market value in the Portfolio of Investments and liabilities for such purchase commitments are included as payables for investments purchased. During the roll period, the Fund foregoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the forward price for the future as well as by the earnings on the cash proceeds of the initial sale. MDRs may be renewed without physical delivery of the securities subject to the contract. The Fund maintains liquid assets from its portfolio having a value not less than the repurchase price, including accrued interest. MDR transactions involve certain risks, including the risk that the MBS returned to the Fund at the end of the roll, while substantially similar, could be inferior to what was initially sold to the counterparty.
(I) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(J) Concentration of Risk. The Fund invests in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.
(K) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no
mainstayinvestments.com 35
Notes to Financial Statements (continued)
assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. New York Life Investments is responsible for the day-to-day portfolio management of the Fund.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.35% up to $1 billion and 0.30% in excess of $1 billion. The effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.35% for the year ended October 31, 2011.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses do not exceed the following percentages of average daily net assets: Investor Class, 0.92%; Class A, 0.82%; and Class I, 0.43%. This agreement expires on February 28, 2012, and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $1,958,729 and waived its fees and/or reimbursed expenses in the amount of $490,540.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from the Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $2,208 and $8,228, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Class A shares of $216 for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 25,461 | ||
Class A | 92,050 | |||
Class I | 557,140 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Class A | $ | 1,423 | 0.0 | %‡ | ||||
‡ | Less than one-tenth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $7,741. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
36 MainStay Indexed Bond Fund
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 3,480,179 | $ | 9,988,498 | $ | (56,614 | ) | $ | 23,889,823 | $ | 37,301,886 | ||||||||
The difference between book-basis and tax basis unrealized appreciation (depreciation) is primarily due to wash sale deferrals, basis adjustment due to class action payments and premium amortization adjustments.
The other temporary differences are primarily due to dividends payable.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed Net | Net Realized | Additional | ||||||||
Investment | Gain (Loss) on | Paid-In | ||||||||
Income (Loss) | Investments | Capital | ||||||||
$ | 178,660 | $ | (178,660 | ) | $ | — | ||||
The reclassifications for the Fund are primarily due to reclassification of consent fee and reclassification of mortgage dollar roll income.
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 23,991,093 | $ | 19,198,098 | ||||
Long-Term Capital Gain | 5,392,261 | 785,515 | ||||||
Total | $ | 29,383,354 | $ | 19,983,613 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of U.S. government securities were $561,741 and $672,475, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $25,727 and $64,423, respectively.
mainstayinvestments.com 37
Notes to Financial Statements (continued)
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 219,195 | $ | 2,532,066 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 23,469 | 266,387 | ||||||
Shares redeemed | (186,847 | ) | (2,140,847 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 55,817 | 657,606 | ||||||
Shares converted into Investor Class (See Note 1) | 21,199 | 244,765 | ||||||
Shares converted from Investor Class (See Note 1) | (43,572 | ) | (501,330 | ) | ||||
Net increase (decrease) | 33,444 | $ | 401,041 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 204,356 | $ | 2,349,296 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 12,770 | 147,438 | ||||||
Shares redeemed | (77,270 | ) | (891,873 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 139,856 | 1,604,861 | ||||||
Shares converted into Investor Class (See Note 1) | 17,718 | 204,748 | ||||||
Shares converted from Investor Class (See Note 1) | (26,828 | ) | (308,609 | ) | ||||
Net increase (decrease) | 130,746 | $ | 1,501,000 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,998,270 | $ | 34,560,967 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 311,764 | 3,523,509 | ||||||
Shares redeemed | (3,745,725 | ) | (42,830,453 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (435,691 | ) | (4,745,977 | ) | ||||
Shares converted into Class A (See Note 1) | 43,762 | 501,330 | ||||||
Shares converted from Class A (See Note 1) | (21,291 | ) | (244,765 | ) | ||||
Net increase (decrease) | (413,220 | ) | $ | (4,489,412 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 3,367,729 | $ | 38,621,093 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 201,269 | 2,311,902 | ||||||
Shares redeemed | (2,938,502 | ) | (33,840,358 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 630,496 | 7,092,637 | ||||||
Shares converted into Class A (See Note 1) | 26,937 | 308,609 | ||||||
Shares converted from Class A (See Note 1) | (17,795 | ) | (204,748 | ) | ||||
Shares converted from Class A (a) | (25,085 | ) | (282,703 | ) | ||||
Net increase (decrease) | 614,553 | $ | 6,913,795 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 11,967,661 | $ | 136,700,271 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,160,150 | 24,435,585 | ||||||
Shares redeemed | (26,194,037 | ) | (300,317,845 | ) | ||||
Net increase (decrease) | (12,066,226 | ) | $ | (139,181,989 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 15,072,713 | $ | 172,634,005 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,474,481 | 16,945,975 | ||||||
Shares redeemed | (13,455,611 | ) | (154,553,006 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 3,091,583 | 35,026,974 | ||||||
Shares converted into Class I (a) | 25,062 | 282,703 | ||||||
Net increase (decrease) | 3,116,645 | $ | 35,309,677 | |||||
(a) In addition to any automatic conversion features described above in Note 1 with respect to Investor Class and Class A shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class and Class A shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, you may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustments or disclosure have been identified.
38 MainStay Indexed Bond Fund
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Indexed Bond Fund (“the Fund”), one of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Indexed Bond Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
mainstayinvestments.com 39
Federal Income Tax Information (Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years. Accordingly, the Fund paid $5,392,261 as a long term capital gain distribution.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; and (ii) on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the Fund’s website at www.mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
40 MainStay Indexed Bond Fund
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
mainstayinvestments.com 41
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
42 MainStay Indexed Bond Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
mainstayinvestments.com 43
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
44 MainStay Indexed Bond Fund
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
mainstayinvestments.com 45
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24950 MS284-11 | MSIN11-12/11 |
NB3
MainStay Intermediate Term Bond Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 23 | |
Notes to Financial Statements | 31 | |
Report of Independent Registered Public Accounting Firm | 40 | |
Federal Income Tax Information | 41 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 41 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 41 | |
Board Members and Officers | 42 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||||
Expense | ||||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 4.5% Initial Sales Charge | With sales charges | –0 | .20% | 5 | .36% | 4 | .33% | 1 | .17% | ||||||||||
Excluding sales charges | 4 | .51 | 6 | .33 | 4 | .81 | 1 | .17 | ||||||||||||
Class A Shares4 | Maximum 4.5% Initial Sales Charge | With sales charges | –0 | .08 | 5 | .46 | 4 | .38 | 1 | .06 | ||||||||||
Excluding sales charges | 4 | .63 | 6 | .44 | 4 | .86 | 1 | .06 | ||||||||||||
Class B Shares4 | Maximum 5% CDSC | With sales charges | –1 | .24 | 5 | .19 | 4 | .04 | 1 | .91 | ||||||||||
if Redeemed Within the First Six Years of Purchase | Excluding sales charges | 3 | .74 | 5 | .51 | 4 | .04 | 1 | .91 | |||||||||||
Class C Shares4 | Maximum 1% CDSC | With sales charges | 2 | .74 | 5 | .53 | 4 | .05 | 1 | .91 | ||||||||||
if Redeemed Within One Year of Purchase | Excluding sales charges | 3 | .74 | 5 | .53 | 4 | .05 | 1 | .91 | |||||||||||
Class I Shares | No Sales Charge | 4 | .97 | 6 | .78 | 5 | .21 | 0 | .81 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Performance figures for Class A, B and C shares, first offered on January 2, 2004, include the historical performance of Class I shares through January 1, 2004, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class A, B and C shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
Barclays Capital U.S. Aggregate Bond Index5 | 5 | .00% | 6 | .41% | 5 | .46% | ||||||
Average Lipper Intermediate Investment Grade Debt Fund6 | 3 | .94 | 5 | .57 | 4 | .87 | ||||||
5. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. The Barclays Capital U.S. Aggregate Bond Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The average Lipper intermediate investment grade debt fund is representative of funds that invest primarily in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of five to ten years. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Intermediate Term Bond Fund
Cost in Dollars of a $1,000 Investment in MainStay Intermediate Term Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,033.00 | $ | 5.18 | $ | 1,020.10 | $ | 5.14 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,033.70 | $ | 4.66 | $ | 1,020.60 | $ | 4.63 | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,029.30 | $ | 8.95 | $ | 1,016.40 | $ | 8.89 | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,028.30 | $ | 9.00 | $ | 1,016.30 | $ | 8.94 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,034.30 | $ | 3.08 | $ | 1,022.20 | $ | 3.06 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.01% for Investor Class, 0.91% for Class A, 1.75% for Class B, 1.76% for Class C and 0.60% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Portfolio Composition as of October 31, 2011 (Unaudited)
Corporate Bonds | 46.9 | |||
U.S. Government & Federal Agencies | 33.1 | |||
Short-Term Investment | 9.9 | |||
Yankee Bonds | 8.4 | |||
Mortgage-Backed Securities | 7.9 | |||
Municipal Bonds | 0.6 | |||
Asset-Backed Securities | 0.4 | |||
Foreign Government Bond | 0.0 | |||
Warrants | 0.0 | |||
Future Contracts | 0.0 | |||
Other Assets, Less Liabilities | (7.2 | ) |
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Issuers Held as of October 31, 2011 (excluding short-term investment)
1. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 3.50%–6.50%, due 2/1/17–3/1/41 | |
2. | United States Treasury Bonds, 3.75%–6.25%, due 5/15/30–8/15/41 | |
3. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 4.00%–6.50%, due 1/1/21–6/1/41 | |
4. | Government National Mortgage Association (Mortgage Pass-Through Securities), 4.00%–12.50%, due 1/15/14–11/20/40 | |
5. | Federal National Mortgage Association, 1.60%, due 11/23/15 | |
6. | General Electric Capital Corp., 2.25%–5.40%, due 11/9/15–2/15/17 | |
7. | Kraft Foods, Inc., 6.125%–7.00%, due 2/1/18–8/11/37 | |
8. | AgriBank FCB, 9.125%, due 7/15/19 | |
9. | Freddie Mac (Collateralized Mortgage Obligations), 5.00%, due 9/15/31–6/15/34 | |
10. | Greenwich Capital Commercial Funding Corp., 5.224%–5.317%, due 6/10/36–4/10/37 |
8 MainStay Intermediate Term Bond Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Gary Goodenough, Dan Roberts, PhD, and Louis N. Cohen of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay Intermediate Term Bond Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Intermediate Term Bond Fund returned 4.51% for Investor Class shares, 4.63% for Class A shares and 3.74% for Class B shares and Class C shares for the 12 months ended October 31, 2011. Over the same period, the Fund’s Class I shares returned 4.97%. Class B shares and Class C shares underperformed—and all other share classes outperformed—the 3.94% return of the average Lipper1 intermediate investment grade debt fund for the 12-month reporting period. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index2 for the 12 months ended October 31, 2011. The Barclays Capital U.S. Aggregate Bond Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s relative performance during the reporting period?
For the latter half of the reporting period, the Fund maintained a shorter duration3 than the Barclays Capital U.S. Aggregate Bond Index. This detracted from relative performance because the benchmark benefited more robustly as U.S. Treasury yields fell. Our yield curve4 positioning was also a drag on performance relative to the benchmark.
Along the corporate credit curve, we anticipated better return potential in the center relative to shorter-and longer-term areas of the curve. We assumed an overweight position at the center of the yield curve in relation to the benchmark’s curve distri-bution, and this positioning slowed performance because the long end of the yield curve—and not the center—led the rally during the second half of the reporting period.
Partially offsetting these factors was the yield advantage imparted by overweight positions in credit-related sectors (investment-grade corporate bonds, high-yield corporate bonds and commercial mortgage-backed securities). An underweight position in residential mortgage-backed securities, which were disturbed by interest-rate volatility, also added value. Issue selection contributed positively across all sectors, although these effects were not as substantial contributors to relative performance as sector weighting.
What was the Fund’s duration strategy during the reporting period?
The Fund maintained an intermediate duration that tracks the duration of the Barclays Capital U.S. Aggregate Bond Index within 10%. At the end of the reporting period, the Fund had a 4.9 year duration, which was roughly two-tenths of a year shorter than the benchmark. The Fund’s duration started the reporting period closer to neutral, and we kept it there for most of the first half of the reporting period. In the second half of the reporting period, we felt that rates were too low and were posi-tioned to rise, so we shortened the Fund’s duration relative to the benchmark. Unfortunately, this adjustment came too early.
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
We promoted credit risk as the principal driver of performance during the reporting period. We expected corporate bonds (both investment-grade and high-yield) and commercial mortgage-backed securities to have superior returns relative to government-related debt for three reasons. First, the prospects of the credit-related sectors were aligned with a decision of the Federal Reserve’s monetary policymaking committee to maintain the federal funds target rate in a range close to zero. Second, we felt that low interest rates would be likely to spark healthy demand for higher-yield products. Third, improving profitability signaled that corporations were doing more with less: less leverage, less short-term debt and smaller funding gaps. In turn, these improving credit fundamentals supported a narrowing of spreads alongside a favorable supply/demand balance for corporate bonds.
During the reporting period, which market segments were the strongest contributors to the Fund’s performance and which market segments were particularly weak?
During the reporting period, overweight positions relative to the benchmark in moderate-quality corporate bonds and commercial mortgage-backed securities originated between 2005 and 2007 were positive contributors to performance because of their respective yields. For corporate bonds, the best performing sectors for the Fund were commodities, as illustrated by mining company Anglo American and chemicals company Incitec Pivot Finance, both of which benefited from higher raw material prices. Incitec Pivot Finance was sold during the reporting period. The Fund’s pipeline holdings, such as Panhandle East and Williams, were helped by elevated energy prices. Consumer-related holdings, including food manufacturer Kraft Foods and telecommunications company Corning, performed well given their stable, recurring cash flows.
On the negative side, some corporate bonds in the Fund were exposed to Eurozone countries whose economies were under
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Barclays Capital U.S. Aggregate Bond Index.
3. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
4. The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting.
mainstayinvestments.com 9
stress. Three examples that detracted from performance were Irish financial services provider Irish Life and Permanent, European energy company (with North African interests) Eni SPA and Italian telecommunication company Telecom Italia Capital S.A. Certain emerging-market credits were a drag on the Fund’s results, such as oil & gas companies CNOOC Finance and Petroleum Co. of Trinidad & Tobago, which were both hurt by spillover from unrest in the Middle East and North Africa. The Fund’s exposure to large, multinational financial institutions, such as Bank of America and Goldman Sachs Group, was negatively affected by contagion fears related to events in Europe. This also detracted from performance. Volatile prices of corporate bonds in retail (such as JC Penney and Sears) and wireless telecommunications (such as Sprint Nextel and Metro PCS Wireless) reflected more modest expectations for improvement in consumer spending. Higher costs associated with the integration of recent acquisitions weighed on the performance of Frontier Communications, a BB-rated5 company, which had a sizeable allocation in the Fund.
The Fund’s underweight position in residential mortgage-backed securities relative to the Barclays Capital U.S. Aggregate Bond Index was a positive contributor to performance. Historically low mortgage rates made the prepayment option embedded in the securities more costly from the investor’s perspective. In turn, investor demand for the sector waned, causing mortgage-backed securities to underperform comparable-duration Treasury securities.
How did the Fund’s sector weightings change during the reporting period?
We modestly reduced the Fund’s credit exposure by reallocating 8% of its assets from investment-grade corporate bonds to U.S. Treasury securities, agency debentures, agency mortgage pass-throughs6 and cash. We also used these trades to shorten the Fund’s duration during the second half of the reporting period and to reduce the Fund’s exposure to the Eurozone. Aside from this trade, designed to reduce the Fund’s risk profile, other activity generally fell into three categories: corporate-bond swaps to execute relative-value ideas, purchases of agency mortgage-backed securities to recycle mortgage principal payments and mortgage dollar rolls.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2011, the Fund held overweight positions relative to the Barclays Capital U.S. Aggregate Bond Index in high-yield corporate bonds, investment-grade corporate bonds and commercial mortgage-backed securities. On the same date, the Fund held underweight positions relative to the benchmark in U.S. Treasury securities, agency debentures and agency mortgage-backed securities. In light of wider spreads, the Fund’s performance was slowed by emphasizing credit-sensitive and commercial sectors and by de-emphasizing U.S. Treasury securities.
5. An obligation rated ‘BB’ by Standard & Poor’s (“S&P”) is deemed by S&P to be less vulnerable to nonpayment than other speculative issues. In the opinion of S&P, however, an obligation rated ‘BB’ faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund.
6. Pass-through mortgages consist of a pool of residential mortgage loans in which homeowners’ monthly payments of principal, interest and prepayments pass from the original bank through a government agency or investment bank to investors.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Intermediate Term Bond Fund
Portfolio of Investments††† October 31, 2011
Principal | ||||||||
Amount | Value | |||||||
Long-Term Bonds 97.3%† Asset-Backed Securities 0.4% | ||||||||
Credit Cards 0.1% | ||||||||
Chase Issuance Trust Series 2006-C4, Class C4 0.533%, due 1/15/14 (a) | $ | 750,000 | $ | 749,954 | �� | |||
Diversified Financial Services 0.1% | ||||||||
Dominos Pizza Master Issuer LLC Series 2007-1, Class A2 5.261%, due 4/25/37 (b) | 550,000 | 553,438 | ||||||
Home Equity 0.0%‡ | ||||||||
Citicorp Residential Mortgage Securities, Inc. Series 2006-1, Class A3 5.706%, due 7/25/36 (c) | 102,806 | 103,032 | ||||||
Utilities 0.2% | ||||||||
Atlantic City Electric Transition Funding LLC Series 2002-1, Class A4 5.55%, due 10/20/23 | 675,000 | 812,953 | ||||||
Total Asset-Backed Securities (Cost $2,077,525) | 2,219,377 | |||||||
Corporate Bonds 46.9% | ||||||||
Advertising 0.2% | ||||||||
Lamar Media Corp. 9.75%, due 4/1/14 | 1,175,000 | 1,292,500 | ||||||
Aerospace & Defense 0.1% | ||||||||
Alliant Techsystems, Inc. 6.875%, due 9/15/20 | 589,000 | 605,198 | ||||||
Agriculture 0.9% | ||||||||
Altria Group, Inc. 9.25%, due 8/6/19 | 470,000 | 624,796 | ||||||
Bunge, Ltd. Finance Corp. 4.10%, due 3/15/16 | 2,200,000 | 2,265,536 | ||||||
5.10%, due 7/15/15 | 2,000,000 | 2,095,178 | ||||||
Lorillard Tobacco Co. 8.125%, due 6/23/19 | 720,000 | 867,689 | ||||||
5,853,199 | ||||||||
Apparel 0.2% | ||||||||
Unifi, Inc. 11.50%, due 5/15/14 | 6,000 | 6,075 | ||||||
VF Corp. 3.50%, due 9/1/21 | 1,360,000 | 1,379,366 | ||||||
1,385,441 | ||||||||
Auto Manufacturers 0.5% | ||||||||
Nissan Motor Acceptance Corp. 4.50%, due 1/30/15 (b) | 3,240,000 | 3,403,264 | ||||||
Auto Parts & Equipment 0.0%‡ | ||||||||
FleetPride Corp. 11.50%, due 10/1/14 (b) | 25,000 | 24,375 | ||||||
Banks 5.0% | ||||||||
X AgriBank FCB 9.125%, due 7/15/19 | 5,795,000 | 7,509,074 | ||||||
Ally Financial, Inc. 7.50%, due 9/15/20 | 295,000 | 297,950 | ||||||
Bank of America Corp. 5.75%, due 8/15/16 | 1,400,000 | 1,370,723 | ||||||
Citigroup, Inc. 8.50%, due 5/22/19 | 552,500 | 683,674 | ||||||
Discover Bank/Greenwood DE 7.00%, due 4/15/20 | 3,550,000 | 3,707,194 | ||||||
8.70%, due 11/18/19 | 2,000,000 | 2,262,080 | ||||||
Fifth Third Bancorp 5.45%, due 1/15/17 | 1,477,000 | 1,574,416 | ||||||
Goldman Sachs Group, Inc. (The) 5.95%, due 1/18/18 | 1,000,000 | 1,051,442 | ||||||
JPMorgan Chase & Co. 5.125%, due 9/15/14 | 2,140,000 | 2,278,077 | ||||||
5.15%, due 10/1/15 | 1,000,000 | 1,062,047 | ||||||
KeyBank N.A. 5.80%, due 7/1/14 | 3,765,000 | 4,055,861 | ||||||
Morgan Stanley 4.75%, due 4/1/14 | 3,135,000 | 3,149,967 | ||||||
5.625%, due 9/23/19 | 285,000 | 281,416 | ||||||
6.00%, due 5/13/14 | 1,490,000 | 1,547,974 | ||||||
6.00%, due 4/28/15 | 300,000 | 316,177 | ||||||
31,148,072 | ||||||||
Beverages 1.4% | ||||||||
Anheuser-Busch InBev Worldwide, Inc. 5.375%, due 11/15/14 | 2,500,000 | 2,812,618 | ||||||
7.75%, due 1/15/19 | 2,000,000 | 2,614,718 | ||||||
Constellation Brands, Inc. 7.25%, due 9/1/16 | 1,723,000 | 1,884,531 | ||||||
8.375%, due 12/15/14 | 1,061,000 | 1,188,320 | ||||||
8,500,187 | ||||||||
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest issuers held, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments††† October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Building Materials 0.1% | ||||||||
Texas Industries, Inc. 9.25%, due 8/15/20 | $ | 400,000 | $ | 364,000 | ||||
USG Corp. 6.30%, due 11/15/16 | 630,000 | 486,675 | ||||||
850,675 | ||||||||
Chemicals 1.0% | ||||||||
Dow Chemical Co. (The) 5.90%, due 2/15/15 | 2,005,000 | 2,231,254 | ||||||
8.55%, due 5/15/19 | 1,015,000 | 1,318,576 | ||||||
Nalco Co. 8.25%, due 5/15/17 | 1,077,000 | 1,195,470 | ||||||
Olin Corp. 8.875%, due 8/15/19 | 170,000 | 185,300 | ||||||
Westlake Chemical Corp. 6.625%, due 1/15/16 | 1,093,000 | 1,103,930 | ||||||
6,034,530 | ||||||||
Coal 0.3% | ||||||||
Consol Energy, Inc. 6.375%, due 3/1/21 (b) | 515,000 | 512,425 | ||||||
8.00%, due 4/1/17 | 805,000 | 881,475 | ||||||
Peabody Energy Corp. 7.375%, due 11/1/16 | 441,000 | 482,895 | ||||||
7.875%, due 11/1/26 | 15,000 | 16,537 | ||||||
1,893,332 | ||||||||
Commercial Services 0.2% | ||||||||
Corrections Corp. of America 7.75%, due 6/1/17 | 174,000 | 188,355 | ||||||
Lender Processing Services, Inc. 8.125%, due 7/1/16 | 885,000 | 871,725 | ||||||
PHH Corp. 9.25%, due 3/1/16 | 360,000 | 370,800 | ||||||
Quebecor World, Inc. (Litigation Recovery Trust-Escrow Shares) 9.75%, due 8/1/49 (b)(d)(e)(f) | 15,000 | 240 | ||||||
Service Corp. International 7.625%, due 10/1/18 | 10,000 | 10,975 | ||||||
1,442,095 | ||||||||
Computers 0.8% | ||||||||
Hewlett-Packard Co. 2.20%, due 12/1/15 | 4,000,000 | 4,012,408 | ||||||
6.125%, due 3/1/14 | 350,000 | 385,724 | ||||||
iGate Corp. 9.00%, due 5/1/16 (b) | 310,000 | 308,450 | ||||||
SunGard Data Systems, Inc. 4.875%, due 1/15/14 | 10,000 | 10,050 | ||||||
4,716,632 | ||||||||
Cosmetics & Personal Care 0.3% | ||||||||
Procter & Gamble Co. (The) 1.45%, due 8/15/16 | 1,860,000 | 1,863,419 | ||||||
Diversified Financial Services 2.0% | ||||||||
Alterra Finance LLC 6.25%, due 9/30/20 | 2,900,000 | 3,098,754 | ||||||
Citigroup, Inc. 5.00%, due 9/15/14 | 1,250,000 | 1,273,738 | ||||||
X General Electric Capital Corp. 2.25%, due 11/9/15 | 5,000,000 | 5,007,635 | ||||||
5.40%, due 2/15/17 | 2,985,000 | 3,323,221 | ||||||
12,703,348 | ||||||||
Electric 3.9% | ||||||||
AES Corp. (The) 7.75%, due 10/15/15 | 1,000,000 | 1,075,000 | ||||||
Allegheny Energy Supply Co. LLC 5.75%, due 10/15/19 (b) | 1,605,000 | 1,747,640 | ||||||
Calpine Construction Finance Co., L.P. and CCFC Finance Corp. 8.00%, due 6/1/16 (b) | 1,111,000 | 1,183,215 | ||||||
CMS Energy Corp. 6.25%, due 2/1/20 | 2,015,000 | 2,144,780 | ||||||
Duquesne Light Holdings, Inc. 5.90%, due 12/1/21 (b) | 3,000,000 | 2,960,688 | ||||||
Entergy Corp. 3.625%, due 9/15/15 | 5,220,000 | 5,269,616 | ||||||
Ipalco Enterprises, Inc. 5.00%, due 5/1/18 (b) | 1,000,000 | 1,015,000 | ||||||
N.V. Energy, Inc. 6.25%, due 11/15/20 | 5,000,000 | 5,383,845 | ||||||
OGE Energy Corp. 5.00%, due 11/15/14 | 1,420,000 | 1,544,018 | ||||||
Public Service Co. of New Mexico 7.95%, due 5/15/18 | 604,000 | 721,754 | ||||||
Reliant Energy Mid-Atlantic Power Holdings LLC Series C 9.681%, due 7/2/26 | 1,000 | 985 | ||||||
Toledo Edison Co. (The) 7.25%, due 5/1/20 | 780,000 | 975,413 | ||||||
24,021,954 | ||||||||
Electrical Components & Equipment 0.2% | ||||||||
Belden, Inc. 7.00%, due 3/15/17 | 1,155,000 | 1,160,775 | ||||||
9.25%, due 6/15/19 | 137,000 | 146,590 | ||||||
1,307,365 | ||||||||
Entertainment 0.4% | ||||||||
NAI Entertainment Holdings LLC 8.25%, due 12/15/17 (b) | 1,000,000 | 1,052,500 |
The notes to the financial statements are an integral part of,
12 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Entertainment (continued) | ||||||||
Peninsula Gaming LLC 8.375%, due 8/15/15 | $ | 1,136,000 | $ | 1,167,240 | ||||
2,219,740 | ||||||||
Environmental Controls 0.2% | ||||||||
Clean Harbors, Inc. 7.625%, due 8/15/16 | 1,250,000 | 1,321,875 | ||||||
Finance—Auto Loans 0.8% | ||||||||
Ford Motor Credit Co. LLC 3.875%, due 1/15/15 | 4,860,000 | 4,862,386 | ||||||
Finance—Commercial 0.2% | ||||||||
Textron Financial Corp. 5.40%, due 4/28/13 | 1,305,000 | 1,337,414 | ||||||
Finance—Investment Banker/Broker 0.8% | ||||||||
Bear Stearns Cos., Inc. (The) 5.30%, due 10/30/15 | 1,549,000 | 1,674,207 | ||||||
7.25%, due 2/1/18 | 275,000 | 323,848 | ||||||
Jefferies Group, Inc. 8.50%, due 7/15/19 | 800,000 | 861,739 | ||||||
Merrill Lynch & Co., Inc. 5.70%, due 5/2/17 | 625,000 | 601,915 | ||||||
6.15%, due 4/25/13 | 790,000 | 811,134 | ||||||
Merrill Lynch & Co., Inc. Series C 5.00%, due 2/3/14 | 800,000 | 811,544 | ||||||
5,084,387 | ||||||||
Finance—Leasing Companies 0.5% | ||||||||
International Lease Finance Corp. 5.625%, due 9/20/13 | 1,010,000 | 994,850 | ||||||
5.75%, due 5/15/16 | 2,070,000 | 1,953,014 | ||||||
2,947,864 | ||||||||
Finance—Mortgage Loan/Banker 0.1% | ||||||||
Countrywide Financial Corp. 6.25%, due 5/15/16 | 750,000 | 732,811 | ||||||
Food 2.2% | ||||||||
Cargill, Inc. 4.307%, due 5/14/21 (b) | 3,000,000 | 3,238,920 | ||||||
6.00%, due 11/27/17 (b) | 1,050,000 | 1,241,389 | ||||||
7.35%, due 3/6/19 (b) | 540,000 | 682,534 | ||||||
X Kraft Foods, Inc. 6.125%, due 2/1/18 | 5,020,000 | 5,921,080 | ||||||
7.00%, due 8/11/37 | 1,260,000 | 1,673,903 | ||||||
Smithfield Foods, Inc. 10.00%, due 7/15/14 | 570,000 | 662,625 | ||||||
Tyson Foods, Inc. 10.50%, due 3/1/14 | 225,000 | 261,000 | ||||||
13,681,451 | ||||||||
Forest Products & Paper 0.0%‡ | ||||||||
Georgia-Pacific Corp. 8.875%, due 5/15/31 | 50,000 | 72,522 | ||||||
Health Care—Services 1.7% | ||||||||
Centene Corp. 5.75%, due 6/1/17 | 785,000 | 788,925 | ||||||
CIGNA Corp. 4.375%, due 12/15/20 | 875,000 | 896,129 | ||||||
Coventry Health Care, Inc. 5.95%, due 3/15/17 | 1,635,000 | 1,837,022 | ||||||
Fresenius Medical Care U.S. Finance, Inc. 6.875%, due 7/15/17 | 455,000 | 487,987 | ||||||
HCA, Inc. 5.75%, due 3/15/14 | 11,000 | 11,248 | ||||||
6.50%, due 2/15/16 | 177,000 | 181,536 | ||||||
8.50%, due 4/15/19 | 888,000 | 976,800 | ||||||
Roche Holdings, Inc. 6.00%, due 3/1/19 (b) | 1,775,000 | 2,152,132 | ||||||
WellPoint, Inc. 5.25%, due 1/15/16 | 1,895,000 | 2,130,461 | ||||||
5.875%, due 6/15/17 | 1,000,000 | 1,152,579 | ||||||
10,614,819 | ||||||||
Household Products & Wares 0.9% | ||||||||
Spectrum Brands, Inc. 9.50%, due 6/15/18 | 939,000 | 1,042,290 | ||||||
Tupperware Brands Corp. 4.75%, due 6/1/21 (b) | 4,385,000 | 4,343,285 | ||||||
5,385,575 | ||||||||
Insurance 2.8% | ||||||||
American International Group, Inc. 4.875%, due 9/15/16 | 2,750,000 | 2,687,592 | ||||||
Genworth Financial, Inc. 7.20%, due 2/15/21 | 480,000 | 433,155 | ||||||
8.625%, due 12/15/16 | 4,300,000 | 4,367,325 | ||||||
Health Care Service Corp. 4.70%, due 1/15/21 (b) | 1,500,000 | 1,643,439 | ||||||
St. Paul Travelers Cos., Inc. (The) 6.25%, due 6/20/16 | 1,200,000 | 1,420,945 | ||||||
Teachers Insurance & Annuity Association of America 6.85%, due 12/16/39 (b) | 4,500,000 | 5,724,319 | ||||||
Unum Group 7.125%, due 9/30/16 | 750,000 | 860,312 | ||||||
17,137,087 | ||||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments††† October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Internet 0.2% | ||||||||
Expedia, Inc. 8.50%, due 7/1/16 (b) | $ | 993,000 | $ | 1,094,631 | ||||
Investment Management/Advisory Services 0.2% | ||||||||
Janus Capital Group, Inc. 6.70%, due 6/15/17 | 1,166,000 | 1,229,282 | ||||||
Leisure Time 0.1% | ||||||||
Brunswick Corp. 11.25%, due 11/1/16 (b) | 430,000 | 503,100 | ||||||
Harley-Davidson Funding Corp. 6.80%, due 6/15/18 (b) | 250,000 | 289,148 | ||||||
792,248 | ||||||||
Lodging 0.2% | ||||||||
Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC 2.847%, due 3/15/14 (a)(b) | 10,000 | 9,325 | ||||||
Sheraton Holding Corp. 7.375%, due 11/15/15 | 332,000 | 366,030 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. 6.75%, due 5/15/18 | 856,000 | 950,160 | ||||||
1,325,515 | ||||||||
Media 2.7% | ||||||||
Charter Communications Operating LLC 8.00%, due 4/30/12 (b) | 1,141,000 | 1,166,672 | ||||||
CSC Holdings LLC 8.50%, due 6/15/15 | 1,067,000 | 1,157,695 | ||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc. 3.50%, due 3/1/16 | 5,000,000 | 5,203,765 | ||||||
DISH DBS Corp. 7.125%, due 2/1/16 | 480,000 | 510,000 | ||||||
NBC Universal Media LLC 5.15%, due 4/30/20 | 2,900,000 | 3,259,078 | ||||||
Time Warner Cable, Inc. 8.25%, due 2/14/14 | 2,535,000 | 2,892,671 | ||||||
Time Warner, Inc. 7.70%, due 5/1/32 | 1,980,000 | 2,578,279 | ||||||
16,768,160 | ||||||||
Mining 0.1% | ||||||||
Alcoa, Inc. 5.90%, due 2/1/27 | 560,000 | 555,443 | ||||||
Miscellaneous—Manufacturing 0.4% | ||||||||
Actuant Corp. 6.875%, due 6/15/17 | 1,014,000 | 1,039,350 | ||||||
SPX Corp. 7.625%, due 12/15/14 | 1,100,000 | 1,188,000 | ||||||
2,227,350 | ||||||||
Office & Business Equipment 0.7% | ||||||||
Xerox Corp. 4.25%, due 2/15/15 | 4,055,000 | 4,275,912 | ||||||
Oil & Gas 2.0% | ||||||||
Chesapeake Energy Corp. 6.50%, due 8/15/17 | 192,000 | 206,400 | ||||||
9.50%, due 2/15/15 | 1,060,000 | 1,213,700 | ||||||
Concho Resources, Inc. 7.00%, due 1/15/21 | 345,000 | 372,600 | ||||||
8.625%, due 10/1/17 | 391,000 | 426,190 | ||||||
Forest Oil Corp. 8.00%, due 12/15/11 | 10,000 | 10,063 | ||||||
Frontier Oil Corp. 8.50%, due 9/15/16 | 601,000 | 634,055 | ||||||
KazMunaiGaz Finance Sub B.V. 11.75%, due 1/23/15 (b) | 165,000 | 200,475 | ||||||
Newfield Exploration Co. 6.625%, due 9/1/14 | 100,000 | 101,000 | ||||||
6.625%, due 4/15/16 | 2,865,000 | 2,947,369 | ||||||
Pemex Project Funding Master Trust 6.625%, due 6/15/35 | 25,000 | 27,250 | ||||||
Plains Exploration & Production Co. 7.625%, due 4/1/20 | 500,000 | 540,000 | ||||||
7.75%, due 6/15/15 | 813,000 | 843,487 | ||||||
Questar Market Resources, Inc. 6.05%, due 9/1/16 (f) | 2,000,000 | 2,076,000 | ||||||
6.80%, due 3/1/20 (f) | 1,306,000 | 1,413,288 | ||||||
Tesoro Corp. 6.50%, due 6/1/17 | 670,000 | 676,700 | ||||||
Whiting Petroleum Corp. 7.00%, due 2/1/14 | 855,000 | 923,400 | ||||||
12,611,977 | ||||||||
Oil & Gas Services 0.3% | ||||||||
Halliburton Co. 6.15%, due 9/15/19 | 1,350,000 | 1,664,593 | ||||||
Packaging & Containers 0.1% | ||||||||
Greif, Inc. 6.75%, due 2/1/17 | 320,000 | 336,000 | ||||||
Pharmaceuticals 0.3% | ||||||||
Cardinal Health, Inc. 4.625%, due 12/15/20 | 1,000,000 | 1,081,043 | ||||||
Medco Health Solutions, Inc. 7.25%, due 8/15/13 | 155,000 | 169,145 |
The notes to the financial statements are an integral part of,
14 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Pharmaceuticals (continued) | ||||||||
Valeant Pharmaceuticals International 6.75%, due 10/1/17 (b) | $ | 500,000 | $ | 500,000 | ||||
1,750,188 | ||||||||
Pipelines 2.7% | ||||||||
Boardwalk Pipelines, L.P. 5.875%, due 11/15/16 | 2,445,000 | 2,715,586 | ||||||
Copano Energy LLC/Copano Energy Finance Corp. 7.125%, due 4/1/21 | 628,000 | 642,130 | ||||||
7.75%, due 6/1/18 | 110,000 | 114,950 | ||||||
Energy Transfer Partners, L.P. 6.05%, due 6/1/41 | 325,000 | 334,023 | ||||||
8.50%, due 4/15/14 | 295,000 | 335,165 | ||||||
Kinder Morgan Energy Partners, L.P. 6.375%, due 3/1/41 | 4,185,000 | 4,707,493 | ||||||
Kinder Morgan Finance Co. LLC 6.00%, due 1/15/18 (b) | 3,720,000 | 3,813,000 | ||||||
MarkWest Energy Partners, L.P./MarkWest Energy Finance Corp. 6.25%, due 6/15/22 | 529,000 | 542,225 | ||||||
6.75%, due 11/1/20 | 145,000 | 152,250 | ||||||
ONEOK, Inc. 6.00%, due 6/15/35 | 1,425,000 | 1,593,298 | ||||||
Panhandle Eastern Pipeline Co., L.P. 8.125%, due 6/1/19 | 600,000 | 728,642 | ||||||
Plains All American Pipeline, L.P./PAA Finance Corp. 5.75%, due 1/15/20 | 1,117,000 | 1,258,677 | ||||||
16,937,439 | ||||||||
Real Estate Investment Trusts 1.5% | ||||||||
Equity One, Inc. 6.25%, due 12/15/14 | 850,000 | 905,038 | ||||||
HCP, Inc. 6.30%, due 9/15/16 | 540,000 | 581,779 | ||||||
Health Care REIT, Inc. 5.25%, due 1/15/22 | 3,000,000 | 2,868,462 | ||||||
Host Hotels & Resorts, L.P. 5.875%, due 6/15/19 (b) | 35,000 | 35,438 | ||||||
6.875%, due 11/1/14 | 10,000 | 10,138 | ||||||
Host Marriott, L.P. 6.375%, due 3/15/15 | 1,165,000 | 1,185,387 | ||||||
Series Q 6.75%, due 6/1/16 | 1,062,000 | 1,099,170 | ||||||
ProLogis, L.P. 7.375%, due 10/30/19 | 2,000,000 | 2,271,000 | ||||||
Weyerhaeuser Co. 7.375%, due 10/1/19 | 131,000 | 144,588 | ||||||
9,101,000 | ||||||||
Retail 2.1% | ||||||||
AmeriGas Partners, L.P./AmeriGas Finance Corp. 6.25%, due 8/20/19 | 532,000 | 526,680 | ||||||
CVS Caremark Corp. 5.75%, due 6/1/17 | 575,000 | 671,392 | ||||||
5.789%, due 1/10/26 (b)(f) | 88,958 | 92,707 | ||||||
Home Depot, Inc. 5.40%, due 3/1/16 | 410,000 | 467,871 | ||||||
HSN, Inc. 11.25%, due 8/1/16 | 375,000 | 416,250 | ||||||
J.C. Penney Corp., Inc. 7.125%, due 11/15/23 | 439,000 | 439,000 | ||||||
Limited Brands, Inc. 8.50%, due 6/15/19 | 127,000 | 147,955 | ||||||
Nordstrom, Inc. 7.00%, due 1/15/38 | 2,005,000 | 2,572,537 | ||||||
O’Reilly Automotive, Inc. 4.625%, due 9/15/21 | 3,955,000 | 3,970,246 | ||||||
Penske Auto Group, Inc. 7.75%, due 12/15/16 | 686,000 | 703,150 | ||||||
Sears Holdings Corp. 6.625%, due 10/15/18 | 2,950,000 | 2,544,375 | ||||||
TJX Cos., Inc. 6.95%, due 4/15/19 | 330,000 | 414,558 | ||||||
12,966,721 | ||||||||
Savings & Loans 0.2% | ||||||||
Amsouth Bank/Birmingham AL 5.20%, due 4/1/15 | 1,435,000 | 1,334,550 | ||||||
Telecommunications 4.4% | ||||||||
Alltel Corp. 6.50%, due 11/1/13 | 2,635,000 | 2,875,900 | ||||||
American Tower Corp. 4.50%, due 1/15/18 | 2,750,000 | 2,828,501 | ||||||
AT&T, Inc. 2.40%, due 8/15/16 | 2,160,000 | 2,208,136 | ||||||
3.875%, due 8/15/21 | 2,465,000 | 2,566,878 | ||||||
Cellco Partnership/Verizon Wireless Capital LLC 8.50%, due 11/15/18 | 1,500,000 | 2,028,108 | ||||||
Corning, Inc. 6.625%, due 5/15/19 | 500,000 | 607,292 | ||||||
8.875%, due 8/15/21 | 1,789,000 | 2,475,976 | ||||||
Crown Castle International Corp. 7.125%, due 11/1/19 | 243,000 | 263,048 | ||||||
EH Holding Corp. 6.50%, due 6/15/19 (b) | 526,000 | 537,835 | ||||||
7.625%, due 6/15/21 (b) | 125,000 | 129,375 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Portfolio of Investments††† October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Telecommunications (continued) | ||||||||
Frontier Communications Corp. 8.25%, due 4/15/17 | $ | 1,000,000 | $ | 1,067,500 | ||||
8.75%, due 4/15/22 | 3,720,000 | 3,943,200 | ||||||
GCI, Inc. 8.625%, due 11/15/19 | 1,187,000 | 1,273,057 | ||||||
MetroPCS Wireless, Inc. 6.625%, due 11/15/20 | 1,000,000 | 940,000 | ||||||
Nextel Communications, Inc. 5.95%, due 3/15/14 | 204,000 | 194,820 | ||||||
NII Capital Corp. 7.625%, due 4/1/21 | 500,000 | 515,000 | ||||||
SBA Telecommunications, Inc. 8.00%, due 8/15/16 | 86,000 | 92,450 | ||||||
8.25%, due 8/15/19 | 1,070,000 | 1,168,975 | ||||||
Sprint Capital Corp. 6.875%, due 11/15/28 | 430,000 | 313,900 | ||||||
8.75%, due 3/15/32 | 500,000 | 415,000 | ||||||
Sprint Nextel Corp. 8.375%, due 8/15/17 | 139,000 | 127,880 | ||||||
tw telecom holdings, Inc. 8.00%, due 3/1/18 | 960,000 | 1,017,600 | ||||||
27,590,431 | ||||||||
Textiles 0.9% | ||||||||
Cintas Corp. No 2 2.85%, due 6/1/16 | 5,480,000 | 5,631,840 | ||||||
Transportation 0.1% | ||||||||
Burlington Northern Santa Fe 5.65%, due 5/1/17 | 455,000 | 523,364 | ||||||
Kansas City Southern Railway 8.00%, due 6/1/15 | 175,000 | 186,375 | ||||||
709,739 | ||||||||
Total Corporate Bonds (Cost $276,639,748) | 291,346,536 | |||||||
Foreign Government Bond 0.0%‡ | ||||||||
Venezuela 0.0%‡ | ||||||||
Republic of Venezuela 6.00%, due 12/9/20 | 169,000 | 100,978 | ||||||
Total Foreign Government Bond (Cost $129,713) | 100,978 | |||||||
Mortgage-Backed Securities 7.9% | ||||||||
Commercial Mortgage Loans (Collateralized Mortgage Obligations) 7.9% | ||||||||
Banc of America Commercial Mortgage, Inc. Series 2005-5, Class A2 5.001%, due 10/10/45 | 41,356 | 41,363 | ||||||
Series 2007-2, Class A4 5.645%, due 4/10/49 (g) | 2,560,000 | 2,730,499 | ||||||
Bayview Commercial Asset Trust Series 2006-4A, Class A1 0.475%, due 12/25/36 (a)(b)(e) | 176,303 | 123,423 | ||||||
Bear Stearns Commercial Mortgage Securities | ||||||||
Series 2005-PW10, Class A4 5.405%, due 12/11/40 (a) | 2,550,000 | 2,803,513 | ||||||
Series 2007-PW16, Class A4 5.715%, due 6/11/40 (g) | 2,270,000 | 2,482,279 | ||||||
Citigroup Commercial Mortgage Trust Series 2008-C7, Class A4 6.072%, due 12/10/49 (g) | 1,300,000 | 1,434,672 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-CD3, Class A5 5.617%, due 10/15/48 | 3,390,000 | 3,679,618 | ||||||
Commercial Mortgage Loan Trust 6.006%, due 12/10/49 (g) | 2,275,000 | 2,425,220 | ||||||
Country Wide Alternative Loan Trust Series 2005-76, Class 2A1 1.23%, due 2/25/36 (a) | 2,539,476 | 1,531,538 | ||||||
Four Times Square Trust Series 2006-4TS, Class A 5.401%, due 12/13/28 (b) | 470,000 | 504,531 | ||||||
X Greenwich Capital Commercial Funding Corp. | ||||||||
Series 2005-GG5, Class A5 5.224%, due 4/10/37 (g) | 2,960,000 | 3,162,165 | ||||||
Series 2004-GG1, Class A7 5.317%, due 6/10/36 (a) | 3,275,000 | 3,495,398 | ||||||
GS Mortgage Securities Corp. Series 2004-GG2, Class A6 5.396%, due 8/10/38 (g) | 3,060,000 | 3,283,594 | ||||||
GS Mortgage Securities Corp. II | ||||||||
Series 2006-GG6, Class A4 5.553%, due 4/10/38 (a) | 2,919,880 | 3,148,431 | ||||||
Series 2007-GG10, Class A4 5.79%, due 8/10/45 (g) | 3,095,000 | 3,295,717 | ||||||
Harborview Mortgage Loan Trust Series 2005-11, Class 2A1A 0.554%, due 8/19/45 (a) | 65,144 | 43,861 |
The notes to the financial statements are an integral part of,
16 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Mortgage-Backed Securities (continued) | ||||||||
Commercial Mortgage Loans (Collateralized Mortgage Obligations) (continued) | ||||||||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||||||
Series 2007-LDPX, Class A3 5.42%, due 1/15/49 | $ | 2,565,000 | $ | 2,725,566 | ||||
Series 2007-CB18, Class A4 5.44%, due 6/12/47 | 2,260,000 | 2,380,969 | ||||||
JP Morgan Mortgage Trust | ||||||||
Series 2007-S3, Class 1A96 6.00%, due 8/25/37 | 645,612 | 537,838 | ||||||
Series 2007-S3, Class 1A97 6.00%, due 8/25/37 | 1,420,347 | 1,183,248 | ||||||
LB-UBS Commercial Mortgage Trust Series 2007-C6, Class A4 5.858%, due 7/15/40 (a) | 1,680,000 | 1,800,579 | ||||||
Morgan Stanley Capital I Series 2007-IQ15, Class A4 5.884%, due 6/11/49 (g) | 2,585,000 | 2,789,223 | ||||||
Mortgage Equity Conversion Asset Trust Series 2007-FF2, Class A 0.59%, due 2/25/42 (a)(b)(e)(f) | 423,700 | 381,330 | ||||||
Timberstar Trust Series 2006-1, Class A 5.668%, due 10/15/36 (b) | 160,000 | 178,300 | ||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||
Series 2007-C33, Class A4 5.899%, due 2/15/51 (g) | 990,000 | 1,053,016 | ||||||
WaMu Mortgage Pass-Through Certificate Series 2006-AR7, Class 2A 1.21%, due 7/25/46 (a) | 3,627,902 | 2,174,782 | ||||||
Total Mortgage-Backed Securities (Cost $47,499,279) | 49,390,673 | |||||||
Municipal Bonds 0.6% | ||||||||
Michigan 0.6% | ||||||||
Michigan Finance Authority Revenue Series A-2 6.65%, due 3/20/12 | 3,700,000 | 3,762,086 | ||||||
West Virginia 0.0%‡ | ||||||||
Tobacco Settlement Finance Authority of West Virginia 7.467%, due 6/1/47 | 420,000 | 303,950 | ||||||
Total Municipal Bonds (Cost $4,120,000) | 4,066,036 | |||||||
U.S. Government & Federal Agencies 33.1% | ||||||||
Fannie Mae (Collateralized Mortgage Obligations) 0.0%‡ | ||||||||
Series 2006-B1, Class AB 6.00%, due 6/25/16 | 25,295 | 25,390 | ||||||
Series 1991-66, Class J 8.125%, due 6/25/21 | 850 | 977 | ||||||
26,367 | ||||||||
X Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities) 3.7% | ||||||||
4.00%, due 2/1/41 | 8,301,503 | 8,665,055 | ||||||
4.50%, due 9/1/39 | 767,734 | 823,529 | ||||||
4.50%, due 5/1/41 | 3,900,393 | 4,134,493 | ||||||
4.50%, due 6/1/41 | 4,195,444 | 4,447,252 | ||||||
5.00%, due 8/1/33 | 937,744 | 1,009,156 | ||||||
5.06%, due 6/1/35 (a) | 337,912 | 359,083 | ||||||
5.50%, due 1/1/21 | 314,053 | 339,567 | ||||||
5.50%, due 2/1/33 | 340,902 | 370,791 | ||||||
5.50%, due 7/1/34 | 886,276 | 963,842 | ||||||
5.50%, due 4/1/37 | 68,878 | 74,616 | ||||||
5.50%, due 5/1/37 | 52,861 | 57,264 | ||||||
5.50%, due 7/1/37 | 272,002 | 294,320 | ||||||
5.50%, due 1/1/38 | 343,741 | 378,391 | ||||||
6.00%, due 2/1/27 | 198,505 | 216,902 | ||||||
6.00%, due 3/1/36 | 432,729 | 475,808 | ||||||
6.50%, due 4/1/37 | 409,459 | 455,404 | ||||||
23,065,473 | ||||||||
X Federal National Mortgage Association 1.9% | ||||||||
1.60%, due 11/23/15 | 11,765,000 | 11,776,071 | ||||||
X Federal National Mortgage Association (Mortgage Pass-Through Securities) 16.4% | ||||||||
3.50%, due 2/1/41 | 15,342,907 | 15,611,108 | ||||||
4.00%, due 9/1/31 | 4,955,513 | 5,200,095 | ||||||
4.00%, due 11/1/40 | 2,107,205 | 2,210,878 | ||||||
4.00%, due 2/1/41 | 479,641 | 502,490 | ||||||
4.00%, due 3/1/41 | 5,195,584 | 5,451,203 | ||||||
4.50%, due 4/1/18 | 168,432 | 180,470 | ||||||
4.50%, due 7/1/18 | 708,144 | 758,754 | ||||||
4.50%, due 11/1/18 | 970,250 | 1,039,593 | ||||||
4.50%, due 3/1/21 TBA (h) | 16,270,000 | 17,322,466 | ||||||
4.50%, due 6/1/23 | 1,509,030 | 1,609,334 | ||||||
5.00%, due 9/1/17 | 301,795 | 326,058 | ||||||
5.00%, due 9/1/20 | 182,090 | 196,616 | ||||||
5.00%, due 10/1/20 | 313,232 | 338,219 | ||||||
5.00%, due 12/1/20 | 621,698 | 671,291 | ||||||
5.00%, due 10/1/33 | 740,979 | 799,678 | ||||||
5.00%, due 6/1/35 | 5,007,229 | 5,402,330 | ||||||
5.00%, due 7/1/35 | 788,945 | 850,704 | ||||||
5.00%, due 1/1/36 | 1,062,680 | 1,145,868 | ||||||
5.00%, due 2/1/36 | 8,119,068 | 8,754,638 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Portfolio of Investments††† October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
X Federal National Mortgage Association (Mortgage Pass-Through Securities) (continued) | ||||||||
5.00%, due 5/1/36 | $ | 2,997,864 | $ | 3,232,541 | ||||
5.00%, due 9/1/36 | 767,295 | 827,360 | ||||||
5.50%, due 2/1/17 | 228,616 | 248,260 | ||||||
5.50%, due 6/1/21 | 699,860 | 759,560 | ||||||
5.50%, due 6/1/33 | 4,657,050 | 5,083,461 | ||||||
5.50%, due 11/1/33 | 652,470 | 712,211 | ||||||
5.50%, due 12/1/33 | 484,055 | 528,377 | ||||||
5.50%, due 4/1/34 | 1,943,175 | 2,125,000 | ||||||
5.50%, due 5/1/34 | 1,716,000 | 1,873,121 | ||||||
5.50%, due 6/1/34 | 569,079 | 621,096 | ||||||
5.50%, due 3/1/35 | 863,940 | 942,909 | ||||||
5.50%, due 4/1/36 | 2,127,714 | 2,321,868 | ||||||
5.50%, due 12/1/36 | 705,741 | 767,604 | ||||||
5.50%, due 1/1/37 | 1,154,233 | 1,283,182 | ||||||
5.50%, due 4/1/37 | 2,390,953 | 2,597,546 | ||||||
5.50%, due 7/1/37 | 1,215,213 | 1,350,975 | ||||||
5.50%, due 8/1/37 | 665,022 | 725,705 | ||||||
5.50%, due 9/1/37 | 23,209 | 25,214 | ||||||
6.00%, due 8/1/17 | 33,984 | 36,939 | ||||||
6.00%, due 1/1/33 | 214,348 | 237,926 | ||||||
6.00%, due 3/1/33 | 262,630 | 291,355 | ||||||
6.00%, due 8/1/34 | 10,130 | 11,203 | ||||||
6.00%, due 9/1/35 | 767,603 | 858,276 | ||||||
6.00%, due 6/1/36 | 502,878 | 553,009 | ||||||
6.00%, due 12/1/36 | 578,832 | 643,497 | ||||||
6.00%, due 4/1/37 | 308,447 | 336,786 | ||||||
6.00%, due 9/1/37 | 132,056 | 145,056 | ||||||
6.00%, due 10/1/37 | 1,536,111 | 1,677,555 | ||||||
6.00%, due 11/1/37 | 94,574 | 103,884 | ||||||
6.00%, due 1/1/38 | 14,783 | 16,229 | ||||||
6.00%, due 11/1/38 | 737,165 | 809,269 | ||||||
6.50%, due 6/1/31 | 58,248 | 65,672 | ||||||
6.50%, due 8/1/31 | 44,041 | 49,653 | ||||||
6.50%, due 10/1/31 | 34,529 | 38,930 | ||||||
6.50%, due 6/1/32 | 51,696 | 58,155 | ||||||
6.50%, due 6/1/36 | 26,171 | 29,114 | ||||||
6.50%, due 7/1/36 | 88,280 | 98,206 | ||||||
6.50%, due 8/1/36 | 16,415 | 18,261 | ||||||
6.50%, due 11/1/36 | 411,900 | 458,215 | ||||||
6.50%, due 2/1/37 | 116,562 | 129,231 | ||||||
6.50%, due 7/1/37 | 45,516 | 50,463 | ||||||
6.50%, due 8/1/37 | 179,720 | 199,254 | ||||||
6.50%, due 9/1/37 | 478,974 | 531,035 | ||||||
6.50%, due 3/1/38 | 205,189 | 227,491 | ||||||
102,072,447 | ||||||||
X Freddie Mac (Collateralized Mortgage Obligations) 1.2% | ||||||||
Series 3104, Class QC 5.00%, due 9/15/31 | 2,400,000 | 2,486,640 | ||||||
Series 2690, Class PG 5.00%, due 4/15/32 | 1,250,000 | 1,352,508 | ||||||
Series 2734, Class PG 5.00%, due 7/15/32 | 1,804,000 | 1,925,255 | ||||||
Series 3113, Class QD 5.00%, due 6/15/34 | 1,565,000 | 1,704,747 | ||||||
7,469,150 | ||||||||
Freddie Mac Real Estate Mortgage Investment Conduit (Collateralized Mortgage Obligation) 0.0%‡ | ||||||||
Series R001, Class AE 4.375%, due 4/15/15 | 91,039 | 91,261 | ||||||
X Government National Mortgage Association (Mortgage Pass-Through Securities) 3.0% | ||||||||
4.00%, due 11/20/40 | 1,212,491 | 1,294,547 | ||||||
5.50%, due 3/1/36 TBA (h) | 2,560,000 | 2,836,800 | ||||||
6.00%, due 2/15/29 | 30,842 | 34,678 | ||||||
6.00%, due 4/15/29 | 162,293 | 182,504 | ||||||
6.00%, due 8/15/32 | 350,412 | 393,775 | ||||||
6.00%, due 12/1/35 TBA (h) | 6,020,000 | 6,716,063 | ||||||
6.50%, due 7/15/28 | 36,687 | 41,947 | ||||||
6.50%, due 5/15/29 | 20,509 | 23,455 | ||||||
6.50%, due 1/1/33 TBA (h) | 6,030,000 | 6,779,510 | ||||||
12.50%, due 1/15/14 | 373 | 376 | ||||||
18,303,655 | ||||||||
X United States Treasury Bonds 6.4% | ||||||||
3.75%, due 8/15/41 | 19,575,000 | 21,630,375 | ||||||
4.375%, due 5/15/41 | 5,355,000 | 6,573,263 | ||||||
5.375%, due 2/15/31 | 6,950,000 | 9,453,084 | ||||||
6.25%, due 5/15/30 | 1,240,000 | 1,836,943 | ||||||
39,493,665 | ||||||||
United States Treasury Notes 0.4% | ||||||||
2.125%, due 8/15/21 | 1,650,000 | 1,642,789 | ||||||
2.375%, due 7/31/17 | 1,000,000 | 1,062,500 | ||||||
2,705,289 | ||||||||
United States Treasury Strip Principal 0.1% | ||||||||
(zero coupon), due 8/15/23 | 820,000 | 600,235 | ||||||
Total U.S. Government & Federal Agencies (Cost $199,590,049) | 205,603,613 | |||||||
Yankee Bonds 8.4% (i) | ||||||||
Auto Manufacturers 0.2% | ||||||||
Volvo Treasury AB 5.95%, due 4/1/15 (b) | 1,130,000 | 1,221,650 | ||||||
The notes to the financial statements are an integral part of,
18 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Yankee Bonds (continued) | ||||||||
Banks 0.8% | ||||||||
Lloyds TSB Bank PLC 4.375%, due 1/12/15 (b) | $ | 5,000,000 | $ | 5,013,755 | ||||
UBS A.G. 3.875%, due 1/15/15 | 215,000 | 215,576 | ||||||
5,229,331 | ||||||||
Diversified Financial Services 0.6% | ||||||||
Irish Life & Permanent Group Holdings PLC 3.60%, due 1/14/13 (b) | 2,500,000 | 2,178,903 | ||||||
RCI Banque S.A. 3.40%, due 4/11/14 (b) | 975,000 | 952,290 | ||||||
Smurfit Capital Funding PLC 7.50%, due 11/20/25 | 528,000 | 496,320 | ||||||
3,627,513 | ||||||||
Electric 0.5% | ||||||||
SP PowerAssets, Ltd. 5.00%, due 10/22/13 (b) | 305,000 | 325,257 | ||||||
Taqa Abu Dhabi National Energy Co. 6.25%, due 9/16/19 (b) | 185,000 | 204,888 | ||||||
TransAlta Corp. 6.65%, due 5/15/18 | 2,255,000 | 2,580,922 | ||||||
3,111,067 | ||||||||
Engineering & Construction 0.2% | ||||||||
BAA Funding, Ltd. 4.875%, due 7/15/23 (b) | 900,000 | 916,000 | ||||||
Holding Company—Diversified 0.2% | ||||||||
EnCana Holdings Finance Corp. 5.80%, due 5/1/14 | 860,000 | 943,167 | ||||||
Insurance 0.2% | ||||||||
Fairfax Financial Holdings, Ltd. | ||||||||
7.75%, due 7/15/37 | 677,000 | 645,750 | ||||||
8.25%, due 10/1/15 | 438,000 | 482,099 | ||||||
8.30%, due 4/15/26 | 15,000 | 15,685 | ||||||
1,143,534 | ||||||||
Media 0.2% | ||||||||
Videotron Ltee 6.375%, due 12/15/15 | 542,000 | 551,485 | ||||||
6.875%, due 1/15/14 | 484,000 | 487,630 | ||||||
9.125%, due 4/15/18 | 252,000 | 277,200 | ||||||
1,316,315 | ||||||||
Mining 0.6% | ||||||||
Anglo American Capital PLC 9.375%, due 4/8/19 (b) | 2,380,000 | 3,083,940 | ||||||
Rio Tinto Finance USA, Ltd. 3.75%, due 9/20/21 | 845,000 | 877,899 | ||||||
3,961,839 | ||||||||
Miscellaneous—Manufacturing 0.6% | ||||||||
Siemens Financieringsmaatschappij N.V. 6.125%, due 8/17/26 (b) | 265,000 | 323,220 | ||||||
Tyco Electronics Group S.A. 6.55%, due 10/1/17 | 2,945,000 | 3,444,749 | ||||||
3,767,969 | ||||||||
Oil & Gas 2.1% | ||||||||
CNOOC Finance 2011, Ltd. 4.25%, due 1/26/21 (b) | 5,490,000 | 5,734,958 | ||||||
ENI S.p.A 4.15%, due 10/1/20 (b) | 2,900,000 | 2,912,151 | ||||||
Gaz Capital S.A. 8.125%, due 7/31/14 (b) | 3,085,000 | 3,432,063 | ||||||
Gazprom International S.A. 7.201%, due 2/1/20 (b) | 190,866 | 209,953 | ||||||
Petroleum Co. of Trinidad & Tobago, Ltd. 9.75%, due 8/14/19 (b) | 585,000 | 680,220 | ||||||
TNK-BP Finance S.A. 7.50%, due 7/18/16 (b) | 285,000 | 314,925 | ||||||
13,284,270 | ||||||||
Telecommunications 2.2% | ||||||||
Inmarsat Finance PLC 7.375%, due 12/1/17 (b) | 1,111,000 | 1,188,770 | ||||||
Qtel International Finance, Ltd. 6.50%, due 6/10/14 (b) | 1,500,000 | 1,642,500 | ||||||
Telecom Italia Capital S.A. 6.175%, due 6/18/14 | 5,185,000 | 5,266,918 | ||||||
Virgin Media Finance PLC 8.375%, due 10/15/19 | 180,000 | 200,250 | ||||||
Virgin Media Secured Finance PLC 6.50%, due 1/15/18 | 960,000 | 1,034,400 | ||||||
Vodafone Group PLC 5.625%, due 2/27/17 | 3,578,000 | 4,203,327 | ||||||
13,536,165 | ||||||||
Total Yankee Bonds (Cost $50,057,183) | 52,058,820 | |||||||
Total Long-Term Bonds (Cost $580,113,497) | 604,786,033 | |||||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Portfolio of Investments††† October 31, 2011 (continued)
Number of | ||||||||
Warrants | Value | |||||||
Warrants 0.0%‡ | ||||||||
Media 0.0%‡ | ||||||||
ION Media Networks, Inc. Second Lien Expires 12/12/39 (d)(e)(f) | 1 | 0 (j | ) | |||||
Unsecured Debt Expires 12/31/49 (d)(e)(f) | 1 | 0 (j | ) | |||||
Total Warrants (Cost $4) | 0 (j | ) | ||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investment 9.9% | ||||||||
Repurchase Agreement 9.9% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $61,839,271 (Collateralized by a Federal Home Loan Mortgage Corp. Security with a rate of 0.78% and a maturity date of 9/8/14, with a Principal Amount of $63,045,000 and a Market Value of $63,080,810) | $ | 61,839,254 | $ | 61,839,254 | ||||
Total Short-Term Investment (Cost $61,839,254) | 61,839,254 | |||||||
Total Investments (Cost $641,952,755) (m) | 107.2 | % | 666,625,287 | |||||
Other Assets, Less Liabilities | (7.2 | ) | (44,879,563 | ) | ||||
Net Assets | 100.0 | % | $ | 621,745,724 | ||||
Unrealized | ||||||||
Contracts | Appreciation | |||||||
Long | (Depreciation) (k) | |||||||
Futures Contracts 0.0%‡(l) | ||||||||
United States Treasury Bonds December 2011 (30 Year) | 55 | $ | (44,825 | ) | ||||
United States Treasury Ultra Long-Term Bonds December 2011 (30 Year) | 25 | 246,813 | ||||||
Total Futures Contracts Long (Settlement Value $11,456,094) | $ | 201,988 | ||||||
Unrealized | ||||||||
Contracts | Appreciation | |||||||
Short | (Depreciation) (k) | |||||||
United States Treasury Notes December 2011 (5 Year) | (294 | ) | $ | (44,388 | ) | |||
December 2011 (10 Year) | (92 | ) | 93,207 | |||||
Total Futures Contracts Short (Settlement Value $47,920,906) | 48,819 | |||||||
Total Futures Contracts (Settlement Value $36,464,812) | $ | 250,807 | ||||||
††† | On a daily basis New York Life Investments confirms that the value of the Fund’s liquid assets (liquid portfolio securities and cash) is sufficient to cover its potential senior securities (e.g., futures, swaps, options). | |
‡ | Less than one-tenth of a percent. | |
(a) | Floating rate—Rate shown is the rate in effect at October 31, 2011. | |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(2) of the Securities Act of 1933, as amended. | |
(c) | Subprime mortgage investment and other asset-backed securities—The total market value of these security at October 31, 2011 is $103,032, which represents less than one-tenth of a percent of the Fund’s net assets. | |
(d) | Non-income producing security. | |
(e) | Illiquid security—The total market value of these securities at October 31, 2011 is $504,993, which represents 0.1% of the Fund’s net assets. | |
(f) | Fair valued security. The total market value of these securities at October 31, 2011 is $3,963,565, which represents 0.6% of the Fund’s net assets. | |
(g) | Collateral strip rate—Bond whose interest is based on the weighted net interest rate of the collateral. Coupon rate adjusts periodically based on a predetermined schedule. Rate shown is the rate in effect at October 31, 2011. | |
(h) | TBA—Securities purchased on a forward commitment basis with an approximate principal amount and maturity date. The actual principal amount and maturity date will be determined upon settlement. The market value of these securities at October 31, 2011 is $33,654,839, which represents 5.4% of the Fund’s net assets. All or a portion of these securities were acquired under a mortgage dollar roll agreement. | |
(i) | Yankee Bond—dollar-denominated bond issued in the United States by a foreign bank or corporation. | |
(j) | Less than one dollar. | |
(k) | Represents the difference between the value of the contracts at the time they were opened and the value at October 31, 2011. | |
(l) | At October 31, 2011, cash in the amount of $191,825 is on deposit with the broker for futures transactions. | |
(m) | At October 31, 2011, cost is $643,547,440 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 29,861,987 | ||
Gross unrealized depreciation | (6,784,140 | ) | ||
Net unrealized appreciation | $ | 23,077,847 | ||
The notes to the financial statements are an integral part of,
20 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Quoted | ||||||||||||||||||
Prices in | ||||||||||||||||||
Active | Significant | |||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||
Investments in Securities (a) | ||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||
Asset-Backed Securities | $ | — | $ | 2,219,377 | $ | — | $ | 2,219,377 | ||||||||||
Corporate Bonds (b) | — | 287,764,301 | 3,582,235 | 291,346,536 | ||||||||||||||
Foreign Government Bond | — | 100,978 | — | 100,978 | ||||||||||||||
Mortgage-Backed Securities (c) | — | 49,009,343 | 381,330 | 49,390,673 | ||||||||||||||
Municipal Bonds | — | 4,066,036 | — | 4,066,036 | ||||||||||||||
U.S. Government & Federal Agencies | — | 205,603,613 | — | 205,603,613 | ||||||||||||||
Yankee Bonds | — | 52,058,820 | — | 52,058,820 | ||||||||||||||
Total Long-Term Bonds | — | 600,822,468 | 3,963,565 | 604,786,033 | ||||||||||||||
Warrants (d) | — | — | 0 | (d) | 0 | (d) | ||||||||||||
Short-Term Investment | ||||||||||||||||||
Repurchase Agreement | — | 61,839,254 | — | 61,839,254 | ||||||||||||||
Total Investments in Securities | — | 662,661,722 | 3,963,565 | 666,625,287 | ||||||||||||||
Other Financial Instruments | ||||||||||||||||||
Futures Contracts Long (e) | 246,813 | — | — | 246,813 | ||||||||||||||
Futures Contracts Short (e) | 93,207 | — | — | 93,207 | ||||||||||||||
Total Investments in Securities and Other Financial Instruments | $ | 340,020 | $ | 662,661,722 | $ | 3,963,565 | $ | 666,965,307 | ||||||||||
Liability Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts Long (e) | $ | (44,825 | ) | $ | �� — | $ | — | $ | (44,825 | ) | ||||||
Futures Contracts Short (e) | (44,388 | ) | — | — | (44,388 | ) | ||||||||||
Total Other Financial Instruments | $ | (89,213 | ) | $ | — | $ | — | $ | (89,213 | ) | ||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 securities valued at $240, $3,489,288 and $92,707 are held in Commercial Services, Oil & Gas and Retail, respectively, within the Corporate Bonds section of the Portfolio of Investments. |
(c) | The Level 3 security valued at $381,330 is held in Commercial Mortgage Loans (Collateralized Mortgage Obligations) within the Mortgage-Backed Securities section of the Portfolio of Investments. |
(d) | The Level 3 securities valued at less than one dollar is held in Media within the Warrants section of the Portfolio of Investments. |
(e) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 21 |
Portfolio of Investments††† October 31, 2011 (continued)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Change in | ||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||||||||||||||||||
(Depreciation) | ||||||||||||||||||||||||||||||||||||||||
from | ||||||||||||||||||||||||||||||||||||||||
Balance | Change in | Balance | Investments | |||||||||||||||||||||||||||||||||||||
as of | Accrued | Realized | Unrealized | Transfers | Transfers | as of | Still Held at | |||||||||||||||||||||||||||||||||
October 31, | Discounts | Gain | Appreciation | in to | out of | October 31, | October 31, | |||||||||||||||||||||||||||||||||
Investments in Securities | 2010 | (Premiums) | (Loss) | (Depreciation) | Purchases | Sales | Level 3 | Level 3 | 2011 | 2011 (a) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Corporate Bonds | ||||||||||||||||||||||||||||||||||||||||
Commercial Services | $ | 780 | $ | — | $ | — | $ | (540 | ) | $ | — | $ | — | $ | — | $ | — | $ | 240 | $ | (540 | ) | ||||||||||||||||||
Media | 177 | — | (13,907 | ) | 13,832 | — | (102 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Oil & Gas | — | (20,314 | ) | — | 83,036 | — | — | 3,426,566 | — | 3,489,288 | 83,036 | |||||||||||||||||||||||||||||
Retail | 97,415 | (39 | ) | (101 | ) | (515 | ) | — | (4,053 | ) (b) | — | — | 92,707 | (424 | ) | |||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Commercial Mortgage Loans (Collateralized Mortgage Obligations) | 420,511 | — | — | (20,471 | ) | — | (18,710 | ) (b) | — | — | 381,330 | (21,397 | ) | |||||||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||||||||||||||||||
Media | 0 | (c) | — | — | — | — | — | — | — | 0 | (c) | — | ||||||||||||||||||||||||||||
Total | $ | 518,883 | $ | (20,353 | ) | $ | (14,008 | ) | $ | 75,342 | $ | — | $ | (22,865 | ) | $ | 3,426,566 | $ | — | $ | 3,963,565 | $ | 60,675 | |||||||||||||||||
(a) | Included in “change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
(b) | Sales include principal reductions. |
(c) | Less than one dollar. |
The notes to the financial statements are an integral part of,
22 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $641,952,755) | $ | 666,625,287 | ||
Cash collateral on deposit at broker | 191,825 | |||
Receivables: | ||||
Interest | 6,255,500 | |||
Investment securities sold | 4,666,458 | |||
Fund shares sold | 1,203,534 | |||
Other assets | 31,368 | |||
Total assets | 678,973,972 | |||
Liabilities | ||||
Due to custodian | 228 | |||
Payables: | ||||
Investment securities purchased | 55,400,708 | |||
Fund shares redeemed | 1,150,193 | |||
Manager (See Note 3) | 249,501 | |||
Transfer agent (See Note 3) | 125,566 | |||
NYLIFE Distributors (See Note 3) | 40,868 | |||
Variation margin on futures contracts | 39,125 | |||
Professional fees | 35,602 | |||
Shareholder communication | 32,302 | |||
Trustees | 2,553 | |||
Custodian | 2,133 | |||
Accrued expenses | 5,212 | |||
Dividend payable | 144,257 | |||
Total liabilities | 57,228,248 | |||
Net assets | $ | 621,745,724 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 57,276 | ||
Additional paid-in capital | 585,986,271 | |||
586,043,547 | ||||
Undistributed net investment income | 539,873 | |||
Accumulated net realized gain (loss) on investments and futures transactions | 10,238,965 | |||
Net unrealized appreciation (depreciation) on investments and futures contracts | 24,923,339 | |||
Net assets | $ | 621,745,724 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 6,013,178 | ||
Shares of beneficial interest outstanding | 551,641 | |||
Net asset value per share outstanding | $ | 10.90 | ||
Maximum sales charge (4.50% of offering price) | 0.51 | |||
Maximum offering price per share outstanding | $ | 11.41 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 47,432,181 | ||
Shares of beneficial interest outstanding | 4,372,562 | |||
Net asset value per share outstanding | $ | 10.85 | ||
Maximum sales charge (4.50% of offering price) | 0.51 | |||
Maximum offering price per share outstanding | $ | 11.36 | ||
Class B | ||||
Net assets applicable to outstanding shares | $ | 7,815,273 | ||
Shares of beneficial interest outstanding | 719,729 | |||
Net asset value and offering price per share outstanding | $ | 10.86 | ||
Class C | ||||
Net assets applicable to outstanding shares | $ | 27,051,926 | ||
Shares of beneficial interest outstanding | 2,488,397 | |||
Net asset value and offering price per share outstanding | $ | 10.87 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 533,433,166 | ||
Shares of beneficial interest outstanding | 49,143,680 | |||
Net asset value and offering price per share outstanding | $ | 10.85 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 23 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Interest (a) | $ | 25,922,234 | ||
Expenses | ||||
Manager (See Note 3) | 3,379,993 | |||
Transfer agent (See Note 3) | 768,027 | |||
Distribution/Service—Investor Class (See Note 3) | 12,233 | |||
Distribution/Service—Class A (See Note 3) | 97,223 | |||
Distribution/Service—Class B (See Note 3) | 73,938 | |||
Distribution/Service—Class C (See Note 3) | 220,051 | |||
Professional fees | 84,209 | |||
Registration | 82,998 | |||
Shareholder communication | 61,843 | |||
Custodian | 31,444 | |||
Trustees | 15,651 | |||
Miscellaneous | 24,533 | |||
Total expenses before waiver/reimbursement | 4,852,143 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (958,333 | ) | ||
Net expenses | 3,893,810 | |||
Net investment income (loss) | 22,028,424 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Security transactions | 11,991,617 | |||
Futures transactions | (1,025,874 | ) | ||
Net realized gain (loss) on investments and futures transactions | 10,965,743 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (6,020,268 | ) | ||
Futures contracts | 250,807 | |||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | (5,769,461 | ) | ||
Net realized and unrealized gain (loss) on investments and futures transactions | 5,196,282 | |||
Net increase (decrease) in net assets resulting from operations | $ | 27,224,706 | ||
(a) | Interest recorded net of foreign withholding taxes in the amount of $370. |
The notes to the financial statements are an integral part of,
24 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 22,028,424 | $ | 22,159,089 | ||||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | 10,965,743 | 12,507,067 | ||||||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency transactions | (5,769,461 | ) | 20,362,570 | |||||
Net increase (decrease) in net assets resulting from operations | 27,224,706 | 55,028,726 | ||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (196,760 | ) | (115,975 | ) | ||||
Class A | (1,574,139 | ) | (1,273,929 | ) | ||||
Class B | (242,220 | ) | (177,715 | ) | ||||
Class C | (720,180 | ) | (535,541 | ) | ||||
Class I | (21,870,061 | ) | (19,995,340 | ) | ||||
(24,603,360 | ) | (22,098,500 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (35,958 | ) | (5,598 | ) | ||||
Class A | (264,034 | ) | (69,433 | ) | ||||
Class B | (58,238 | ) | (12,101 | ) | ||||
Class C | (166,355 | ) | (34,781 | ) | ||||
Class I | (3,659,553 | ) | (1,013,979 | ) | ||||
(4,184,138 | ) | (1,135,892 | ) | |||||
Total dividends and distributions to shareholders | (28,787,498 | ) | (23,234,392 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 224,977,290 | 114,757,447 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 26,454,150 | 21,514,227 | ||||||
Cost of shares redeemed | (185,597,415 | ) | (185,802,260 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 65,834,025 | (49,530,586 | ) | |||||
Net increase (decrease) in net assets | 64,271,233 | (17,736,252 | ) | |||||
Net Assets | ||||||||
Beginning of year | 557,474,491 | 575,210,743 | ||||||
End of year | $ | 621,745,724 | $ | 557,474,491 | ||||
Undistributed net investment income at end of year | $ | 539,873 | $ | 2,408,779 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 25 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 10.94 | $ | 10.37 | $ | 9.39 | $ | 9.92 | ||||||||||
Net investment income (loss) | 0.38 | 0.35 | 0.30 | 0.25 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.09 | 0.61 | 0.96 | (0.54 | ) | |||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | (0.01 | ) | 0.01 | — | |||||||||||||
Total from investment operations | 0.47 | 0.95 | 1.27 | (0.29 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.43 | ) | (0.36 | ) | (0.29 | ) | (0.24 | ) | ||||||||||
From net realized gain on investments | (0.08 | ) | (0.02 | ) | — | — | ||||||||||||
Total dividends and distributions | (0.51 | ) | (0.38 | ) | (0.29 | ) | (0.24 | ) | ||||||||||
Net asset value at end of period | $ | 10.90 | $ | 10.94 | $ | 10.37 | $ | 9.39 | ||||||||||
Total investment return (a) | 4.51 | % | 9.33 | % | 13.72 | % | (2.98 | %)(b) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 3.55 | % | 3.38 | % | 3.03 | % | 3.73 | % †† | ||||||||||
Net expenses | 1.03 | % | 1.07 | % | 1.17 | % | 1.20 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.13 | % | 1.17 | % | 1.25 | % | 1.34 | % †† | ||||||||||
Portfolio turnover rate | 104 | % (c) | 185 | % (c) | 246 | % (c) | 114 | % (c) | ||||||||||
Net assets at end of period (in 000’s) | $ | 6,013 | $ | 4,608 | $ | 2,743 | $ | 1,727 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(b) | Total investment return is not annualized. | |
(c) | The portfolio turnover rates not including mortgage dollar rolls were 65%, 79%, 130%, and 92% for years ended October 31, 2011, 2010, 2009, and 2008, respectively. |
The notes to the financial statements are an integral part of,
26 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.89 | $ | 10.32 | $ | 9.35 | �� | $ | 9.73 | $ | 9.74 | |||||||||||
Net investment income (loss) | 0.39 | 0.36 | 0.34 | 0.43 | 0.43 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.09 | 0.61 | 0.93 | (0.41 | ) | 0.01 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | (0.01 | ) | 0.01 | — | 0.00 | ‡ | |||||||||||||||
Total from investment operations | 0.48 | 0.96 | 1.28 | 0.02 | 0.44 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.44 | ) | (0.37 | ) | (0.31 | ) | (0.40 | ) | (0.45 | ) | ||||||||||||
From net realized gain on investments | (0.08 | ) | (0.02 | ) | — | — | — | |||||||||||||||
Total dividends and distributions | (0.52 | ) | (0.39 | ) | (0.31 | ) | (0.40 | ) | (0.45 | ) | ||||||||||||
Net asset value at end of year | $ | 10.85 | $ | 10.89 | $ | 10.32 | $ | 9.35 | $ | 9.73 | ||||||||||||
Total investment return (a) | 4.63 | % | 9.48 | % | 13.89 | % | 0.07 | % | 4.63 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 3.62 | % | 3.47 | % | 3.20 | % | 4.02 | % | 4.35 | % | ||||||||||||
Net expenses | 0.93 | % | 0.96 | % | 1.00 | % | 1.03 | % | 1.10 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.03 | % | 1.06 | % | 1.08 | % | 1.16 | % | 1.38 | % | ||||||||||||
Portfolio turnover rate | 104 | % (b) | 185 | % (b) | 246 | % (b) | 114 | % (b) | 70 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 47,432 | $ | 35,837 | $ | 33,134 | $ | 16,211 | $ | 10,821 |
‡ | Less than one cent per share. | |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(b) | The portfolio turnover rates not including mortgage dollar rolls were 65%, 79%, 130%, and 92% for years ended October 31, 2011, 2010, 2009, and 2008, respectively. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 27 |
Financial Highlights selected per share data and ratios
Class B | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.90 | $ | 10.33 | $ | 9.36 | $ | 9.74 | $ | 9.76 | ||||||||||||
Net investment income (loss) | 0.30 | 0.27 | 0.23 | 0.30 | 0.35 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.09 | 0.61 | 0.95 | (0.37 | ) | 0.01 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | (0.01 | ) | 0.01 | — | 0.00 | ‡ | |||||||||||||||
Total from investment operations | 0.39 | 0.87 | 1.19 | (0.07 | ) | 0.36 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.35 | ) | (0.28 | ) | (0.22 | ) | (0.31 | ) | (0.38 | ) | ||||||||||||
From net realized gain on investments | (0.08 | ) | (0.02 | ) | — | — | — | |||||||||||||||
Total dividends and distributions | (0.43 | ) | (0.30 | ) | (0.22 | ) | (0.31 | ) | (0.38 | ) | ||||||||||||
Net asset value at end of year | $ | 10.86 | $ | 10.90 | $ | 10.33 | $ | 9.36 | $ | 9.74 | ||||||||||||
Total investment return (a) | 3.74 | % | 8.55 | % | 12.82 | % | (0.79 | %) | 3.75 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.81 | % | 2.62 | % | 2.29 | % | 3.13 | % | 3.60 | % | ||||||||||||
Net expenses | 1.78 | % | 1.81 | % | 1.92 | % | 1.91 | % | 1.85 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.88 | % | 1.91 | % | 2.00 | % | 2.08 | % | 2.13 | % | ||||||||||||
Portfolio turnover rate | 104 | % (b) | 185 | % (b) | 246 | % (b) | 114 | % (b) | 70 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 7,815 | $ | 7,797 | $ | 6,065 | $ | 4,580 | $ | 2,968 |
‡ | Less than one cent per share. | |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(b) | The portfolio turnover rates not including mortgage dollar rolls were 65%, 79%, 130%, and 92% for years ended October 31, 2011, 2010, 2009, and 2008, respectively. |
The notes to the financial statements are an integral part of,
28 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class C | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.91 | $ | 10.34 | $ | 9.37 | $ | 9.75 | $ | 9.76 | ||||||||||||
Net investment income (loss) | 0.30 | 0.27 | 0.23 | 0.30 | 0.35 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.09 | 0.61 | 0.95 | (0.37 | ) | 0.02 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | (0.01 | ) | 0.01 | — | 0.00 | ‡ | |||||||||||||||
Total from investment operations | 0.39 | 0.87 | 1.19 | (0.07 | ) | 0.37 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.35 | ) | (0.28 | ) | (0.22 | ) | (0.31 | ) | (0.38 | ) | ||||||||||||
From net realized gain on investments | (0.08 | ) | (0.02 | ) | — | — | — | |||||||||||||||
Total dividends and distributions | (0.43 | ) | (0.30 | ) | (0.22 | ) | (0.31 | ) | (0.38 | ) | ||||||||||||
Net asset value at end of year | $ | 10.87 | $ | 10.91 | $ | 10.34 | $ | 9.37 | $ | 9.75 | ||||||||||||
Total investment return (a) | 3.74 | % | 8.54 | % | 12.92 | % | (0.89 | %) | 3.86 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.80 | % | 2.63 | % | 2.27 | % | 3.11 | % | 3.60 | % | ||||||||||||
Net expenses | 1.78 | % | 1.81 | % | 1.92 | % | 1.92 | % | 1.85 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.88 | % | 1.91 | % | 2.00 | % | 2.08 | % | 2.13 | % | ||||||||||||
Portfolio turnover rate | 104 | % (b) | 185 | % (b) | 246 | % (b) | 114 | % (b) | 70 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 27,052 | $ | 22,850 | $ | 16,747 | $ | 7,106 | $ | 2,689 |
‡ | Less than one cent per share. | |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(b) | The portfolio turnover rates not including mortgage dollar rolls were 65%, 79%, 130%, and 92% for years ended October 31, 2011, 2010, 2009, and 2008, respectively. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 29 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 10.89 | $ | 10.32 | $ | 9.35 | $ | 9.73 | $ | 9.75 | ||||||||||||
Net investment income (loss) | 0.43 | 0.41 | 0.34 | 0.43 | 0.46 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.09 | 0.60 | 0.96 | (0.38 | ) | 0.01 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | (0.01 | ) | 0.01 | — | 0.00 | ‡ | |||||||||||||||
Total from investment operations | 0.52 | 1.00 | 1.31 | 0.05 | 0.47 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.48 | ) | (0.41 | ) | (0.34 | ) | (0.43 | ) | (0.49 | ) | ||||||||||||
From net realized gain on investments | (0.08 | ) | (0.02 | ) | — | — | — | |||||||||||||||
Total dividends and distributions | (0.56 | ) | (0.43 | ) | (0.34 | ) | (0.43 | ) | (0.49 | ) | ||||||||||||
Net asset value at end of year | $ | 10.85 | $ | 10.89 | $ | 10.32 | $ | 9.35 | $ | 9.73 | ||||||||||||
Total investment return (a) | 4.97 | % | 9.88 | % | 14.22 | % | 0.39 | % | 4.94 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 3.98 | % | 3.84 | % | 3.50 | % | 4.35 | % | 4.75 | % | ||||||||||||
Net expenses | 0.60 | % | 0.59 | % | 0.66 | % | 0.70 | % | 0.70 | % | ||||||||||||
Expenses (before reimbursement/waiver) | 0.78 | % | 0.81 | % | 0.83 | % | 0.78 | % | 0.74 | % | ||||||||||||
Portfolio turnover rate | 104 | % (b) | 185 | % (b) | 246 | % (b) | 114 | % (b) | 70 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 533,433 | $ | 486,383 | $ | 516,522 | $ | 133,090 | $ | 140,221 |
‡ | Less than one cent per share. | |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(b) | The portfolio turnover rates not including mortgage dollar rolls were 65%, 79%, 130%, and 92% for years ended October 31, 2011, 2010, 2009, and 2008, respectively. |
The notes to the financial statements are an integral part of,
30 MainStay Intermediate Term Bond Fund | and should be read in conjunction with, the financial statements. |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Intermediate Term Bond Fund (the “Fund”), a diversified fund. The Fund is the successor of the MainStay Intermediate Term Bond Fund, a series of Eclipse Funds Inc. (the “Predecessor Fund”). The reorganization of the Predecessor Fund with and into the Fund occurred on February 26, 2010. All information and references to periods prior to February 26, 2010 relate to the Predecessor Fund.
The Fund currently offers five classes of shares. Class I shares commenced operations on January 2, 1991. Class A, Class B, and Class C shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class B and Class C shares are offered at NAV without an initial sales charge, although a declining CDSC may be imposed on redemptions made within six years of the date of purchase of Class B shares and a 1.00% CDSC may be imposed on redemptions made within one year of the date of purchase of Class C shares. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Investor Class or Class A shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The five classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class B and Class C shares are subject to higher distribution and/or service fee rates than Investor Class and Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek to maximize total return, consistent with liquidity, moderate risk to principal and investment in debt securities.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• Level 1—quoted prices in active markets for identical investments
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
mainstayinvestments.com 31
Notes to Financial Statements (continued)
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities are valued at the evaluated bid prices supplied by a pricing agent or brokers selected by the Fund’s Manager (as defined in Note 3(A)) in consultation with the Fund’s Subadvisor (as defined in Note 3(A)) whose prices reflect broker/dealer supplied valuations and electronic data processing techniques, if such prices are deemed by the Fund’s Manager, in consultation with the Fund’s Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, Yankee bonds, convertible bonds, asset-backed securities, and mortgage-backed securities, are generally categorized as Level 2 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values determined on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund held securities with a value of $3,963,565 that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or Subadvisor conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. As of October 31, 2011, the Fund did not hold any foreign equity securities.
Generally, a security is considered illiquid if it cannot be sold or disposed of in the ordinary course of business at approximately the price at which it is valued. Its illiquidity might prevent the sale of such security at a time when the Manager or Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of a Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in determining value, which could vary from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or Subadvisor determines the liquidity of the Fund’s investments; in doing so, the Manager or Subadvisor may consider various factors, including (i) the frequency of trades and quotations, (ii) the number of dealers and prospective purchasers, (iii) dealer undertakings to make a market, and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities generally will be valued in such manner as the Board in good faith deems appropriate to reflect their fair market value.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
32 MainStay Intermediate Term Bond Fund
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income monthly and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method and include gains and losses from repayments of principal on mortgage-backed securities.
Interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased, other than Short-Term Investments, for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities or, in the case of a callable security, over the period to the first date of call. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method. Income from payment-in-kind securities is recorded daily based on the effective interest method of accrual.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security, or securities index). The Fund is subject to equity price risk and interest rate risk in the normal course of investing in these transactions. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking to market” such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. Risks arise from the possible imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the terms of their contracts. However, the Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a broker that holds margin on behalf of the Fund, the Fund may not be entitled to the return of all of the margin owed to the Fund, potentially resulting in a loss. The Fund may also invest in futures contracts to help manage the duration and yield curve of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAV and may result in a loss to the Fund.
mainstayinvestments.com 33
Notes to Financial Statements (continued)
(I) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell currencies of different countries on a specified future date at a specified rate. The Fund is subject to foreign currency exchange rate risk in the normal course of investing in these transactions. During the period the forward contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking to market” such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. Cash movement occurs on settlement date. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract. The Fund enters into foreign currency forward contracts to reduce currency risk versus the benchmark or for trade settlement.
The use of foreign currency forward contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract amount reflects the extent of the Fund’s involvement in these financial instruments. Risks arise from the possible movements in the foreign exchange rates underlying these instruments. While the Fund may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the Fund than if it had not engaged in such transactions. Exchange rate movements can be large, depending on the currency, and can last for extended periods of time, affecting the value of the Fund’s assets. Moreover, there may be an imperfect correlation between the Fund’s holdings of securities denominated in a particular currency and the forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to the risk of currency exchange loss. The unrealized appreciation (depreciation) on forward contracts reflects the Fund’s exposure at valuation date to credit loss in the event of a counterparty’s failure to perform its obligations. At October 31, 2011, the Fund did not hold any foreign currency forward contracts.
(J) Rights and Warrants. A right is a certificate that permits the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. A warrant is an instrument that entitles the holder to buy an equity security at a specific price for a specific period of time. The Fund generally enters into rights and warrants when securities are acquired through a corporate action. With respect to warrants in international markets, the securities are only purchased when the underlying security cannot be purchased due to the many restrictions an industry and/or country might place on foreign investors. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The Fund could also lose the entire value of its investment in warrants if the warrant is not exercised by the date of its expiration. The securities are sold as soon as the opportunity becomes available. The Fund is exposed to risk until each sale is completed. At October 31, 2011, the Fund did not hold any rights.
(K) Mortgage Dollar Rolls. The Fund may enter into mortgage dollar roll (“MDR”) transactions in which it sells mortgage-backed securities (“MBS”) from its portfolio to a counterparty from whom it simultaneously agrees to buy a similar security on a delayed delivery basis. The MDR transactions of the Fund are classified as purchase and sale transactions. The securities sold in connection with the MDRs are removed from the portfolio and a realized gain or loss is recognized. The securities the Fund has agreed to acquire are included at market value in the Portfolio of Investments and liabilities for such purchase commitments are included as payables for investments purchased. During the roll period, the Fund foregoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the forward price for the future as well as by the earnings on the cash proceeds of the initial sale. MDRs may be renewed without physical delivery of the securities subject to the contract. The Fund maintains liquid assets from its portfolio having a value not less than the repurchase price, including accrued interest. MDR transactions involve certain risks, including the risk that the MBS returned to the Fund at the end of the roll, while substantially similar, could be inferior to what was initially sold to the counterparty.
(L) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(M) Concentration of Risk. The Fund invests in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic instruments. These risks include those resulting from currency fluctuations, future adverse political and economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely
34 MainStay Intermediate Term Bond Fund
to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.
(N) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(O) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. These derivatives are not accounted for as hedging instruments.
Fair value of derivatives as of October 31, 2011:
Asset Derivatives
Statement of | Equity | Interest | ||||||||||||
Assets and Liabilities | Contracts | Rate Contracts | ||||||||||||
Location | Risk | Risk | Total | |||||||||||
Warrants | Investment in securities, at value | $ | 0 | (a) | $ | — | $ | 0 | (a) | |||||
Futures Contracts | Net Assets—Net unrealized appreciation (depreciation) on investments and futures contracts (b) | — | 340,020 | 340,020 | ||||||||||
Total Fair Value | $ | 0 | (a) | $ | 340,020 | $ | 340,020 | |||||||
Liability Derivatives
Statement of | Equity | Interest | ||||||||||||
Assets and Liabilities | Contracts | Rate Contracts | ||||||||||||
Location | Risk | Risk | Total | |||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation (depreciation) on investments and futures contracts (b) | $ | — | $ | (89,213 | ) | $ | (89,213 | ) | |||||
Total Fair Value | $ | — | $ | (89,213 | ) | $ | (89,213 | ) | ||||||
(a) | Less than one dollar. |
(b) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2011:
Realized Gain (Loss)
Statement of | Equity | Interest | ||||||||||||
Operations | Contracts | Rate Contracts | ||||||||||||
Location | Risk | Risk | Total | |||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | (1,025,874 | ) | $ | (1,025,874 | ) | |||||
Total Realized Gain (Loss) | $ | — | $ | (1,025,874 | ) | $ | (1,025,874 | ) | ||||||
mainstayinvestments.com 35
Notes to Financial Statements (continued)
Change in Unrealized Appreciation (Depreciation)
Statement of | Equity | Interest | ||||||||||||
Operations | Contracts | Rate Contracts | ||||||||||||
Location | Risk | Risk | Total | |||||||||||
Warrants | Net change in unrealized appreciation (depreciation) on investments | $ | — | $ | — | $ | — | |||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | — | 250,807 | 250,807 | ||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | — | $ | 250,807 | $ | 250,807 | ||||||||
Number of Contracts, Notional Amounts or Shares/Units (1)
Equity | Interest | |||||||||||
Contracts | Rate Contracts | |||||||||||
Risk | Risk | Total | ||||||||||
Warrants (2) | 2 | 2 | ||||||||||
Futures Contracts Long (2) | — | 154 | 154 | |||||||||
Futures Contracts Short (2) | — | (360 | ) | (360 | ) | |||||||
(1) | Amount disclosed represents the weighted average held during the year ended October 31, 2011. |
(2) | Amount(s) represent(s) number of contracts or number of shares/units. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million; 0.575% from $500 million to $1 billion; and 0.55% in excess of $1 billion. The Manager has contractually agreed to waive a portion of its management fee so that it does not exceed average daily net assets as follows: 0.50% up to $1 billion; and 0.475% in excess of $1 billion. This agreement may be modified or terminated only with the approval of the Board. The effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.60% for the year ended October 31, 2011.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses of Class I shares do not exceed 0.60% of its average daily net assets. This agreement also requires the Manager to waive a portion of the management fee in addition to the management fee waiver described above or other non-class specific expenses of the Investor Class, Class A, Class B and Class C shares to the extent necessary in order to maintain the expense limitation applicable to Class I shares. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $3,379,993 and waived its fees and/or reimbursed expenses in the amount of $958,333.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from the Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Pursuant to the Class B and Class��C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I shares are not subject to a distribution or service fee.
36 MainStay Intermediate Term Bond Fund
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $4,762 and $27,093, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $315, $8,187 and $7,633, respectively, for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 11,165 | ||
Class A | 50,009 | |||
Class B | 16,908 | |||
Class C | 50,212 | |||
Class I | 639,733 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Class A | $ | 1,452 | 0.0 | %‡ | ||||
Class B | 1,371 | 0.0 | ‡ | |||||
Class C | 1,373 | 0.0 | ‡ | |||||
Class I | 27,867,205 | 5.2 | ||||||
‡ | Less than one-tenth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $7,158. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 8,797,217 | $ | 3,971,370 | $ | (144,257 | ) | $ | 23,077,847 | $ | 35,702,177 | ||||||||
The difference between book-basis and tax basis unrealized appreciation (depreciation) is primarily due to wash sale deferrals, marking to market of futures contracts and straddle loss deferrals. The other temporary differences are primarily due to dividends payable.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated Net | ||||||||||
Undistributed | Realized | |||||||||
Net Investment | Gain (Loss) on | Additional | ||||||||
Income (Loss) | Investments | Paid-In Capital | ||||||||
$ | 706,030 | $ | (706,030 | ) | $ | — | ||||
The reclassifications for the Fund are primarily due to reclassification of consent fee and reclassification of mortgage dollar roll income.
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets, was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 25,740,320 | $ | 23,234,392 | ||||
Long-Term Capital Gain | 3,047,178 | — | ||||||
Total | $ | 28,787,498 | $ | 23,234,392 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
mainstayinvestments.com 37
Notes to Financial Statements (continued)
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of U.S. government securities were $494,139 and $444,545, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $141,901 and $119,362, respectively.
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 243,625 | $ | 2,629,632 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 21,366 | 228,384 | ||||||
Shares redeemed | (137,618 | ) | (1,475,977 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 127,373 | 1,382,039 | ||||||
Shares converted into Investor Class (See Note 1) | 57,866 | 624,109 | ||||||
Shares converted from Investor Class (See Note 1) | (54,985 | ) | (590,963 | ) | ||||
Net increase (decrease) | 130,254 | $ | 1,415,185 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 269,857 | $ | 2,875,264 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 11,041 | 117,401 | ||||||
Shares redeemed | (117,560 | ) | (1,243,478 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 163,338 | 1,749,187 | ||||||
Shares converted into Investor Class (See Note 1) | 37,647 | 399,676 | ||||||
Shares converted from Investor Class (See Note 1) | (44,198 | ) | (470,733 | ) | ||||
Net increase (decrease) | 156,787 | $ | 1,678,130 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 3,274,959 | $ | 35,325,804 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 141,171 | 1,503,158 | ||||||
Shares redeemed | (2,386,990 | ) | (25,531,604 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 1,029,140 | 11,297,358 | ||||||
Shares converted into Class A (See Note 1) | 80,640 | 861,787 | ||||||
Shares converted from Class A (See Note 1) | (29,355 | ) | (315,224 | ) | ||||
Net increase (decrease) | 1,080,425 | $ | 11,843,921 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 2,180,706 | $ | 22,981,076 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 105,518 | 1,113,761 | ||||||
Shares redeemed | (1,987,254 | ) | (21,106,748 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 298,970 | 2,988,089 | ||||||
Shares converted into Class A (See Note 1) | 91,766 | 969,156 | ||||||
Shares converted from Class A (See Note 1) | (11,656 | ) | (124,012 | ) | ||||
Shares converted from Class A (a) | (298,088 | ) | (3,079,252 | ) | ||||
Net increase (decrease) | 80,992 | $ | 753,981 | |||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 253,333 | $ | 2,726,704 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 23,336 | 248,097 | ||||||
Shares redeemed | (218,469 | ) | (2,337,789 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 58,200 | 637,012 | ||||||
Shares converted from Class B (See Note 1) | (54,126 | ) | (579,709 | ) | ||||
Net increase (decrease) | 4,074 | $ | 57,303 | |||||
38 MainStay Intermediate Term Bond Fund
Class B | Shares | Amount | ||||||
Year ended October 31, 2010: | ||||||||
Shares sold | 372,653 | $ | 3,943,633 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 14,019 | 148,284 | ||||||
Shares redeemed | (184,752 | ) | (1,947,651 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 201,920 | 2,144,266 | ||||||
Shares converted from Class B (See Note 1) | (73,461 | ) | (774,087 | ) | ||||
Net increase (decrease) | 128,459 | $ | 1,370,179 | |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,164,715 | $ | 12,576,234 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 52,907 | 563,260 | ||||||
Shares redeemed | (824,172 | ) | (8,823,304 | ) | ||||
Net increase (decrease) | 393,450 | $ | 4,316,190 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,083,145 | $ | 11,418,024 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 34,666 | 366,734 | ||||||
Shares redeemed | (642,695 | ) | (6,797,055 | ) | ||||
Net increase (decrease) | 475,116 | $ | 4,987,703 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 16,009,189 | $ | 171,718,916 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,245,719 | 23,911,251 | ||||||
Shares redeemed | (13,772,540 | ) | (147,428,741 | ) | ||||
Net increase (decrease) | 4,482,368 | $ | 48,201,426 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 6,992,907 | $ | 73,539,450 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,873,419 | 19,768,047 | ||||||
Shares redeemed | (14,538,955 | ) | (154,707,328 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (5,672,629 | ) | (61,399,831 | ) | ||||
Shares converted into Class I (a) | 298,088 | 3,079,252 | ||||||
Net increase (decrease) | (5,374,541 | ) | $ | (58,320,579 | ) | |||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class, Class A and Class B shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion; and | |
• | All Class B shares are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class, Class A and Class B shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, they may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 39
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Intermediate Term Bond Fund (“the Fund”), one of the funds constituting Mainstay Funds Trust, as of October 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Intermediate Term Bond Fund of Mainstay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
40 MainStay Intermediate Term Bond Fund
Federal Income Tax Information (Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years. Accordingly, the Fund paid $3,047,178 as a long term capital gain distribution.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the Fund’s website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 41
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
42 MainStay Intermediate Term Bond Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 43
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
44 MainStay Intermediate Term Bond Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 45
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
46 MainStay Intermediate Term Bond Fund
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24993 MS284-11 | MSIT11-12/11 |
NB4
MainStay Retirement Funds
Message from the President and Annual Report
October 31, 2011
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
MainStay Retirement 2010 Fund | 5 | |
MainStay Retirement 2020 Fund | 22 | |
MainStay Retirement 2030 Fund | 39 | |
MainStay Retirement 2040 Fund | 56 | |
MainStay Retirement 2050 Fund | 73 | |
Notes to Financial Statements | 90 | |
Report of Independent Registered Public Accounting Firm | 104 | |
Federal Income Tax Information | 105 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 105 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 105 | |
Board Members and Officers | 106 | |
Investors should refer to each Fund’s Summary Prospectus and/or Prospectus and consider each Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about each Fund. You may obtain copies of each Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read each Fund’s Summary Prospectus and/or Prospectus carefully before investing.
MainStay Retirement 2010 Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (6/29/07) | Ratio2 | ||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –2 | .25% | 0 | .80% | 2 | .90% | ||||||||
Excluding sales charges | 3 | .44 | 2 | .12 | 2 | .90 | ||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –2 | .16 | 0 | .84 | 1 | .87 | ||||||||
Excluding sales charges | 3 | .54 | 2 | .17 | 1 | .87 | ||||||||||
Class I Shares | No Sales Charge | 3 | .85 | 2 | .43 | 1 | .63 | |||||||||
Class R2 Shares4 | No Sales Charge | 3 | .53 | 2 | .10 | 1 | .97 | |||||||||
Class R3 Shares5 | No Sales Charge | 3 | .18 | 1 | .80 | 2 | .22 | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008 include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Class R2 shares were first offered on June 29, 2007, although this class did not commence investment operations until January 8, 2009. Performance figures for Class R2 shares include the historical performance of Class A shares through January 7, 2009, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R2 shares might have been lower. |
5. | Class R3 shares were first offered on June 29, 2007, although this class did not commence investment operations until May 1, 2008. Performance figures for Class R3 shares include the historical performance of Class A shares through April 30, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R3 shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
S&P 500® Index6 | 8 | .09% | –2 | .00% | ||||
MSCI EAFE® Index7 | –4 | .08 | –6 | .35 | ||||
Barclays Capital U.S. Aggregate Bond Index8 | 5 | .00 | 7 | .05 | ||||
Average Lipper Mixed-Asset Target 2010 Fund9 | 3 | .38 | 1 | .03 | ||||
6. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500 Index is the Fund’s broad-based securities market index. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
7. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
8. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
9. | The average Lipper mixed-asset target 2010 fund is representative of funds that seek to maximize assets for retirement or other purposes with an expected time horizon not exceeding December 31, 2010. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Retirement 2010 Fund
Cost in Dollars of a $1,000 Investment in MainStay Retirement 2010 Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 954.30 | $ | 2.36 | $ | 1,022.80 | $ | 2.45 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 955.20 | $ | 1.82 | $ | 1,023.30 | $ | 1.89 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 956.40 | $ | 0.59 | $ | 1,024.60 | $ | 0.61 | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 955.20 | $ | 2.32 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 953.30 | $ | 3.54 | $ | 1,021.60 | $ | 3.67 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.48% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for Class R2 and 0.72% for Class R3) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
mainstayinvestments.com 7
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
See Portfolio of Investments beginning on page 12 for specific holdings within these categories.
8 MainStay Retirement 2010 Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Retirement 2010 Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Retirement 2010 Fund returned 3.44% for Investor Class shares and 3.54% for Class A shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 3.85%, Class R2 shares returned 3.53% and Class R3 shares returned 3.18%. Class R3 shares underperformed—and all other share classes out-performed—the 3.38% return of the average Lipper2 mixed-asset target 2010 fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the –4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index,5 which is an additional benchmark for the Fund. See page 5 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a portfolio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests primarily in mutual funds managed by New York Life Investments, mutual funds managed by an advisor not affiliated with New York Life Investments or exchange traded funds (“ETFs”) if a New York Life Investments managed mutual fund in a particular asset class is not available (collectively, “Underlying Funds”). The Underlying Funds may invest in fixed-income securities or in domestic or international equities at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large cap equities.
Our efforts to manage the Fund’s risk posture through its allocation to stocks and bonds contributed positively, but only marginally, to the Fund’s relative performance. Within the target allocation outlined in the Prospectus, we maintained a slightly higher-than-normal allocation to stocks and a slightly lower-than-normal allocations to bonds through the early part of 2011, before softer economic conditions led us to retreat to a more normal mix.
In late summer, with equities having sold off considerably in response to the growing debt crisis, we again began to overweight equities slightly in relation to the target allocation on the belief that conditions were better than many investors perceived them to be. Although our timing was by no means perfect, the repositioning added to returns.
We were less successful within the fixed-income portion of the Fund. Being wary of the very low yields available on U.S. Treasury securities and mindful of the improving health of corporate balance sheets (which should translate into low default rates), we preferred shorter-duration6 lower-credit-quality bonds over longer-dated government-backed bonds. We have maintained this preference, but the positioning detracted from performance during the summer. During the summer months, investors flocked to U.S. Treasury securities for their perceived safety, which drove interest rates down and caused spreads7 to widen.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced significant challenges relative to their benchmarks and peers. Included among these were MainStay Flexible Bond Opportunities Fund, MainStay MAP Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases, sector exposure, credit quality and duration. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
As previously noted, the Fund’s allocation to stocks and bonds varied slightly over the course of the reporting period in response to the changing environment. Within equities, we gave mild emphasis to three themes. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 6 for more information on Lipper Inc.
3. See footnote on page 6 for more information on the S&P 500® Index.
4. See footnote on page 6 for more information on the MSCI EAFE® Index.
5. See footnote on page 6 for more information on the Barclays Capital U.S. Aggregate Bond Index.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
mainstayinvestments.com 9
valued, to have superior access to capital and to be better positioned to benefit from growth in the developing world. Second, the Fund reflected a preference for growth stocks over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging issues.
The fixed-income portion of the Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index, the Fund’s fixed-income benchmark. The Fund was also heavily tilted toward corporate bonds instead of government-backed issues. This positioning reflected our view that corporations have improved the quality of their balance sheets significantly in recent years by reducing leverage, accumulating cash and controlling operating costs. We anticipated that corporate default rates would remain low for the next few years. If this happens, we believe that the higher yields available on corporate bonds may prove attractive.
How did the Fund’s allocations change over the course of the reporting period?
The largest change during the reporting period was a shift out of MainStay Indexed Bond Fund, MainStay Intermediate Term Bond Fund and MainStay High Yield Opportunities Fund into MainStay Flexible Bond Opportunities Fund.
We also reduced exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund into MainStay Large Cap Growth Fund, MainStay MAP Fund and MainStay Epoch U.S. All Cap Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Also noteworthy was a new position in MainStay Cash Reserves Fund. We established the position to shorten the duration of the fixed-income portion of the Fund as protection against a potential rise in interest rates. The new position also served as a liquidity facility to adjust the Fund’s overall mix of exposure to stocks and bonds.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds were redirected to MainStay ICAP International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion of the Fund and to implement the intended bias toward U.S. equities.
Were there any other significant allocation changes during the reporting period?
In several cases, we exited positions in actively managed non-MainStay Funds in favor of low-cost ETFs that invest in similar market segments.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Underlying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and substantial allocations. (Contributions take weightings and total returns into account.) One of the most substantial detractors from performance was MainStay MAP Fund, but only because the allocation was largest near the end of the reporting period, when the equity markets were declining, and smallest early in the period, when equities generated their largest gains. MainStay ICAP International Fund also detracted from performance, in part because of similar positioning.
What factors and risks affected the Fund’s Underlying Fixed Income Fund investments during the reporting period?
The Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index. We favored credit instruments over government bonds throughout the reporting period. While this was an advantageous posture at times, the flight to quality by investors to U.S. Treasury securities and higher-quality corporate bonds over the summer in response to the escalating European sovereign debt crisis caused this positioning to be generally unproductive. We found this especially true during the final few months of the reporting period. We continued to maintain a positive outlook on corporate bonds over U.S. Treasurys at the end of the reporting period.
During the reporting period, which fixed-income market segments were strong performers and which segments were particularly weak?
Interest rates finished the reporting period markedly lower than they were when the fiscal year began. Accordingly, Underlying Funds that invested in long-maturity bonds generally did better than those that focused on securities with shorter durations. The return on cash investments was little more than zero and
10 MainStay Retirement 2010 Fund
most Underlying Funds that invest primarily in short-term bonds failed to deliver returns much greater than that. Credit instruments and investment-grade bonds diverged sharply at points during the reporting period, but the differences ended up being relatively small over the entire period.
Which Underlying Fixed Income Funds made the strongest contributions to the Fund’s overall per-
formance, and which Underlying Fixed Income Funds were the greatest detractors?
formance, and which Underlying Fixed Income Funds were the greatest detractors?
The strongest fixed-income contributions to overall performance came from large positions in MainStay Indexed Bond Fund and MainStay Intermediate Term Bond Fund. At the other end of the spectrum, small positions in American Century International Bond Fund and American Century Inflation-Adjusted Bond Fund were the greatest fixed-income detractors from the Fund’s overall performance.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 11
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 91.7%† | ||||||||
Equity Funds 45.6% | ||||||||
MainStay 130/30 Core Fund Class I | 169,658 | $ | 1,343,695 | |||||
MainStay 130/30 International Fund Class I | 5,581 | 35,604 | ||||||
MainStay Common Stock Fund Class I | 170,688 | 1,942,429 | ||||||
MainStay Epoch International Small Cap Fund Class I | 102,934 | 1,732,371 | ||||||
MainStay Epoch U.S. All Cap Fund Class I | 252,545 | 5,881,782 | ||||||
MainStay Growth Equity Fund Class I (a) | 2,948 | 33,230 | ||||||
MainStay ICAP Equity Fund Class I | 92,847 | 3,260,802 | ||||||
MainStay ICAP International Fund Class I | 87,664 | 2,416,031 | ||||||
MainStay ICAP Select Equity Fund Class I | 61,936 | 2,073,014 | ||||||
MainStay International Equity Fund Class I | 424 | 4,620 | ||||||
MainStay Large Cap Growth Fund Class I (a) | 632,060 | 4,708,844 | ||||||
MainStay MAP Fund Class I | 205,710 | 6,397,582 | ||||||
MainStay U.S. Small Cap Fund Class I | 34,147 | 564,445 | ||||||
Total Equity Funds (Cost $30,060,859) | 30,394,449 | |||||||
Fixed Income Funds 46.1% | ||||||||
MainStay Cash Reserves Fund Class I | 1,618,610 | 1,618,610 | ||||||
MainStay Convertible Fund Class I | 64,302 | 972,890 | ||||||
MainStay Flexible Bond Opportunities Fund Class I | 601,011 | 5,246,827 | ||||||
MainStay Floating Rate Fund Class I | 164,586 | 1,532,296 | ||||||
MainStay Global High Income Fund Class I | 77,815 | 921,334 | ||||||
MainStay High Yield Corporate Bond Fund Class I | 294,911 | 1,722,281 | ||||||
MainStay High Yield Opportunities Fund Class I | 34,301 | 388,282 | ||||||
MainStay Indexed Bond Fund Class I | 672,795 | 7,851,522 | ||||||
MainStay Intermediate Term Bond Fund Class I | 959,816 | 10,413,999 | ||||||
Total Fixed Income Funds (Cost $30,535,783) | 30,668,041 | |||||||
Total Affiliated Investment Companies (Cost $60,596,642) | 61,062,490 | |||||||
Unaffiliated Investment Companies 8.0% | ||||||||
Equity Funds 4.4% | ||||||||
Columbia Funds Series Trust-Columbia SmallCap Index Fund | 19,382 | 323,488 | ||||||
iShares Russell 2000 Index ETF | 2,830 | 209,335 | ||||||
Vanguard Emerging Markets ETF | 56,918 | 2,361,528 | ||||||
Total Equity Funds (Cost $2,986,085) | 2,894,351 | |||||||
Fixed Income Funds 3.6% | ||||||||
iShares Barclays TIPS Bond Fund | 19,778 | 2,303,939 | ||||||
SPDR Barclays Capital International Treasury Bond ETF | 1,489 | 90,993 | ||||||
Total Fixed Income Funds (Cost $2,275,138) | 2,394,932 | |||||||
Total Unaffiliated Investment Companies (Cost $5,261,223) | 5,289,283 | |||||||
Total Investments (Cost $65,857,865) (b) | 99.7 | % | 66,351,773 | |||||
Other Assets, Less Liabilities | 0.3 | 216,699 | ||||||
Net Assets | 100.0 | % | $ | 66,568,472 | ||||
† | Percentages indicated are based on Fund net assets. | |
(a) | Non-income producing Underlying Fund. | |
(b) | At October 31, 2011, cost is $66,188,100 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 996,260 | ||
Gross unrealized depreciation | (832,587 | ) | ||
Net unrealized appreciation | $ | 163,673 | ||
The following abbreviations are used in the above portfolio:
ETF—Exchange Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
TIPS—Treasury Inflation Protected Security
The notes to the financial statements are an integral part of,
12 MainStay Retirement 2010 Fund | and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies | ||||||||||||||||
Equity Funds | $ | 30,394,449 | $ | — | $ | — | $ | 30,394,449 | ||||||||
Fixed Income Funds | 30,668,041 | — | — | 30,668,041 | ||||||||||||
Total Affiliated Investment Companies | 61,062,490 | — | — | 61,062,490 | ||||||||||||
Unaffiliated Investment Companies | ||||||||||||||||
Equity Funds | 2,894,351 | — | — | 2,894,351 | ||||||||||||
Fixed Income Funds | 2,394,932 | — | — | 2,394,932 | ||||||||||||
Total Unaffiliated Investment Companies | 5,289,283 | — | — | 5,289,283 | ||||||||||||
Total Investments in Securities | $ | 66,351,773 | $ | — | $ | — | $ | 66,351,773 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $60,596,642) | $ | 61,062,490 | ||
Investments in unaffiliated investment companies, at value (identified cost $5,261,223) | 5,289,283 | |||
Receivables: | ||||
Fund shares sold | 686,278 | |||
Manager (See Note 3) | 12,204 | |||
Other assets | 28,459 | |||
Total assets | 67,078,714 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 464,156 | |||
Transfer agent (See Note 3) | 18,946 | |||
Professional fees | 9,652 | |||
Shareholder communication | 7,810 | |||
NYLIFE Distributors (See Note 3) | 4,817 | |||
Custodian | 652 | |||
Trustees | 261 | |||
Accrued expenses | 3,948 | |||
Total liabilities | 510,242 | |||
Net assets | $ | 66,568,472 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 6,621 | ||
Additional paid-in capital | 61,825,655 | |||
61,832,276 | ||||
Undistributed net investment income | 862,207 | |||
Accumulated net realized gain (loss) on investments | 3,380,081 | |||
Net unrealized appreciation (depreciation) on investments | 493,908 | |||
Net assets | $ | 66,568,472 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 600,957 | ||
Shares of beneficial interest outstanding | 59,906 | |||
Net asset value per share outstanding | $ | 10.03 | ||
Maximum sales charge (5.50% of offering price) | 0.58 | |||
Maximum offering price per share outstanding | $ | 10.61 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 6,358,403 | ||
Shares of beneficial interest outstanding | 635,446 | |||
Net asset value per share outstanding | $ | 10.01 | ||
Maximum sales charge (5.50% of offering price) | 0.58 | |||
Maximum offering price per share outstanding | $ | 10.59 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 43,983,829 | ||
Shares of beneficial interest outstanding | 4,364,852 | |||
Net asset value and offering price per share outstanding | $ | 10.08 | ||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 14,889,825 | ||
Shares of beneficial interest outstanding | 1,486,815 | |||
Net asset value and offering price per share outstanding | $ | 10.01 | ||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 735,458 | ||
Shares of beneficial interest outstanding | 73,531 | |||
Net asset value and offering price per share outstanding | $ | 10.00 | ||
The notes to the financial statements are an integral part of,
14 MainStay Retirement 2010 Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 1,254,063 | ||
Dividend distributions from unaffiliated investment companies | 108,300 | |||
Total income | 1,362,363 | |||
Expenses | ||||
Transfer agent (See Note 3) | 101,883 | |||
Registration | 73,852 | |||
Manager (See Note 3) | 54,622 | |||
Distribution/Service—Investor Class (See Note 3) | 1,416 | |||
Distribution/Service—Class A (See Note 3) | 17,173 | |||
Distribution/Service—Class R2 (See Note 3) | 10,604 | |||
Distribution/Service—Class R3 (See Note 3) | 3,982 | |||
Professional fees | 29,103 | |||
Shareholder communication | 13,468 | |||
Custodian | 8,861 | |||
Shareholder service (See Note 3) | 5,038 | |||
Trustees | 1,570 | |||
Miscellaneous | 7,148 | |||
Total expenses before waiver/reimbursement | 328,720 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (221,660 | ) | ||
Expense reimbursement from Transfer agent (See Note 3) | (1,088 | ) | ||
Net expenses | 105,972 | |||
Net investment income (loss) | 1,256,391 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Affiliated investment company transactions | 3,603,318 | |||
Unaffiliated investment company transactions | 306,455 | |||
Realized capital gain distributions from affiliated investment companies | 285,382 | |||
Realized capital gain distributions from unaffiliated investment companies | 19,016 | |||
Net realized gain (loss) on investments from affiliated and unaffiliated investment companies | 4,214,171 | |||
Net change in unrealized appreciation (depreciation) on investments | (3,287,201 | ) | ||
Net realized and unrealized gain (loss) on investments | 926,970 | |||
Net increase (decrease) in net assets resulting from operations | $ | 2,183,361 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,256,391 | $ | 927,228 | ||||
Net realized gain (loss) on investments from affiliated and unaffiliated investment company transactions | 4,214,171 | 3,786,265 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (3,287,201 | ) | 387,462 | |||||
Net increase (decrease) in net assets resulting from operations | 2,183,361 | 5,100,955 | ||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (11,625 | ) | (4,024 | ) | ||||
Class A | (168,020 | ) | (142,596 | ) | ||||
Class I | (952,657 | ) | (737,674 | ) | ||||
Class R2 | (42,424 | ) | (32,713 | ) | ||||
Class R3 | (17,146 | ) | (18,719 | ) | ||||
(1,191,872 | ) | (935,726 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (7,004 | ) | — | |||||
Class A | (97,617 | ) | — | |||||
Class I | (505,903 | ) | — | |||||
Class R2 | (25,733 | ) | — | |||||
Class R3 | (11,581 | ) | — | |||||
(647,838 | ) | — | ||||||
Total dividends and distributions to shareholders | (1,839,710 | ) | (935,726 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 40,404,413 | 13,412,930 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 1,838,703 | 935,726 | ||||||
Cost of shares redeemed | (21,077,490 | ) | (16,028,793 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 21,165,626 | (1,680,137 | ) | |||||
Net increase (decrease) in net assets | 21,509,277 | 2,485,092 | ||||||
Net Assets | ||||||||
Beginning of year | 45,059,195 | 42,574,103 | ||||||
End of year | $ | 66,568,472 | $ | 45,059,195 | ||||
Undistributed net investment income at end of year | $ | 862,207 | $ | 641,264 | ||||
The notes to the financial statements are an integral part of,
16 MainStay Retirement 2010 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 10.07 | $ | 9.15 | $ | 7.95 | $ | 9.95 | ||||||||||
Net investment income (loss) (a) | 0.21 | 0.17 | 0.22 | 0.15 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.13 | 0.94 | 1.17 | (2.15 | ) | |||||||||||||
Total from investment operations | 0.34 | 1.11 | 1.39 | (2.00 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.24 | ) | (0.19 | ) | (0.19 | ) | — | |||||||||||
From net realized gain on investments | (0.14 | ) | — | — | — | |||||||||||||
Total dividends and distributions | (0.38 | ) | (0.19 | ) | (0.19 | ) | — | |||||||||||
Net asset value at end of period | $ | 10.03 | $ | 10.07 | $ | 9.15 | $ | 7.95 | ||||||||||
Total investment return (b) | 3.44 | % | 12.34 | % | 17.90 | % | (20.10 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 2.03 | % | 1.82 | % | 2.61 | % | 2.38 | % †† | ||||||||||
Net expenses (d) | 0.47 | % | 0.47 | % | 0.38 | % | 0.46 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.42 | % | 2.03 | % | 0.89 | % | 6.41 | % †† | ||||||||||
Portfolio turnover rate | 107 | % | 81 | % | 76 | % | 127 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 601 | $ | 468 | $ | 163 | $ | 41 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.04 | $ | 9.12 | $ | 7.95 | $ | 10.57 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.22 | 0.19 | 0.23 | 0.24 | 0.06 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.14 | 0.92 | 1.15 | (2.80 | ) | 0.51 | ||||||||||||||||
Total from investment operations | 0.36 | 1.11 | 1.38 | (2.56 | ) | 0.57 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.25 | ) | (0.19 | ) | (0.21 | ) | (0.05 | ) | — | |||||||||||||
From net realized gain on investments | (0.14 | ) | — | — | (0.01 | ) | — | |||||||||||||||
Total dividends and distributions | (0.39 | ) | (0.19 | ) | (0.21 | ) | (0.06 | ) | — | |||||||||||||
Net asset value at end of period | $ | 10.01 | $ | 10.04 | $ | 9.12 | $ | 7.95 | $ | 10.57 | ||||||||||||
Total investment return (b) | 3.54 | % | 12.51 | % | 17.85 | % | (24.37 | %) | 5.70 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.18 | % | 2.01 | % | 2.78 | % | 2.46 | % | 1.83 | %†† | ||||||||||||
Net expenses (d) | 0.37 | % | 0.37 | % | 0.37 | % | 0.38 | % | 0.38 | %†† | ||||||||||||
Expenses (before waiver/reimbursement) (d) | 0.78 | % | 1.00 | % | 1.09 | % | 1.81 | % | 31.10 | %†† | ||||||||||||
Portfolio turnover rate | 107 | % | 81 | % | 76 | % | 127 | % | 17 | % | ||||||||||||
Net assets at end of period (in 000’s) | $6,358 | $6,935 | $ | 6,570 | $ | 4,418 | $ | 281 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
18 MainStay Retirement 2010 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.11 | $ | 9.18 | $ | 7.96 | $ | 10.58 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.24 | 0.22 | 0.25 | 0.26 | 0.08 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.14 | 0.92 | 1.18 | (2.81 | ) | 0.50 | ||||||||||||||||
Total from investment operations | 0.38 | 1.14 | 1.43 | (2.55 | ) | 0.58 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.27 | ) | (0.21 | ) | (0.21 | ) | (0.06 | ) | — | |||||||||||||
From net realized gain on investments | (0.14 | ) | — | — | (0.01 | ) | — | |||||||||||||||
Total dividends and distributions | (0.41 | ) | (0.21 | ) | (0.21 | ) | (0.07 | ) | — | |||||||||||||
Net asset value at end of period | $ | 10.08 | $ | 10.11 | $ | 9.18 | $ | 7.96 | $ | 10.58 | ||||||||||||
Total investment return (b) | 3.85 | % | 12.66 | % | 18.38 | % | (24.25 | %) | 5.80 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.36 | % | 2.28 | % | 2.98 | % | 2.77 | % | 2.42 | %†† | ||||||||||||
Net expenses (d) | 0.12 | % | 0.12 | % | 0.12 | % | 0.13 | % | 0.13 | %†† | ||||||||||||
Expenses (before reimbursement/waiver) (d) | 0.53 | % | 0.76 | % | 0.84 | % | 1.51 | % | 30.84 | %†† | ||||||||||||
Portfolio turnover rate | 107 | % | 81 | % | 76 | % | 127 | % | 17 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 43,984 | $ | 35,009 | $ | 33,025 | $ | 20,105 | $ | 930 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Financial Highlights selected per share data and ratios
Class R2 | ||||||||||||||||||||
January 8, | ||||||||||||||||||||
2009** | ||||||||||||||||||||
through | ||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.05 | $ | 9.12 | $ | 7.84 | ||||||||||||||
Net investment income (loss) (a) | 0.20 | 0.18 | 0.15 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.14 | 0.93 | 1.13 | |||||||||||||||||
Total from investment operations | 0.34 | 1.11 | 1.28 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.24 | ) | (0.18 | ) | — | |||||||||||||||
From net realized gain on investments | (0.14 | ) | — | — | ||||||||||||||||
Total dividends and distributions | (0.38 | ) | (0.18 | ) | — | |||||||||||||||
Net asset value at end of period | $ | 10.01 | $ | 10.05 | $ | 9.12 | ||||||||||||||
Total investment return (b) | 3.53 | % | 12.37 | % | 16.33 | %(c)(d) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.04 | % | 1.90 | % | 2.12 | %†† | ||||||||||||||
Net expenses (e) | 0.47 | % | 0.47 | % | 0.47 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) (e) | 0.88 | % | 1.10 | % | 1.18 | %†† | ||||||||||||||
Portfolio turnover rate | 107 | % | 81 | % | 76 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 14,890 | $1,781 | $ | 1,821 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
20 MainStay Retirement 2010 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R3 | ||||||||||||||||||
May 1, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 10.04 | $ | 9.13 | $ | 7.93 | $ | 10.07 | ||||||||||
Net investment income (loss) (a) | 0.18 | 0.16 | 0.20 | 0.14 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.13 | 0.92 | 1.17 | (2.28 | ) | |||||||||||||
Total from investment operations | 0.31 | 1.08 | 1.37 | (2.14 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.21 | ) | (0.17 | ) | (0.17 | ) | — | |||||||||||
From net realized gain on investments | (0.14 | ) | — | — | — | |||||||||||||
Total dividends and distributions | (0.35 | ) | (0.17 | ) | (0.17 | ) | — | |||||||||||
Net asset value at end of period | $ | 10.00 | $ | 10.04 | $ | 9.13 | $ | 7.93 | ||||||||||
Total investment return (b) | 3.18 | % | 11.99 | % | 17.62 | % | (21.25 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.82 | % | 1.67 | % | 2.47 | % | 3.25 | % †† | ||||||||||
Net expenses (d) | 0.72 | % | 0.72 | % | 0.72 | % | 0.73 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.13 | % | 1.35 | % | 1.44 | % | 1.86 | % †† | ||||||||||
Portfolio turnover rate | 107 | % | 81 | % | 76 | % | 127 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 735 | $ | 866 | $ | 996 | $ | 887 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 21 |
MainStay Retirement 2020 Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (6/29/07) | Ratio2 | ||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –2 | .74% | –0 | .67% | 2 | .13% | ||||||||
Excluding sales charges | 2 | .92 | 0 | .63 | 2 | .13 | ||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –2 | .66 | –0 | .58 | 1 | .83 | ||||||||
Excluding sales charges | 3 | .01 | 0 | .72 | 1 | .83 | ||||||||||
Class I Shares | No Sales Charge | 3 | .34 | 0 | .95 | 1 | .58 | |||||||||
Class R2 Shares4 | No Sales Charge | 3 | .08 | 0 | .65 | 1 | .93 | |||||||||
Class R3 Shares5 | No Sales Charge | 2 | .71 | 0 | .37 | 2 | .18 | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Class R2 shares were first offered on June 29, 2007, although this class did not commence investment operations until January 8, 2009. Performance figures for Class R2 shares include the historical performance of Class A shares through January 7, 2009, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R2 shares might have been lower. |
5. | Class R3 shares were first offered on June 29, 2007, although this class did not commence investment operations until May 1, 2008. Performance figures for Class R3 shares include the historical performance of Class A |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
22 MainStay Retirement 2020 Fund
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
S&P 500® Index6 | 8 | .09% | –2 | .00% | ||||
MSCI EAFE® Index7 | –4 | .08 | –6 | .35 | ||||
Barclays Capital U.S. Aggregate Bond Index8 | 5 | .00 | 7 | .05 | ||||
Average Lipper Mixed-Asset Target 2020 Fund9 | 3 | .60 | –0 | .51 | ||||
shares through April 30, 2008, adjusted for differences in expenses and fees. Unadjusted, the performance shown for the Class R3 shares might have been lower. |
6. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500 Index is the broad-based securities market index. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
7. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
8. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
9. | The average Lipper mixed-asset target 2020 fund is representative of funds that seek to maximize assets for retirement or other purposes with an expected time horizon from January 1, 2016, to December 31, 2020. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 23
Cost in Dollars of a $1,000 Investment in MainStay Retirement 2020 Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 930.30 | $ | 2.29 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 931.20 | $ | 1.80 | $ | 1,023.30 | $ | 1.89 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 932.40 | $ | 0.58 | $ | 1,024.60 | $ | 0.61 | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 931.20 | $ | 2.29 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 930.10 | $ | 3.50 | $ | 1,021.60 | $ | 3.67 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for Class R2 and 0.72% for Class R3) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
24 MainStay Retirement 2020 Fund
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
See Portfolio of Investments beginning on page 29 for specific holdings within these categories.
mainstayinvestments.com 25
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Retirement 2020 Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Retirement 2020 Fund returned 2.92% for Investor Class shares and 3.01% for Class A shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 3.34%, Class R2 shares returned 3.08% and Class R3 shares returned 2.71%. All share classes underperformed the 3.60% return of the average Lipper2 mixed-asset target 2020 fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the –4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index,5 which is an additional benchmark for the Fund. See page 22 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a portfolio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests primarily in mutual funds managed by New York Life Investments, mutual funds managed by an advisor not affiliated with New York Life Investments or exchange traded funds (“ETFs”) if a New York Life Investments managed mutual fund in a particular asset class is not available (collectively, “Underlying Funds”). The Underlying Funds may invest in fixed-income securities or in domestic or international equities at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large cap equities.
Our efforts to manage the Fund’s risk posture through its allocation to stocks and bonds contributed positively, but only marginally, to the Fund’s relative performance. Within the target allocations outlined in the Prospectus, we maintained a slightly higher-than-normal allocation to stocks and a slightly lower-than-normal allocation to bonds through the early part of 2011, before softer economic conditions led us to retreat to a more normal mix.
In late summer, with equities having sold off considerably in response to the growing debt crisis, we again began to overweight equities slightly in relation to the target allocation on the belief that conditions were better than many investors perceived them to be. Although our timing was by no means perfect, the repositioning added to returns.
We were less successful within the fixed-income portion of the Fund. Being wary of the very low yields available on U.S. Treasury securities and mindful of the improving health of corporate balance sheets (which should translate into low default rates), we preferred shorter-duration6 lower-credit-quality bonds over longer-dated government-backed bonds. We have maintained this preference, but the positioning detracted from performance during the summer. During the summer months, investors flocked to U.S. Treasury securities for their perceived safety, which drove interest rates down and caused spreads7 to widen.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced significant challenges relative to their benchmarks and peers. Included among these were MainStay Flexible Bond Opportunities Fund, MainStay MAP Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases, sector exposure, credit quality and duration. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
As previously noted, the Fund’s allocation to stocks and bonds varied slightly over the course of the reporting period in response to the changing environment. Within equities, we gave mild emphasis to three themes. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively valued, to have superior access to capital and to be better
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 23 for more information on Lipper Inc.
3. See footnote on page 23 for more information on the S&P 500® Index.
4. See footnote on page 23 for more information on the MSCI EAFE® Index.
5. See footnote on page 23 for more information on the Barclays Capital U.S. Aggregate Bond Index.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
26 MainStay Retirement 2020 Fund
positioned to benefit from growth in the developing world. Second, the Fund reflected a preference for growth stocks over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging issues.
The fixed-income portion of the Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index, the Fund’s fixed-income benchmark. The Fund was also heavily tilted toward corporate bonds instead of government-backed issues. This positioning reflected our view that corporations have improved the quality of their balance sheets significantly in recent years by reducing leverage, accumulating cash and controlling operating costs. We anticipated that corporate default rates would remain low for the next few years. If this happens, we believe that the higher yields available on corporate bonds may prove attractive.
How did the Fund’s allocations change over the course of the reporting period?
The largest change during the reporting period was a shift out of MainStay Indexed Bond Fund, MainStay Intermediate Term Bond Fund and MainStay High Yield Opportunities Fund into MainStay Flexible Bond Opportunities Fund.
We also reduced exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund into MainStay Large Cap Growth Fund, MainStay MAP Fund and MainStay Epoch U.S. All Cap Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Also noteworthy was a new position in MainStay Cash Reserves Fund. We established the position to shorten the duration of the fixed-income portion of the Fund as protection against a potential rise in interest rates. The new position also served as a liquidity facility to adjust the Fund’s overall mix of exposure to stocks and bonds.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds redirected to MainStay ICAP International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion of the Fund and to implement the intended bias toward U.S. equities.
Were there any other significant allocation changes during the reporting period?
In several cases, we exited positions in actively managed non-MainStay Funds in favor of low-cost ETFs that invest in similar market segments.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Underlying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and substantial allocations. (Contributions take weightings and total returns into account.) Among the most substantial detractors from performance were Vanguard MSCI Emerging Market ETF and MainStay Epoch International Small Cap Fund.
What factors and risks affected the Fund’s Underlying Fixed Income Fund investments during the reporting period?
The Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index. We favored credit instruments over government bonds throughout the reporting period. While this was an advantageous posture at times, the flight to quality by investors to U.S. Treasury securities and higher-quality corporate bonds over the summer in response to the escalating European sovereign debt crisis caused this positioning to be generally unproductive. We found this especially true during the final few months of the reporting period. We continued to maintain a positive outlook on corporate bonds over U.S. Treasurys at the end of the reporting period.
During the reporting period, which fixed-income market segments were strong performers and which segments were particularly weak?
Interest rates finished the reporting period markedly lower than they were when the fiscal year began. Accordingly, Underlying Funds that invested in long-maturity bonds generally did better than those that focused on securities with shorter durations. The return on cash investments was little more than zero and most Underlying Funds that invest primarily in short-term bonds failed to deliver returns much greater than that. Credit instruments and investment-grade bonds diverged sharply at points during the reporting period, but the differences ended up being relatively small over the entire period.
mainstayinvestments.com 27
Which Underlying Fixed Income Funds made the strongest contributions to the Fund’s overall per-
formance, and which Underlying Fixed Income Funds were the greatest detractors?
formance, and which Underlying Fixed Income Funds were the greatest detractors?
The strongest fixed-income contributions to overall performance came from comparatively large positions in MainStay Indexed Bond Fund and MainStay Intermediate Term Bond Fund. At the other end of the spectrum, small positions in American Century International Bond Fund and American Century Inflation-Adjusted Bond Fund were the greatest fixed-income detractors from the Fund’s overall performance.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
28 MainStay Retirement 2020 Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 92.2%† | ||||||||
Equity Funds 58.1% | ||||||||
MainStay 130/30 Core Fund Class I | 329,810 | $ | 2,612,095 | |||||
MainStay 130/30 International Fund Class I | 50,183 | 320,169 | ||||||
MainStay Common Stock Fund Class I | 379,241 | 4,315,764 | ||||||
MainStay Epoch Global Choice Fund Class I | 41,936 | 612,265 | ||||||
MainStay Epoch International Small Cap Fund Class I | 204,767 | 3,446,230 | ||||||
MainStay Epoch U.S. All Cap Fund Class I | 472,725 | 11,009,772 | ||||||
MainStay Growth Equity Fund Class I (a)(b) | 20,383 | 229,721 | ||||||
MainStay ICAP Equity Fund Class I | 184,784 | 6,489,605 | ||||||
MainStay ICAP International Fund Class I | 181,227 | 4,994,608 | ||||||
MainStay ICAP Select Equity Fund Class I | 117,096 | 3,919,211 | ||||||
MainStay International Equity Fund Class I | 38,451 | 418,736 | ||||||
MainStay Large Cap Growth Fund Class I (a) | 1,116,097 | 8,314,922 | ||||||
MainStay MAP Fund Class I | 413,995 | 12,875,235 | ||||||
MainStay U.S. Small Cap Fund Class I | 60,587 | 1,001,496 | ||||||
Total Equity Funds (Cost $59,052,777) | 60,559,829 | |||||||
Fixed Income Funds 34.1% | ||||||||
MainStay Cash Reserves Fund Class I | 2,550,167 | 2,550,167 | ||||||
MainStay Convertible Fund Class I | 91,248 | 1,380,588 | ||||||
MainStay Flexible Bond Opportunities Fund Class I (b) | 971,938 | 8,485,017 | ||||||
MainStay Floating Rate Fund Class I | 259,759 | 2,418,353 | ||||||
MainStay Global High Income Fund Class I | 130,484 | 1,544,929 | ||||||
MainStay High Yield Corporate Bond Fund Class I | 423,064 | 2,470,694 | ||||||
MainStay High Yield Opportunities Fund Class I | 37,313 | 422,386 | ||||||
MainStay Indexed Bond Fund Class I | 379,782 | 4,432,058 | ||||||
MainStay Intermediate Term Bond Fund Class I | 1,094,418 | 11,874,435 | ||||||
Total Fixed Income Funds (Cost $35,567,915) | 35,578,627 | |||||||
Total Affiliated Investment Companies (Cost $94,620,692) | 96,138,456 | |||||||
Unaffiliated Investment Companies 7.7% | ||||||||
Equity Funds 5.6% | ||||||||
Columbia Funds Series Trust-Columbia SmallCap Index Fund | 46,769 | 780,566 | ||||||
iShares Russell 2000 Index ETF | 6,815 | 504,106 | ||||||
Vanguard Emerging Markets ETF | 110,572 | 4,587,632 | ||||||
Total Equity Funds (Cost $6,123,631) | 5,872,304 | |||||||
Fixed Income Funds 2.1% | ||||||||
iShares Barclays TIPS Bond Fund | 17,973 | 2,093,675 | ||||||
SPDR Barclays Capital International Treasury Bond ETF | 1,787 | 109,203 | ||||||
Total Fixed Income Funds (Cost $2,090,268) | 2,202,878 | |||||||
Total Unaffiliated Investment Companies (Cost $8,213,899) | 8,075,182 | |||||||
Total Investments (Cost $102,834,591) (c) | 99.9 | % | 104,213,638 | |||||
Other Assets, Less Liabilities | 0.1 | 78,331 | ||||||
Net Assets | 100.0 | % | $ | 104,291,969 | ||||
† | Percentages indicated are based on Fund net assets. | |
(a) | Non-income producing Underlying Fund. | |
(b) | The Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. (See Note 3) | |
(c) | At October 31, 2011, cost is $103,329,652 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 2,332,127 | ||
Gross unrealized depreciation | (1,448,141 | ) | ||
Net unrealized appreciation | $ | 883,986 | ||
The following abbreviations are used in the above portfolio:
ETF—Exchange Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
TIPS—Treasury Inflation Protected Security
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 29 |
Portfolio of Investments October 31, 2011 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies | ||||||||||||||||
Equity Funds | $ | 60,559,829 | $ | — | $ | — | $ | 60,559,829 | ||||||||
Fixed Income Funds | 35,578,627 | — | — | 35,578,627 | ||||||||||||
Total Affiliated Investment Companies | 96,138,456 | — | — | 96,138,456 | ||||||||||||
Unaffiliated Investment Companies | ||||||||||||||||
Equity Funds | 5,872,304 | — | — | 5,872,304 | ||||||||||||
Fixed Income Funds | 2,202,878 | — | — | 2,202,878 | ||||||||||||
Total Unaffiliated Investment Companies | 8,075,182 | — | — | 8,075,182 | ||||||||||||
Total Investments in Securities | $ | 104,213,638 | $ | — | $ | — | $ | 104,213,638 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
30 MainStay Retirement 2020 Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $94,620,692) | $ | 96,138,456 | ||
Investments in unaffiliated investment companies, at value (identified cost $8,213,899) | 8,075,182 | |||
Receivables: | ||||
Fund shares sold | 108,924 | |||
Manager (See Note 3) | 11,137 | |||
Other assets | 29,072 | |||
Total assets | 104,362,771 | |||
Liabilities | ||||
Payables: | ||||
Transfer agent (See Note 3) | 23,440 | |||
Fund shares redeemed | 12,194 | |||
Shareholder communication | 10,920 | |||
Professional fees | 10,582 | |||
NYLIFE Distributors (See Note 3) | 8,705 | |||
Custodian | 562 | |||
Trustees | 393 | |||
Accrued expenses | 4,006 | |||
Total liabilities | 70,802 | |||
Net assets | $ | 104,291,969 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 10,974 | ||
Additional paid-in capital | 96,497,797 | |||
96,508,771 | ||||
Undistributed net investment income | 1,009,471 | |||
Accumulated net realized gain (loss) on investments | 5,394,680 | |||
Net unrealized appreciation (depreciation) on investments | 1,379,047 | |||
Net assets | $ | 104,291,969 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 2,959,599 | ||
Shares of beneficial interest outstanding | 312,088 | |||
Net asset value per share outstanding | $ | 9.48 | ||
Maximum sales charge (5.50% of offering price) | 0.55 | |||
Maximum offering price per share outstanding | $ | 10.03 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 14,032,355 | ||
Shares of beneficial interest outstanding | 1,481,449 | |||
Net asset value per share outstanding | $ | 9.47 | ||
Maximum sales charge (5.50% of offering price) | 0.55 | |||
Maximum offering price per share outstanding | $ | 10.02 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 63,847,956 | ||
Shares of beneficial interest outstanding | 6,705,094 | |||
Net asset value and offering price per share outstanding | $ | 9.52 | ||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 21,392,158 | ||
Shares of beneficial interest outstanding | 2,257,850 | |||
Net asset value and offering price per share outstanding | $ | 9.47 | ||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 2,059,901 | ||
Shares of beneficial interest outstanding | 218,001 | |||
Net asset value and offering price per share outstanding | $ | 9.45 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 31 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 1,657,548 | ||
Dividend distributions from unaffiliated investment companies | 118,372 | |||
Total income | 1,775,920 | |||
Expenses | ||||
Transfer agent (See Note 3) | 120,714 | |||
Manager (See Note 3) | 81,960 | |||
Registration | 74,822 | |||
Distribution/Service—Investor Class (See Note 3) | 6,207 | |||
Distribution/Service—Class A (See Note 3) | 35,418 | |||
Distribution/Service—Class R2 (See Note 3) | 13,485 | |||
Distribution/Service—Class R3 (See Note 3) | 10,074 | |||
Professional fees | 31,021 | |||
Shareholder communication | 19,066 | |||
Custodian | 8,375 | |||
Shareholder service (See Note 3) | 7,409 | |||
Trustees | 2,384 | |||
Miscellaneous | 7,724 | |||
Total expenses before waiver/reimbursement | 418,659 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (241,132 | ) | ||
Expense reimbursement from Transfer agent (See Note 3) | (1,951 | ) | ||
Net expenses | 175,576 | |||
Net investment income (loss) | 1,600,344 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Affiliated investment company transactions | 5,310,878 | |||
Unaffiliated investment company transactions | 671,457 | |||
Realized capital gain distributions from affiliated investment companies | 251,078 | |||
Realized capital gain distributions from unaffiliated investment companies | 58,588 | |||
Net realized gain (loss) on investments from affiliated and unaffiliated investment companies | 6,292,001 | |||
Net change in unrealized appreciation (depreciation) on investments | (5,105,467 | ) | ||
Net realized and unrealized gain (loss) on investments | 1,186,534 | |||
Net increase (decrease) in net assets resulting from operations | $ | 2,786,878 | ||
The notes to the financial statements are an integral part of,
32 MainStay Retirement 2020 Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,600,344 | $ | 1,123,488 | ||||
Net realized gain (loss) on investments from affiliated and unaffiliated investment company transactions | 6,292,001 | 4,562,821 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (5,105,467 | ) | 2,079,880 | |||||
Net increase (decrease) in net assets resulting from operations | 2,786,878 | 7,766,189 | ||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (40,491 | ) | (17,599 | ) | ||||
Class A | (278,945 | ) | (199,170 | ) | ||||
Class I | (1,066,646 | ) | (820,771 | ) | ||||
Class R2 | (33,109 | ) | (18,380 | ) | ||||
Class R3 | (34,294 | ) | (26,508 | ) | ||||
(1,453,485 | ) | (1,082,428 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (32,465 | ) | — | |||||
Class A | (215,292 | ) | — | |||||
Class I | (739,851 | ) | — | |||||
Class R2 | (27,393 | ) | — | |||||
Class R3 | (30,810 | ) | — | |||||
(1,045,811 | ) | — | ||||||
Total dividends and distributions to shareholders | (2,499,296 | ) | (1,082,428 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 55,599,218 | 20,167,580 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 2,495,627 | 1,082,428 | ||||||
Cost of shares redeemed | (20,194,687 | ) | (19,350,396 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 37,900,158 | 1,899,612 | ||||||
Net increase (decrease) in net assets | 38,187,740 | 8,583,373 | ||||||
Net Assets | ||||||||
Beginning of year | 66,104,229 | 57,520,856 | ||||||
End of year | $ | 104,291,969 | $ | 66,104,229 | ||||
Undistributed net investment income at end of year | $ | 1,009,471 | $ | 713,291 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 33 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 9.54 | $ | 8.56 | $ | 7.43 | $ | 9.83 | ||||||||||
Net investment income (loss) (a) | 0.16 | 0.12 | 0.18 | 0.12 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.12 | 1.01 | 1.13 | (2.52 | ) | |||||||||||||
Total from investment operations | 0.28 | 1.13 | 1.31 | (2.40 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.19 | ) | (0.15 | ) | (0.16 | ) | — | |||||||||||
From net realized gain on investments | (0.15 | ) | — | (0.02 | ) | — | ||||||||||||
Total dividends and distributions | (0.34 | ) | (0.15 | ) | (0.18 | ) | — | |||||||||||
Net asset value at end of period | $ | 9.48 | $ | 9.54 | $ | 8.56 | $ | 7.43 | ||||||||||
Total investment return (b) | 2.92 | % | 13.33 | % | 17.99 | % | (24.42 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.71 | % | 1.48 | % | 2.31 | % | 2.02 | % †† | ||||||||||
Net expenses (d) | 0.47 | % | 0.47 | % | 0.47 | % | 0.47 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 0.88 | % | 1.16 | % | 1.31 | % | 1.48 | % †† | ||||||||||
Portfolio turnover rate | 97 | % | 73 | % | 68 | % | 134 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 2,960 | $ | 1,926 | $ | 915 | $ | 342 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
34 MainStay Retirement 2020 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.53 | $ | 8.54 | $ | 7.44 | $ | 10.57 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.18 | 0.15 | 0.19 | 0.17 | 0.04 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | 0.99 | 1.11 | (3.25 | ) | 0.53 | ||||||||||||||||
Total from investment operations | 0.29 | 1.14 | 1.30 | (3.08 | ) | 0.57 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.20 | ) | (0.15 | ) | (0.18 | ) | (0.04 | ) | — | |||||||||||||
From net realized gain on investments | (0.15 | ) | — | (0.02 | ) | (0.01 | ) | — | ||||||||||||||
Total dividends and distributions | (0.35 | ) | (0.15 | ) | (0.20 | ) | (0.05 | ) | — | |||||||||||||
Net asset value at end of period | $ | 9.47 | $ | 9.53 | $ | 8.54 | $ | 7.44 | $ | 10.57 | ||||||||||||
Total investment return (b) | 3.01 | % | 13.55 | % | 17.97 | % | (29.25 | %) | 5.70 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.87 | % | 1.67 | % | 2.48 | % | 1.79 | % | 1.32 | %†† | ||||||||||||
Net expenses (d) | 0.37 | % | 0.37 | % | 0.37 | % | 0.38 | % | 0.38 | %†† | ||||||||||||
Expenses (before waiver/reimbursement) (d) | 0.67 | % | 0.86 | % | 1.01 | % | 1.74 | % | 35.65 | %†† | ||||||||||||
Portfolio turnover rate | 97 | % | 73 | % | 68 | % | 134 | % | 25 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 14,032 | $ | 13,421 | $ | 11,026 | $ | 4,940 | $ | 297 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 35 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.57 | $ | 8.58 | $ | 7.45 | $ | 10.57 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.20 | 0.17 | 0.21 | 0.19 | 0.05 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.12 | 0.99 | 1.12 | (3.24 | ) | 0.52 | ||||||||||||||||
Total from investment operations | 0.32 | 1.16 | 1.33 | (3.05 | ) | 0.57 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.22 | ) | (0.17 | ) | (0.18 | ) | (0.06 | ) | — | |||||||||||||
From net realized gain on investments | (0.15 | ) | — | (0.02 | ) | (0.01 | ) | — | ||||||||||||||
Total dividends and distributions | (0.37 | ) | (0.17 | ) | (0.20 | ) | (0.07 | ) | — | |||||||||||||
Net asset value at end of period | $ | 9.52 | $ | 9.57 | $ | 8.58 | $ | 7.45 | $ | 10.57 | ||||||||||||
Total investment return (b) | 3.34 | % | 13.69 | % | 18.30 | % | (29.14 | %) | 5.80 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 2.03 | % | 1.95 | % | 2.73 | % | 2.06 | % | 1.56 | %†† | ||||||||||||
Net expenses (d) | 0.12 | % | 0.12 | % | 0.12 | % | 0.13 | % | 0.13 | %†† | ||||||||||||
Expenses (before reimbursement/waiver) (d) | 0.42 | % | 0.61 | % | 0.76 | % | 1.45 | % | 35.16 | %†† | ||||||||||||
Portfolio turnover rate | 97 | % | 73 | % | 68 | % | 134 | % | 25 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 63,848 | $ | 47,125 | $ | 42,809 | $ | 19,743 | $ | 440 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
36 MainStay Retirement 2020 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R2 | ||||||||||||||||||||
January 8, | ||||||||||||||||||||
2009** | ||||||||||||||||||||
through | ||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.52 | $ | 8.54 | $ | 7.21 | ||||||||||||||
Net investment income (loss) (a) | 0.15 | 0.14 | 0.12 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.13 | 0.98 | 1.21 | |||||||||||||||||
Total from investment operations | 0.28 | 1.12 | 1.33 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.18 | ) | (0.14 | ) | — | |||||||||||||||
From net realized gain on investments | (0.15 | ) | — | — | ||||||||||||||||
Total dividends and distributions | (0.33 | ) | (0.14 | ) | — | |||||||||||||||
Net asset value at end of period | $ | 9.47 | $ | 9.52 | $ | 8.54 | ||||||||||||||
Total investment return (b) | 3.08 | % | 13.29 | % | 18.45 | %(c)(d) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.61 | % | 1.54 | % | 1.82 | %†† | ||||||||||||||
Net expenses (e) | 0.47 | % | 0.47 | % | 0.47 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) (e) | 0.77 | % | 0.96 | % | 1.09 | %†† | ||||||||||||||
Portfolio turnover rate | 97 | % | 73 | % | 68 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 21,392 | $ | 1,718 | $ | 1,057 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 37 |
Financial Highlights selected per share data and ratios
Class R3 | ||||||||||||||||||
May 1, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 9.51 | $ | 8.54 | $ | 7.42 | $ | 9.98 | ||||||||||
Net investment income (loss) (a) | 0.15 | 0.11 | 0.17 | 0.10 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | 0.99 | 1.12 | (2.66 | ) | |||||||||||||
Total from investment operations | 0.26 | 1.10 | 1.29 | (2.56 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.17 | ) | (0.13 | ) | (0.15 | ) | — | |||||||||||
From net realized gain on investments | (0.15 | ) | — | (0.02 | ) | — | ||||||||||||
Total dividends and distributions | (0.32 | ) | (0.13 | ) | (0.17 | ) | — | |||||||||||
Net asset value at end of period | $ | 9.45 | $ | 9.51 | $ | 8.54 | $ | 7.42 | ||||||||||
Total investment return (b) | 2.71 | % | 13.02 | % | 17.71 | % | (25.65 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.52 | % | 1.33 | % | 2.31 | % | 2.61 | % †† | ||||||||||
Net expenses (d) | 0.72 | % | 0.72 | % | 0.72 | % | 0.73 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.02 | % | 1.21 | % | 1.37 | % | 1.81 | % †† | ||||||||||
Portfolio turnover rate | 97 | % | 73 | % | 68 | % | 134 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 2,060 | $ | 1,915 | $ | 1,713 | $ | 1,305 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
38 MainStay Retirement 2020 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
MainStay Retirement 2030 Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from Class to Class based on differences in Class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (6/29/07) | Ratio2 | ||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –3 | .18% | –2 | .17% | 2 | .42% | ||||||||
Excluding sales charges | 2 | .46 | –0 | .88 | 2 | .42 | ||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –3 | .09 | –2 | .10 | 1 | .97 | ||||||||
Excluding sales charges | 2 | .55 | –0 | .82 | 1 | .97 | ||||||||||
Class I Shares | No Sales Charge | 2 | .85 | –0 | .55 | 1 | .72 | |||||||||
Class R2 Shares4 | No Sales Charge | 2 | .45 | –0 | .93 | 2 | .07 | |||||||||
Class R3 Shares5 | No Sales Charge | 2 | .23 | –1 | .14 | 2 | .32 | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Class R2 shares were first offered on June 29, 2007, although this class did not commence investment operations until January 8, 2009. Performance figures for Class R2 shares include the historical performance of Class A shares through January 7, 2009, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R2 shares might have been lower. |
5. | Class R3 shares were first offered on June 29, 2007, although this class did not commence investment operations until May 1, 2008. Performance figures for Class R3 shares include the historical performance of Class A shares through April 30, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R3 shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 39
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
S&P 500® Index6 | 8 | .09% | –2 | .00% | ||||
MSCI EAFE® Index7 | –4 | .08 | –6 | .35 | ||||
Barclays Capital U.S. Aggregate Bond Index8 | 5 | .00 | 7 | .05 | ||||
Average Lipper Mixed-Asset Target 2030 Fund9 | 3 | .14 | –1 | .95 | ||||
6. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500 Index is the Fund’s broad-based securities market index. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
7. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
8. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
9. | The average Lipper mixed-asset target 2030 fund is representative of funds that seek to maximize assets for retirement or other purposes with an expected time horizon from January 1, 2026, to December 31, 2030. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
40 MainStay Retirement 2030 Fund
Cost in Dollars of a $1,000 Investment in MainStay Retirement 2030 Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 907.50 | $ | 2.26 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 907.40 | $ | 1.78 | $ | 1,023.30 | $ | 1.89 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 909.00 | $ | 0.58 | $ | 1,024.60 | $ | 0.61 | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 906.30 | $ | 2.26 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 906.40 | $ | 3.46 | $ | 1,021.60 | $ | 3.67 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for Class R2 and 0.72% for Class R3) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
mainstayinvestments.com 41
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
Capital Appreciation | 40.60 | |||
Total Return | 21.10 | |||
Growth of Capital | 19.50 | |||
Current Income | 18.80 | |||
Other Assets, Less Liabilities | (0.00 | ) |
See Portfolio of Investments beginning on page 46 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
42 MainStay Retirement 2030 Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Retirement 2030 Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Retirement 2030 Fund returned 2.46% for Investor Class shares and 2.55% for Class A shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 2.85%, Class R2 shares returned 2.45% and Class R3 shares returned 2.23%. All share classes underperformed the 3.14% return of the average Lipper2 mixed-asset target 2030 fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the −4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index,5 which is an additional benchmark for the Fund. See page 39 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a portfolio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests primarily in mutual funds managed by New York Life Investments, mutual funds managed by an advisor not affiliated with New York Life Investments or exchange traded funds (“ETFs”) if a New York Life Investments managed mutual fund in a particular asset class is not available (collectively, “Underlying Funds”). The Underlying Funds may invest in fixed-income securities or in domestic or international equities at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large cap equities.
Our efforts to manage the Fund’s risk posture through its allocation to stocks and bonds contributed positively, but only marginally, to the Fund’s relative performance. Within the target allocations outlined in the Prospectus, we maintained a slightly higher-than-normal allocation to stocks and a slightly lower-than-normal allocation to bonds through the early part of 2011, before softer economic conditions led us to retreat to a more normal mix.
In late summer, with equities having sold off considerably in response to the growing debt crisis, we again began to overweight equities slightly in relation to the target allocation on the belief that conditions were better than many investors perceived them to be. Although our timing was by no means perfect, the repositioning added to returns.
We were less successful within the fixed-income portion of the Fund. Being wary of the very low yields available on U.S. Treasury securities and mindful of the improving health of corporate balance sheets (which should translate into low default rates), we preferred shorter-duration6 lower-credit-quality bonds over longer-dated government-backed bonds. We have maintained this preference, but the positioning detracted from performance during the summer. During the summer months, investors flocked to U.S. Treasury securities for their perceived safety, which drove interest rates down and caused spreads7 to widen.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced significant challenges relative to their benchmarks and peers. Included among these were MainStay Flexible Bond Opportunities Fund, MainStay MAP Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases, sector exposure, credit quality and duration. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
As previously noted, the Fund’s allocation to stocks and bonds varied slightly over the course of the reporting period in response to the changing environment. Within equities, we gave mild emphasis to three themes. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively valued, to have superior access to capital and to be better
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 40 for more information on Lipper Inc.
3. See footnote on page 40 for more information on the S&P 500® Index.
4. See footnote on page 40 for more information on the MSCI EAFE® Index.
5. See footnote on page 40 for more information on the Barclays Capital U.S. Aggregate Bond Index.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
mainstayinvestments.com 43
positioned to benefit from growth in the developing world. Second, the Fund reflected a preference for growth stocks over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging issues.
The fixed-income portion of the Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index, the Fund’s fixed-income benchmark. The Fund was also heavily tilted toward corporate bonds instead of government-backed issues. This positioning reflected our view that corporations have improved the quality of their balance sheets significantly in recent years by reducing leverage, accumulating cash and controlling operating costs. We anticipated that corporate default rates would remain low for the next few years. If this happens, we believe that the higher yields available on corporate bonds may prove attractive.
How did the Fund’s allocations change over the course of the reporting period?
The largest change during the reporting period was a shift out of MainStay Indexed Bond Fund, MainStay Intermediate Term Bond Fund and MainStay High Yield Opportunities Fund into MainStay Flexible Bond Opportunities Fund.
We also reduced exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund into MainStay Large Cap Growth Fund, MainStay MAP Fund and MainStay Epoch U.S. All Cap Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Also noteworthy was a new position in MainStay Cash Reserves Fund. We established the position to shorten the duration of the fixed-income portion of the Fund as protection against a potential rise in interest rates. The new position also served as a liquidity facility to adjust the Fund’s overall mix of exposure to stocks and bonds.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds redirected to MainStay ICAP International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion of the Fund and to implement the intended bias toward U.S. equities.
Were there any other significant allocation changes during the reporting period?
In several cases, we exited positions in actively managed non-MainStay Funds in favor of low-cost ETFs that invest in similar market segments.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Underlying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and substantial allocations. (Contributions take weightings and total returns into account.) Among the most substantial detractors from performance were Vanguard MSCI Emerging Market ETF and MainStay Epoch International Small Cap Fund.
What factors and risks affected the Fund’s Underlying Fixed Income Fund investments during the reporting period?
The Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index. We favored credit instruments over government bonds throughout the reporting period. While this was an advantageous posture at times, the flight to quality by investors to U.S. Treasury securities and higher-quality corporate bonds over the summer in response to the escalating European sovereign debt crisis caused this positioning to be generally unproductive. We found this especially true during the final few months of the reporting period. We continued to maintain a positive outlook on corporate bonds over U.S. Treasurys at the end of the reporting period.
During the reporting period, which fixed-income market segments were strong performers and which segments were particularly weak?
Interest rates finished the reporting period markedly lower than they were when the fiscal year began. Accordingly, Underlying Funds that invested in long-maturity bonds generally did better than those that focused on securities with shorter durations. The return on cash investments was little more than zero and most Underlying Funds that invest primarily in short-term bonds failed to deliver returns much greater than that. Credit instruments and investment-grade bonds diverged sharply at points during the reporting period, but the differences ended up being relatively small over the entire period.
44 MainStay Retirement 2030 Fund
Which Underlying Fixed Income Funds made the strongest contributions to the Fund’s overall per-
formance, and which Underlying Fixed Income Funds were the greatest detractors?
formance, and which Underlying Fixed Income Funds were the greatest detractors?
The strongest fixed-income contributions to overall performance came from positions in MainStay Convertible Fund and MainStay High Yield Corporate Bond Fund. At the other end of the spectrum, small positions in American Century International Bond Fund and American Century Inflation-Adjusted Bond Fund were the greatest fixed-income detractors from the Fund’s overall performance.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 45
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 91.5%† | ||||||||
Equity Funds 71.1% | ||||||||
MainStay 130/30 Core Fund Class I | 522,920 | $ | 4,141,525 | |||||
MainStay 130/30 International Fund Class I | 156,624 | 999,259 | ||||||
MainStay Common Stock Fund Class I | 438,460 | 4,989,672 | ||||||
MainStay Epoch Global Choice Fund Class I | 191,113 | 2,790,251 | ||||||
MainStay Epoch International Small Cap Fund Class I | 318,290 | 5,356,829 | ||||||
MainStay Epoch U.S. All Cap Fund Class I | 738,156 | 17,191,646 | ||||||
MainStay Growth Equity Fund Class I (a)(b) | 52,342 | 589,891 | ||||||
MainStay ICAP Equity Fund Class I | 320,918 | 11,270,651 | ||||||
MainStay ICAP International Fund Class I | 318,089 | 8,766,528 | ||||||
MainStay ICAP Select Equity Fund Class I | 163,073 | 5,458,056 | ||||||
MainStay International Equity Fund Class I | 180,701 | 1,967,838 | ||||||
MainStay Large Cap Growth Fund Class I (b) | 1,817,794 | 13,542,565 | ||||||
MainStay MAP Fund Class I | 710,361 | 22,092,225 | ||||||
MainStay U.S. Small Cap Fund Class I | 107,575 | 1,778,222 | ||||||
Total Equity Funds (Cost $100,844,073) | 100,935,158 | |||||||
Fixed Income Funds 20.4% | ||||||||
MainStay Cash Reserves Fund Class I | 3,594,683 | 3,594,683 | ||||||
MainStay Convertible Fund Class I | 93,328 | 1,412,056 | ||||||
MainStay Flexible Bond Opportunities Fund Class I (a) | 1,496,127 | 13,061,191 | ||||||
MainStay Floating Rate Fund Class I | 421,501 | 3,924,171 | ||||||
MainStay Global High Income Fund Class I (a) | 235,648 | 2,790,077 | ||||||
MainStay High Yield Corporate Bond Fund Class I | 528,952 | 3,089,081 | ||||||
MainStay High Yield Opportunities Fund Class I | 8,633 | 97,725 | ||||||
MainStay Indexed Bond Fund Class I | 16,687 | 194,738 | ||||||
MainStay Intermediate Term Bond Fund Class I | 73,627 | 798,854 | ||||||
Total Fixed Income Funds (Cost $29,271,662) | 28,962,576 | |||||||
Total Affiliated Investment Companies (Cost $130,115,735) | 129,897,734 | |||||||
Unaffiliated Investment Companies 8.5% | ||||||||
Equity Funds 7.5% | ||||||||
Columbia Funds Series Trust-Columbia SmallCap Index Fund | 138,883 | 2,317,955 | ||||||
iShares Russell 2000 Index ETF | 20,245 | 1,497,522 | ||||||
SPDR S&P Emerging Markets ETF | 33 | 2,107 | ||||||
Vanguard Emerging Markets ETF | 163,965 | 6,802,909 | ||||||
Total Equity Funds (Cost $11,160,328) | 10,620,493 | |||||||
Fixed Income Funds 1.0% | ||||||||
iShares Barclays TIPS Bond Fund | 264 | 30,754 | ||||||
SPDR Barclays Capital International Treasury Bond ETF | 24,102 | 1,472,873 | ||||||
Total Fixed Income Funds (Cost $1,461,529) | 1,503,627 | |||||||
Total Unaffiliated Investment Companies (Cost $12,621,857) | 12,124,120 | |||||||
Total Investments (Cost $142,737,592)(c) | 100.0 | % | 142,021,854 | |||||
Other Assets, Less Liabilities | (0.0 | )‡ | (33,618 | ) | ||||
Net Assets | 100.0 | % | $ | 141,988,236 | ||||
† | Percentages indicated are based on Fund net assets. | |
‡ | Less than one-tenth of a percent. | |
(a) | The Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. (See Note 3) | |
(b) | Non-income producing Underlying Fund. | |
(c) | At October 31, 2011, cost is $143,435,548 for federal income tax purposes and net unrealized depreciation is as follows: |
Gross unrealized appreciation | $ | 1,999,957 | ||
Gross unrealized depreciation | (3,413,651 | ) | ||
Net unrealized depreciation | $ | (1,413,694 | ) | |
The following abbreviations are used in the above portfolio:
ETF—Exchange Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
TIPS—Treasury Inflation Protected Security
The notes to the financial statements are an integral part of,
46 MainStay Retirement 2030 Fund | and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies | ||||||||||||||||
Equity Funds | $ | 100,935,158 | $ | — | $ | — | $ | 100,935,158 | ||||||||
Fixed Income Funds | 28,962,576 | — | — | 28,962,576 | ||||||||||||
Total Affiliated Investment Companies | 129,897,734 | — | — | 129,897,734 | ||||||||||||
Unaffiliated Investment Companies | ||||||||||||||||
Equity Funds | 10,620,493 | — | — | 10,620,493 | ||||||||||||
Fixed Income Funds | 1,503,627 | — | — | 1,503,627 | ||||||||||||
Total Unaffiliated Investment Companies | 12,124,120 | — | — | 12,124,120 | ||||||||||||
Total Investments in Securities | $ | 142,021,854 | $ | — | $ | — | $ | 142,021,854 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 47 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $130,115,735) | $ | 129,897,734 | ||
Investments in unaffiliated investment companies, at value (identified cost $12,621,857) | 12,124,120 | |||
Cash | 29,058 | |||
Receivables: | ||||
Fund shares sold | 192,010 | |||
Manager (See Note 3) | 16,672 | |||
Other assets | 29,053 | |||
Total assets | 142,288,647 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 193,356 | |||
Transfer agent (See Note 3) | 39,158 | |||
Investment securities purchased | 28,058 | |||
Shareholder communication | 13,938 | |||
Professional fees | 11,551 | |||
NYLIFE Distributors (See Note 3) | 9,058 | |||
Custodian | 675 | |||
Trustees | 533 | |||
Accrued expenses | 4,084 | |||
Total liabilities | 300,411 | |||
Net assets | $ | 141,988,236 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 15,666 | ||
Additional paid-in capital | 132,365,674 | |||
132,381,340 | ||||
Undistributed net investment income | 1,033,719 | |||
Accumulated net realized gain (loss) on investments | 9,288,915 | |||
Net unrealized appreciation (depreciation) on investments | (715,738 | ) | ||
Net assets | $ | 141,988,236 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 2,768,308 | ||
Shares of beneficial interest outstanding | 306,574 | |||
Net asset value per share outstanding | $ | 9.03 | ||
Maximum sales charge (5.50% of offering price) | 0.53 | |||
Maximum offering price per share outstanding | $ | 9.56 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 13,572,663 | ||
Shares of beneficial interest outstanding | 1,506,472 | |||
Net asset value per share outstanding | $ | 9.01 | ||
Maximum sales charge (5.50% of offering price) | 0.52 | |||
Maximum offering price per share outstanding | $ | 9.53 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 104,014,986 | ||
Shares of beneficial interest outstanding | 11,449,821 | |||
Net asset value and offering price per share outstanding | $ | 9.08 | ||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 15,517,085 | ||
Shares of beneficial interest outstanding | 1,724,271 | |||
Net asset value and offering price per share outstanding | $ | 9.00 | ||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 6,115,194 | ||
Shares of beneficial interest outstanding | 678,807 | |||
Net asset value and offering price per share outstanding | $ | 9.01 | ||
The notes to the financial statements are an integral part of,
48 MainStay Retirement 2030 Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 2,002,825 | ||
Dividend distributions from unaffiliated investment companies | 125,956 | |||
Total income | 2,128,781 | |||
Expenses | ||||
Transfer agent (See Note 3) | 216,666 | |||
Manager (See Note 3) | 122,471 | |||
Distribution/Service—Investor Class (See Note 3) | 5,883 | |||
Distribution/Service—Class A (See Note 3) | 34,358 | |||
Distribution/Service—Class R2 (See Note 3) | 13,468 | |||
Distribution/Service—Class R3 (See Note 3) | 31,264 | |||
Registration | 75,703 | |||
Professional fees | 33,740 | |||
Shareholder communication | 27,101 | |||
Shareholder service (See Note 3) | 11,640 | |||
Custodian | 8,924 | |||
Trustees | 3,489 | |||
Miscellaneous | 8,455 | |||
Total expenses before waiver/reimbursement | 593,162 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (341,109 | ) | ||
Expense reimbursement from Transfer agent (See Note 3) | (3,477 | ) | ||
Net expenses | 248,576 | |||
Net investment income (loss) | 1,880,205 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Affiliated investment company transactions | 9,282,461 | |||
Unaffiliated investment company transactions | 1,177,305 | |||
Realized capital gain distributions from affiliated investment companies | 148,189 | |||
Realized capital gain distributions from unaffiliated investment companies | 89,972 | |||
Net realized gain (loss) on investments and investments from affiliated and unaffiliated investment companies | 10,697,927 | |||
Net change in unrealized appreciation (depreciation) on investments | (10,508,630 | ) | ||
Net realized and unrealized gain (loss) on investments | 189,297 | |||
Net increase (decrease) in net assets resulting from operations | $ | 2,069,502 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 49 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,880,205 | $ | 1,073,850 | ||||
Net realized gain (loss) on investments from affiliated and unaffiliated investment company transactions | 10,697,927 | 4,879,049 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (10,508,630 | ) | 4,495,979 | |||||
Net increase (decrease) in net assets resulting from operations | 2,069,502 | 10,448,878 | ||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (29,235 | ) | (10,126 | ) | ||||
Class A | (206,887 | ) | (150,443 | ) | ||||
Class I | (1,177,323 | ) | (808,959 | ) | ||||
Class R2 | (42,653 | ) | (22,641 | ) | ||||
Class R3 | (75,848 | ) | (59,829 | ) | ||||
(1,531,946 | ) | (1,051,998 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (10,738 | ) | — | |||||
Class A | (72,139 | ) | — | |||||
Class I | (361,008 | ) | — | |||||
Class R2 | (15,861 | ) | — | |||||
Class R3 | (33,113 | ) | — | |||||
(492,859 | ) | — | ||||||
Total dividends and distributions to shareholders | (2,024,805 | ) | (1,051,998 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 83,765,951 | 24,863,319 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 2,023,093 | 1,051,998 | ||||||
Cost of shares redeemed | (31,033,795 | ) | (15,997,158 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 54,755,249 | 9,918,159 | ||||||
Net increase (decrease) in net assets | 54,799,946 | 19,315,039 | ||||||
Net Assets | ||||||||
Beginning of year | 87,188,290 | 67,873,251 | ||||||
End of year | $ | 141,988,236 | $ | 87,188,290 | ||||
Undistributed net investment income at end of year | $ | 1,033,719 | $ | 606,338 | ||||
The notes to the financial statements are an integral part of,
50 MainStay Retirement 2030 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.99 | $ | 7.97 | $ | 6.92 | $ | 9.60 | ||||||||||
Net investment income (loss) (a) | 0.12 | 0.09 | 0.12 | 0.07 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | 1.04 | 1.07 | (2.75 | ) | |||||||||||||
Total from investment operations | 0.22 | 1.13 | 1.19 | (2.68 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.13 | ) | (0.11 | ) | (0.13 | ) | — | |||||||||||
From net realized gain on investments | (0.05 | ) | — | (0.01 | ) | — | ||||||||||||
Total dividends and distributions | (0.18 | ) | (0.11 | ) | (0.14 | ) | — | |||||||||||
Net asset value at end of period | $ | 9.03 | $ | 8.99 | $ | 7.97 | $ | 6.92 | ||||||||||
Total investment return (b) | 2.46 | % | 14.30 | % | 17.67 | % | (27.92 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.33 | % | 1.05 | % | 1.75 | % | 1.26 | % †† | ||||||||||
Net expenses (d) | 0.47 | % | 0.47 | % | 0.47 | % | 0.46 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 0.98 | % | 1.34 | % | 1.70 | % | 1.42 | % †† | ||||||||||
Portfolio turnover rate | 104 | % | 60 | % | 71 | % | 148 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 2,768 | $ | 1,785 | $ | 606 | $ | 104 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 51 |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.97 | $ | 7.95 | $ | 6.92 | $ | 10.59 | $ | 10.00 | ||||||||||||
Net investment income (loss) | 0.14 | (a) | 0.10 | (a) | 0.15 | (a) | 0.11 | (a) | 0.02 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.09 | 1.04 | 1.05 | (3.69 | ) | 0.57 | ||||||||||||||||
Total from investment operations | 0.23 | 1.14 | 1.20 | (3.58 | ) | 0.59 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.12 | ) | (0.16 | ) | (0.08 | ) | — | |||||||||||||
From net realized gain on investments | (0.05 | ) | — | (0.01 | ) | (0.01 | ) | — | ||||||||||||||
Total dividends and distributions | (0.19 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | — | |||||||||||||
Net asset value at end of period | $ | 9.01 | $ | 8.97 | $ | 7.95 | $ | 6.92 | $ | 10.59 | ||||||||||||
Total investment return (b) | 2.55 | % | 14.40 | % | 17.63 | % | (33.97 | %) | 5.90 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.52 | % | 1.25 | % | 2.14 | % | 1.22 | % | 0.71 | %†† | ||||||||||||
Net expenses (d) | 0.37 | % | 0.37 | % | 0.37 | % | 0.38 | % | 0.38 | %†† | ||||||||||||
Expenses (before waiver/reimbursement) (d) | 0.65 | % | 0.89 | % | 1.01 | % | 1.76 | % | 35.87 | %†† | ||||||||||||
Portfolio turnover rate | 104 | % | 60 | % | 71 | % | 148 | % | 42 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 13,573 | $ | 12,733 | $ | 10,314 | $ | 4,784 | $ | 306 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
52 MainStay Retirement 2030 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.04 | $ | 8.00 | $ | 6.94 | $ | 10.60 | $ | 10.00 | ||||||||||||
Net investment income (loss) | 0.15 | (a) | 0.13 | (a) | 0.17 | (a) | 0.13 | (a) | 0.03 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | 1.04 | 1.04 | (3.69 | ) | 0.57 | ||||||||||||||||
Total from investment operations | 0.25 | 1.17 | 1.21 | (3.56 | ) | 0.60 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.13 | ) | (0.14 | ) | (0.09 | ) | — | |||||||||||||
From net realized gain on investments | (0.05 | ) | — | (0.01 | ) | (0.01 | ) | — | ||||||||||||||
Total dividends and distributions | (0.21 | ) | (0.13 | ) | (0.15 | ) | (0.10 | ) | — | |||||||||||||
Net asset value at end of period | $ | 9.08 | $ | 9.04 | $ | 8.00 | $ | 6.94 | $ | 10.60 | ||||||||||||
Total investment return (b) | 2.85 | % | 14.77 | % | 17.96 | % | (33.86 | %) | 6.00 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.58 | % | 1.52 | % | 2.37 | % | 1.49 | % | 0.96 | %†† | ||||||||||||
Net expenses (d) | 0.12 | % | 0.12 | % | 0.12 | % | 0.13 | % | 0.13 | %†† | ||||||||||||
Expenses (before reimbursement/waiver) (d) | 0.40 | % | 0.64 | % | 0.76 | % | 1.36 | % | 35.62 | %†† | ||||||||||||
Portfolio turnover rate | 104 | % | 60 | % | 71 | % | 148 | % | 42 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 104,015 | $ | 63,817 | $ | 50,513 | $ | 23,249 | $ | 287 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 53 |
Financial Highlights selected per share data and ratios
Class R2 | ||||||||||||||||||||
January 8, | ||||||||||||||||||||
2009** | ||||||||||||||||||||
through | ||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.96 | $ | 7.94 | $ | 6.64 | ||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.09 | 0.08 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | 1.03 | 1.22 | |||||||||||||||||
Total from investment operations | 0.22 | 1.12 | 1.30 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.13 | ) | (0.10 | ) | — | |||||||||||||||
From net realized gain on investments | (0.05 | ) | — | — | ||||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.10 | ) | — | |||||||||||||||
Net asset value at end of period | $ | 9.00 | $ | 8.96 | $ | 7.94 | ||||||||||||||
Total investment return (b) | 2.45 | % | 14.27 | % | 19.58 | %(c)(d) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.22 | % | 1.10 | % | 1.34 | %†† | ||||||||||||||
Net expenses (e) | 0.47 | % | 0.47 | % | 0.47 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) (e) | 0.75 | % | 0.99 | % | 1.10 | %†† | ||||||||||||||
Portfolio turnover rate | 104 | % | 60 | % | 71 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 15,517 | $ | 2,907 | $ | 1,540 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
54 MainStay Retirement 2030 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R3 | ||||||||||||||||||
May 1, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.97 | $ | 7.96 | $ | 6.92 | $ | 9.76 | ||||||||||
Net investment income (loss) (a) | 0.11 | 0.08 | 0.14 | 0.03 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.09 | 1.02 | 1.03 | (2.87 | ) | |||||||||||||
Total from investment operations | 0.20 | 1.10 | 1.17 | (2.84 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.11 | ) | (0.09 | ) | (0.12 | ) | — | |||||||||||
From net realized gain on investments | (0.05 | ) | — | (0.01 | ) | — | ||||||||||||
Total dividends and distributions | (0.16 | ) | (0.09 | ) | (0.13 | ) | — | |||||||||||
Net asset value at end of period | $ | 9.01 | $ | 8.97 | $ | 7.96 | $ | 6.92 | ||||||||||
Total investment return (b) | 2.23 | % | 13.97 | % | 17.28 | % | (29.10 | %)(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.18 | % | 0.91 | % | 1.98 | % | 0.79 | % †† | ||||||||||
Net expenses (d) | 0.72 | % | 0.72 | % | 0.72 | % | 0.73 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.00 | % | 1.24 | % | 1.36 | % | 1.69 | % †† | ||||||||||
Portfolio turnover rate | 104 | % | 60 | % | 71 | % | 148 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 6,115 | $ | 5,946 | $ | 4,901 | $ | 3,695 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. | |
(c) | Total investment return is not annualized. | |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 55 |
MainStay Retirement 2040 Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (6/29/07) | Ratio2 | ||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –3 | .42% | –2 | .91% | 2 | .71% | ||||||||
Excluding sales charges | 2 | .20 | –1 | .63 | 2 | .71 | ||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –3 | .34 | –2 | .85 | 2 | .13 | ||||||||
Excluding sales charges | 2 | .29 | –1 | .58 | 2 | .13 | ||||||||||
Class I Shares | No Sales Charge | 2 | .48 | –1 | .35 | 1 | .88 | |||||||||
Class R2 Shares4 | No Sales Charge | 2 | .17 | –1 | .64 | 2 | .23 | |||||||||
Class R3 Shares5 | No Sales Charge | 1 | .98 | –1 | .92 | 2 | .48 | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Class R2 shares were first offered on June 29, 2007, although this class did not commence investment operations until January 8, 2009. Performance figures for Class R2 shares include the historical performance of Class A shares through January 7, 2009, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R2 shares might have been lower. |
5. | Class R3 shares were first offered on June 29, 2007, although this class did not commence investment operations until May 1, 2008. Performance figures for Class R3 shares include the historical performance of Class A shares through April 30, 2008, adjusted for differences in certain expenses |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
56 MainStay Retirement 2040 Fund
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
S&P 500® Index6 | 8 | .09% | –2 | .00% | ||||
MSCI EAFE® Index7 | –4 | .08 | –6 | .35 | ||||
Barclays Capital U.S. Aggregate Bond Index8 | 5 | .00 | 7 | .05 | ||||
Average Lipper Mixed-Asset Target 2040 Fund9 | 2 | .76 | –2 | .47 | ||||
and fees. Unadjusted, the performance shown for Class R3 shares might have been lower. |
6. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500 Index is the Fund’s broad-based securities market index. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
7. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
8. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
9. | The average Lipper mixed-asset target 2040 fund is representative of funds that seek to maximize assets for retirement or other purposes with an expected time horizon from January 1, 2036, to December 31, 2040. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 57
Cost in Dollars of a $1,000 Investment in MainStay Retirement 2040 Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 896.90 | $ | 2.25 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 897.50 | $ | 1.77 | $ | 1,023.30 | $ | 1.89 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 897.40 | $ | 0.57 | $ | 1,024.60 | $ | 0.61 | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 896.70 | $ | 2.25 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 895.60 | $ | 3.44 | $ | 1,021.60 | $ | 3.67 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for Class R2 and 0.72% for Class R3) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
58 MainStay Retirement 2040 Fund
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
Capital Appreciation | 41.9 | |||
Growth of Capital | 27.7 | |||
Total Return | 23.3 | |||
Current Income | 6.9 | |||
Other Assets, Less Liabilities | 0.2 |
See Portfolio of Investments beginning on page 63 for specific holdings within these categories.
mainstayinvestments.com 59
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Retirement 2040 Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Retirement 2040 Fund returned 2.20% for Investor Class shares and 2.29% for Class A shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 2.48%, Class R2 shares returned 2.17% and Class R3 shares returned 1.98%. All share classes underperformed the 2.76% return of the average Lipper2 mixed-asset target 2040 fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the –4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index,5 which is an additional benchmark for the Fund. See page 56 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a portfolio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests primarily in mutual funds managed by New York Life Investments, mutual funds managed by an advisor not affiliated with New York Life Investments or exchange traded funds (“ETFs”) if a New York Life Investments managed mutual fund in a particular asset class is not available (collectively, “Underlying Funds”). The Underlying Funds may invest in fixed-income securities or in domestic or international equities at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large cap equities.
Our efforts to manage the Fund’s risk posture through its allocation to stocks and bonds contributed positively, but only marginally, to the Fund’s relative performance. Within the target allocations outlined in the Prospectus, we maintained a slightly higher-than-normal allocation to stocks and a slightly lower-than-normal allocation to bonds through the early part of 2011, before softer economic conditions led us to retreat to a more normal mix.
In late summer, with equities having sold off considerably in response to the growing debt crisis, we again began to overweight equities slightly in relation to the target allocation on the belief that conditions were better than many investors perceived them to be. Although our timing was by no means perfect, the repositioning added to returns.
We were less successful within the fixed-income portion of the Fund. Being wary of the very low yields available on U.S. Treasury securities and mindful of the improving health of corporate balance sheets (which should translate into low default rates), we preferred shorter-duration6 lower-credit-quality bonds over longer-dated government-backed bonds. We have maintained this preference, but the positioning detracted from performance during the summer. During the summer months, investors flocked to U.S. Treasury securities for their perceived safety, which drove interest rates down and caused spreads7 to widen.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced significant challenges relative to their benchmarks and peers. Included among these were MainStay Flexible Bond Opportunities Fund, MainStay MAP Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases, sector exposure, credit quality and duration. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
As previously noted, the Fund’s allocation to stocks and bonds varied slightly over the course of the reporting period in response to the changing environment. Within equities, we gave mild emphasis to three themes. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively valued, to have superior access to capital and to be better
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 57 for more information on Lipper Inc.
3. See footnote on page 57 for more information on the S&P 500® Index.
4. See footnote on page 57 for more information on the MSCI EAFE® Index.
5. See footnote on page 57 for more information on the Barclays Capital U.S. Aggregate Bond Index.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
60 MainStay Retirement 2040 Fund
positioned to benefit from growth in the developing world. Second, the Fund reflected a preference for growth stocks over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging issues.
The fixed-income portion of the Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index, the Fund’s fixed-income benchmark. The Fund was also heavily tilted toward corporate bonds instead of government-backed issues. This positioning reflected our view that corporations have improved the quality of their balance sheets significantly in recent years by reducing leverage, accumulating cash and controlling operating costs. We anticipated that corporate default rates would remain low for the next few years. If this happens, we believe that the higher yields available on corporate bonds may prove attractive.
How did the Fund’s allocations change over the course of the reporting period?
Among the larger changes during the reporting period was a shift out of MainStay Indexed Bond Fund, MainStay Intermediate Term Bond Fund and MainStay High Yield Opportunities Fund into MainStay Flexible Bond Opportunities Fund.
We also reduced exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund into MainStay Large Cap Growth Fund and MainStay MAP Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Also noteworthy was a new position in MainStay Cash Reserves Fund. We established the position to shorten the duration of the fixed-income portion of the Fund as protection against a potential rise in interest rates. The new position also served as a liquidity facility to adjust the Fund’s overall mix of exposure to stocks and bonds.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds redirected to MainStay ICAP International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion
of the Fund and to implement the intended bias toward U.S. equities.
of the Fund and to implement the intended bias toward U.S. equities.
Were there any other significant allocation changes during the reporting period?
In several cases, we exited positions in actively managed non-MainStay Funds in favor of low-cost ETFs that invest in similar market segments.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Underlying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and substantial allocations. (Contributions take weightings and total returns into account.) Among the most substantial detractors from performance were Vanguard MSCI Emerging Market ETF and MainStay Epoch International Small Cap Fund.
What factors and risks affected the Fund’s Underlying Fixed Income Fund investments during the reporting period?
The Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index. We favored credit instruments over government bonds throughout the reporting period. While this was an advantageous posture at times, the flight to quality by investors to U.S. Treasury securities and higher-quality corporate bonds over the summer in response to the escalating European sovereign debt crisis caused this positioning to be generally unproductive. We found this especially true during the final few months of the reporting period. We continued to maintain a positive outlook on corporate bonds over U.S. Treasurys at the end of the reporting period.
During the reporting period, which fixed-income market segments were strong performers and which segments were particularly weak?
Interest rates finished the reporting period markedly lower than they were when the fiscal year began. Accordingly, Underlying Funds that invested in long-maturity bonds generally did better than those that focused on securities with shorter durations. The return on cash investments was little more than zero and most Underlying Funds that invest primarily in short-term bonds failed to deliver returns much greater than that. Credit instruments and investment-grade bonds diverged sharply at points during the reporting period, but the differences ended up being relatively small over the entire period.
mainstayinvestments.com 61
Which Underlying Fixed Income Funds made the strongest contributions to the Fund’s overall per-
formance, and which Underlying Fixed Income Funds were the greatest detractors?
formance, and which Underlying Fixed Income Funds were the greatest detractors?
The strongest fixed-income contributions to overall performance came from positions in MainStay Convertible Fund and MainStay High Yield Corporate Bond Fund. At the other end of the spectrum, a small position in American Century International Bond Fund and a larger position in MainStay Flexible Bond Opportunities Fund were the greatest fixed-income detractors from the Fund’s overall performance. The Fund’s position in American Century International Bond Fund has been sold.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
62 MainStay Retirement 2040 Fund
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 90.1%† | ||||||||
Equity Funds 77.7% | ||||||||
MainStay 130/30 Core Fund Class I | 351,292 | $ | 2,782,235 | |||||
MainStay 130/30 International Fund Class I | 122,334 | 780,492 | ||||||
MainStay Common Stock Fund Class I | 234,098 | 2,664,039 | ||||||
MainStay Epoch Global Choice Fund Class I | 111,022 | 1,620,919 | ||||||
MainStay Epoch International Small Cap Fund Class I | 204,821 | 3,447,145 | ||||||
MainStay Epoch U.S. All Cap Fund Class I | 462,905 | 10,781,052 | ||||||
MainStay Growth Equity Fund Class I (a)(b) | 35,788 | 403,327 | ||||||
MainStay ICAP Equity Fund Class I | 169,651 | 5,958,149 | ||||||
MainStay ICAP International Fund Class I | 207,969 | 5,731,629 | ||||||
MainStay ICAP Select Equity Fund Class I | 101,804 | 3,407,369 | ||||||
MainStay International Equity Fund Class I | 153,052 | 1,666,731 | ||||||
MainStay Large Cap Growth Fund Class I (a) | 1,172,740 | 8,736,916 | ||||||
MainStay MAP Fund Class I | 464,798 | 14,455,210 | ||||||
MainStay U.S. Small Cap Fund Class I | 158,283 | 2,616,417 | ||||||
Total Equity Funds (Cost $65,540,257) | 65,051,630 | |||||||
Fixed Income Funds 12.4% | ||||||||
MainStay Cash Reserves Fund Class I | 1,567,629 | 1,567,629 | ||||||
MainStay Convertible Fund Class I | 32,714 | 494,970 | ||||||
MainStay Flexible Bond Opportunities Fund Class I | 553,110 | 4,828,649 | ||||||
MainStay Floating Rate Fund Class I | 152,287 | 1,417,795 | ||||||
MainStay Global High Income Fund Class I | 80,494 | 953,049 | ||||||
MainStay High Yield Corporate Bond Fund Class I | 191,226 | 1,116,758 | ||||||
Total Fixed Income Funds (Cost $10,523,482) | 10,378,850 | |||||||
Total Affiliated Investment Companies (Cost $76,063,739) | 75,430,480 | |||||||
Unaffiliated Investment Companies 9.8% | ||||||||
Equity Funds 9.8% | ||||||||
Columbia Funds Series Trust-Columbia SmallCap Index Fund | 139,976 | 2,336,195 | ||||||
iShares Russell 2000 Index ETF | 19,994 | 1,478,956 | ||||||
SPDR S&P Emerging Markets ETF | 5,057 | 322,940 | ||||||
Vanguard Emerging Markets ETF | 97,653 | 4,051,623 | ||||||
Total Unaffiliated Investment Companies (Cost $8,665,989) | 8,189,714 | |||||||
Total Investments (Cost $84,729,728) (c) | 99.9 | % | 83,620,194 | |||||
Other Assets, Less Liabilities | 0.1 | 71,276 | ||||||
Net Assets | 100.0 | % | $ | 83,691,470 | ||||
† | Percentages indicated are based on Fund net assets. | |
(a) | Non-income producing Underlying Fund. | |
(b) | The Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. (See Note 3) | |
(c) | At October 31, 2011, cost is $85,068,022 for federal income tax purposes and net unrealized depreciation is as follows: |
Gross unrealized appreciation | $ | 903,712 | ||
Gross unrealized depreciation | (2,351,540 | ) | ||
Net unrealized depreciation | $ | (1,447,828 | ) | |
The following abbreviation is used in the above portfolio:
ETF—Exchange Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 63 |
Portfolio of Investments October 31, 2011 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies | ||||||||||||||||
Equity Funds | $ | 65,051,630 | $ | — | $ | — | $ | 65,051,630 | ||||||||
Fixed Income Funds | 10,378,850 | — | — | 10,378,850 | ||||||||||||
Total Affiliated Investment Companies | 75,430,480 | — | — | 75,430,480 | ||||||||||||
Unaffiliated Investment Companies | ||||||||||||||||
Equity Funds | 8,189,714 | — | — | 8,189,714 | ||||||||||||
Total Investments in Securities | $ | 83,620,194 | $ | — | $ | — | $ | 83,620,194 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
64 MainStay Retirement 2040 Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $76,063,739) | $ | 75,430,480 | ||
Investments in unaffiliated investment companies, at value (identified cost $8,665,989) | 8,189,714 | |||
Receivables: | ||||
Fund shares sold | 217,294 | |||
Manager (See Note 3) | 18,585 | |||
Other assets | 28,725 | |||
Total assets | 83,884,798 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 131,815 | |||
Transfer agent (See Note 3) | 32,240 | |||
Professional fees | 9,873 | |||
Shareholder communication | 8,456 | |||
NYLIFE Distributors (See Note 3) | 5,910 | |||
Custodian | 739 | |||
Trustees | 312 | |||
Accrued expenses | 3,983 | |||
Total liabilities | 193,328 | |||
Net assets | $ | 83,691,470 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 9,496 | ||
Additional paid-in capital | 79,048,599 | |||
79,058,095 | ||||
Undistributed net investment income | 384,983 | |||
Accumulated net realized gain (loss) on investments | 5,357,926 | |||
Net unrealized appreciation (depreciation) on investments | (1,109,534 | ) | ||
Net assets | $ | 83,691,470 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 2,306,434 | ||
Shares of beneficial interest outstanding | 262,531 | |||
Net asset value per share outstanding | $ | 8.79 | ||
Maximum sales charge (5.50% of offering price) | 0.51 | |||
Maximum offering price per share outstanding | $ | 9.30 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 7,151,052 | ||
Shares of beneficial interest outstanding | 816,656 | |||
Net asset value per share outstanding | $ | 8.76 | ||
Maximum sales charge (5.50% of offering price) | 0.51 | |||
Maximum offering price per share outstanding | $ | 9.27 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 59,618,748 | ||
Shares of beneficial interest outstanding | 6,748,659 | |||
Net asset value and offering price per share outstanding | $ | 8.83 | ||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 9,559,430 | ||
Shares of beneficial interest outstanding | 1,090,217 | |||
Net asset value and offering price per share outstanding | $ | 8.77 | ||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 5,055,806 | ||
Shares of beneficial interest outstanding | 578,083 | |||
Net asset value and offering price per share outstanding | $ | 8.75 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 65 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 968,464 | ||
Dividend distributions from unaffiliated investment companies | 53,896 | |||
Total income | 1,022,360 | |||
Expenses | ||||
Transfer agent (See Note 3) | 183,320 | |||
Registration | 74,695 | |||
Manager (See Note 3) | 73,132 | |||
Distribution/Service—Investor Class (See Note 3) | 4,740 | |||
Distribution/Service—Class A (See Note 3) | 18,149 | |||
Distribution/Service—Class R2 (See Note 3) | 11,831 | |||
Distribution/Service—Class R3 (See Note 3) | 25,182 | |||
Professional fees | 30,314 | |||
Shareholder communication | 18,241 | |||
Shareholder service (See Note 3) | 9,769 | |||
Custodian | 9,037 | |||
Trustees | 2,080 | |||
Miscellaneous | 7,388 | |||
Total expenses before waiver/reimbursement | 467,878 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (304,893 | ) | ||
Expense reimbursement from Transfer agent (See Note 3) | (1,748 | ) | ||
Net expenses | 161,237 | |||
Net investment income (loss) | 861,123 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Affiliated investment company transactions | 5,183,924 | |||
Unaffiliated investment company transactions | 737,774 | |||
Realized capital gain distributions from affiliated investment companies | 52,109 | |||
Realized capital gain distributions from unaffiliated investment companies | 78,390 | |||
Net realized gain (loss) on investments from affiliated and unaffiliated investment companies | 6,052,197 | |||
Net change in unrealized appreciation (depreciation) on investments | (6,246,547 | ) | ||
Net realized and unrealized gain (loss) on investments | (194,350 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | 666,773 | ||
The notes to the financial statements are an integral part of,
66 MainStay Retirement 2040 Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 861,123 | $ | 474,077 | ||||
Net realized gain (loss) on investments from affiliated and unaffiliated investment company transactions | 6,052,197 | 3,323,398 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (6,246,547 | ) | 2,249,856 | |||||
Net increase (decrease) in net assets resulting from operations | 666,773 | 6,047,331 | ||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (18,662 | ) | (8,084 | ) | ||||
Class A | (90,850 | ) | (65,682 | ) | ||||
Class I | (526,048 | ) | (361,660 | ) | ||||
Class R2 | (41,846 | ) | (18,538 | ) | ||||
Class R3 | (47,438 | ) | (34,687 | ) | ||||
(724,844 | ) | (488,651 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (17,030 | ) | — | |||||
Class A | (77,851 | ) | — | |||||
Class I | (387,508 | ) | — | |||||
Class R2 | (39,261 | ) | — | |||||
Class R3 | (53,257 | ) | — | |||||
(574,907 | ) | — | ||||||
Total dividends and distributions to shareholders | (1,299,751 | ) | (488,651 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 52,177,059 | 14,894,119 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 1,298,805 | 488,396 | ||||||
Cost of shares redeemed | (18,889,057 | ) | (9,413,966 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 34,586,807 | 5,968,549 | ||||||
Net increase (decrease) in net assets | 33,953,829 | 11,527,229 | ||||||
Net Assets | ||||||||
Beginning of year | 49,737,641 | 38,210,412 | ||||||
End of year | $ | 83,691,470 | $ | 49,737,641 | ||||
Undistributed net investment income at end of year | $ | 384,983 | $ | 217,127 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 67 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.80 | $ | 7.75 | $ | 6.74 | $ | 9.56 | ||||||||||
Net investment income (loss) (a) | 0.09 | 0.06 | 0.09 | 0.06 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (b) | 1.08 | 1.04 | (2.88 | ) | ||||||||||||
Total from investment operations | 0.20 | 1.14 | 1.13 | (2.82 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.11 | ) | (0.09 | ) | (0.12 | ) | — | |||||||||||
From net realized gain on investments | (0.10 | ) | — | — | — | |||||||||||||
Total dividends and distributions | (0.21 | ) | (0.09 | ) | (0.12 | ) | — | |||||||||||
Net asset value at end of period | $ | 8.79 | $ | 8.80 | $ | 7.75 | $ | 6.74 | ||||||||||
Total investment return (c) | 2.20 | % | 14.76 | % | 17.20 | % | (29.50 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.00 | % | 0.77 | % | 1.25 | % | 1.10 | % †† | ||||||||||
Net expenses (e) | 0.47 | % | 0.47 | % | 0.47 | % | 0.46 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (e) | 1.13 | % | 1.60 | % | 1.94 | % | 1.93 | % †† | ||||||||||
Portfolio turnover rate | 111 | % | 65 | % | 75 | % | 145 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 2,306 | $ | 1,337 | $ | 614 | $ | 81 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
68 MainStay Retirement 2040 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.77 | $ | 7.72 | $ | 6.75 | $ | 10.61 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.11 | 0.08 | 0.12 | 0.10 | 0.02 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | (b) | 1.06 | 1.00 | (3.91 | ) | 0.59 | |||||||||||||||
Total from investment operations | 0.21 | 1.14 | 1.12 | (3.81 | ) | 0.61 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.12 | ) | (0.09 | ) | (0.15 | ) | (0.04 | ) | — | |||||||||||||
From net realized gain on investments | (0.10 | ) | — | — | (0.01 | ) | — | |||||||||||||||
Total dividends and distributions | (0.22 | ) | (0.09 | ) | (0.15 | ) | (0.05 | ) | — | |||||||||||||
Net asset value at end of period | $ | 8.76 | $ | 8.77 | $ | 7.72 | $ | 6.75 | $ | 10.61 | ||||||||||||
Total investment return (c) | 2.29 | % | 14.89 | % | 17.09 | % | (36.07 | %) | 6.10 | %(d) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.23 | % | 0.97 | % | 1.77 | % | 1.07 | % | 0.49 | %†† | ||||||||||||
Net expenses (e) | 0.37 | % | 0.37 | % | 0.37 | % | 0.38 | % | 0.38 | %†† | ||||||||||||
Expenses (before waiver/reimbursement) (e) | 0.79 | % | 1.02 | % | 1.19 | % | 2.57 | % | 39.66 | %†† | ||||||||||||
Portfolio turnover rate | 111 | % | 65 | % | 75 | % | 145 | % | 25 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 7,151 | $ | 6,826 | $ | 5,459 | $ | 2,364 | $ | 265 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 69 |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.84 | $ | 7.77 | $ | 6.76 | $ | 10.61 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.11 | 0.10 | 0.14 | 0.11 | 0.03 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.12 | (b) | 1.08 | 1.00 | (3.90 | ) | 0.58 | |||||||||||||||
Total from investment operations | 0.23 | 1.18 | 1.14 | (3.79 | ) | 0.61 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.11 | ) | (0.13 | ) | (0.05 | ) | — | |||||||||||||
From net realized gain on investments | (0.10 | ) | — | — | (0.01 | ) | — | |||||||||||||||
Total dividends and distributions | (0.24 | ) | (0.11 | ) | (0.13 | ) | (0.06 | ) | — | |||||||||||||
Net asset value at end of period | $ | 8.83 | $ | 8.84 | $ | 7.77 | $ | 6.76 | $ | 10.61 | ||||||||||||
Total investment return (c) | 2.48 | % | 15.24 | % | 17.34 | % | (35.96 | %) | 6.20 | %(d) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.22 | % | 1.22 | % | 2.04 | % | 1.25 | % | 0.75 | %†† | ||||||||||||
Net expenses (e) | 0.12 | % | 0.12 | % | 0.12 | % | 0.13 | % | 0.13 | %†† | ||||||||||||
Expenses (before reimbursement/waiver) (e) | 0.54 | % | 0.77 | % | 0.94 | % | 2.02 | % | 39.47 | %†† | ||||||||||||
Portfolio turnover rate | 111 | % | 65 | % | 75 | % | 145 | % | 25 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 59,619 | $ | 33,551 | $ | 27,031 | $ | 11,263 | $ | 273 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
70 MainStay Retirement 2040 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R2 | ||||||||||||||||||||
January 8, | ||||||||||||||||||||
2009** | ||||||||||||||||||||
through | ||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.78 | $ | 7.72 | $ | 6.43 | ||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.06 | 0.05 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (b) | 1.08 | 1.24 | ||||||||||||||||
Total from investment operations | 0.20 | 1.14 | 1.29 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.11 | ) | (0.08 | ) | — | |||||||||||||||
From net realized gain on investments | (0.10 | ) | — | — | ||||||||||||||||
Total dividends and distributions | (0.21 | ) | (0.08 | ) | — | |||||||||||||||
Net asset value at end of period | $ | 8.77 | $ | 8.78 | $ | 7.72 | ||||||||||||||
Total investment return (c) | 2.17 | % | 14.85 | % | 20.06 | %(d)(e) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.97 | % | 0.78 | % | 0.91 | %†† | ||||||||||||||
Net expenses (f) | 0.47 | % | 0.47 | % | 0.47 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) (f) | 0.89 | % | 1.12 | % | 1.26 | %†† | ||||||||||||||
Portfolio turnover rate | 111 | % | 65 | % | 75 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 9,559 | $ | 3,394 | $ | 1,425 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(f) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 71 |
Financial Highlights selected per share data and ratios
Class R3 | ||||||||||||||||||
May 1, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.76 | $ | 7.72 | $ | 6.73 | $ | 9.71 | ||||||||||
Net investment income (loss) (a) | 0.08 | 0.05 | 0.11 | 0.04 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | (b) | 1.06 | 0.99 | (3.02 | ) | ||||||||||||
Total from investment operations | 0.18 | 1.11 | 1.10 | (2.98 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.09 | ) | (0.07 | ) | (0.11 | ) | — | |||||||||||
From net realized gain on investments | (0.10 | ) | — | — | — | |||||||||||||
Total dividends and distributions | (0.19 | ) | (0.07 | ) | (0.11 | ) | — | |||||||||||
Net asset value at end of period | $ | 8.75 | $ | 8.76 | $ | 7.72 | $ | 6.73 | ||||||||||
Total investment return (c) | 1.98 | % | 14.47 | % | 16.77 | % | (30.69 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 0.86 | % | 0.61 | % | 1.68 | % | 1.07 | % †† | ||||||||||
Net expenses (e) | 0.72 | % | 0.72 | % | 0.72 | % | 0.73 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (e) | 1.14 | % | 1.37 | % | 1.55 | % | 2.08 | % †† | ||||||||||
Portfolio turnover rate | 111 | % | 65 | % | 75 | % | 145 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 5,056 | $ | 4,628 | $ | 3,682 | $ | 2,767 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
72 MainStay Retirement 2040 Fund | and should be read in conjunction with, the financial statements. |
MainStay Retirement 2050 Fund
Investment and Performance Comparison1 (Unaudited)
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Period Ended October 31, 2011
Since | Gross | |||||||||||||||
Inception | Expense | |||||||||||||||
Class | Sales Charge | One Year | (6/29/07) | Ratio2 | ||||||||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges | –3 | .52% | –3 | .42% | 3 | .30% | ||||||||
Excluding sales charges | 2 | .10 | –2 | .15 | 3 | .30 | ||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges | –3 | .34 | –3 | .32 | 2 | .42 | ||||||||
Excluding sales charges | 2 | .28 | –2 | .05 | 2 | .42 | ||||||||||
Class I Shares | No Sales Charge | 2 | .49 | –1 | .80 | 2 | .17 | |||||||||
Class R2 Shares4 | No Sales Charge | 2 | .16 | –2 | .15 | 2 | .52 | |||||||||
Class R3 Shares5 | No Sales Charge | 2 | .00 | –2 | .38 | 2 | .77 | |||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Class R2 shares were first offered on June 29, 2007, although this class did not commence investment operations until January 8, 2009. Performance figures for Class R2 shares include the historical performance of Class A shares through January 7, 2009, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R2 shares might have been lower. |
5. | Class R3 shares were first offered on June 29, 2007, although this class did not commence investment operations until May 1, 2008. Performance figures for Class R3 shares include the historical performance of Class A shares through April 30, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R3 shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 73
One | Since | |||||||
Benchmark Performance | Year | Inception | ||||||
S&P 500® Index6 | 8 | .09% | –2 | .00% | ||||
MSCI EAFE® Index7 | –4 | .08 | –6 | .35 | ||||
Barclays Capital U.S. Aggregate Bond Index8 | 5 | .00 | 7 | .05 | ||||
Average Lipper Mixed-Asset Target 2050+ Fund9 | 2 | .51 | –2 | .76 | ||||
6. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500 Index is the Fund’s broad-based securities market index. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
7. | The MSCI Europe, Australasia and Far East Index (“MSCI EAFE® Index”) consists of international stocks representing the developed world outside of North America. The MSCI EAFE® Index is the Fund’s secondary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
8. | The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
9. | The average Lipper mixed-asset target 2050+ fund is representative of funds that seek to maximize assets for retirement or other purposes with an expected time horizon exceeding December 31, 2045. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be read in conjunction with them.
74 MainStay Retirement 2050 Fund
Cost in Dollars of a $1,000 Investment in MainStay Retirement 2050 Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 890.00 | $ | 2.24 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 891.10 | $ | 1.76 | $ | 1,023.30 | $ | 1.89 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 892.60 | $ | 0.57 | $ | 1,024.60 | $ | 0.61 | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 890.20 | $ | 2.24 | $ | 1,022.80 | $ | 2.40 | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 890.70 | $ | 3.43 | $ | 1,021.60 | $ | 3.67 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.47% for Investor Class, 0.37% for Class A, 0.12% for Class I, 0.47% for Class R2 and 0.72% for Class R3) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
mainstayinvestments.com 75
Investment Objectives of Underlying Funds as of October 31, 2011 (Unaudited)
See Portfolio of Investments beginning on page 80 for specific holdings within these categories.
76 MainStay Retirement 2050 Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon, CFA, and Jonathan Swaney of New York Life Investments,1 the Fund’s Manager.
How did MainStay Retirement 2050 Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Retirement 2050 Fund returned 2.10% for Investor Class shares and 2.28% for Class A shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 2.49%, Class R2 shares returned 2.16% and Class R3 shares returned 2.00%. All share classes underperformed the 2.51% return of the average Lipper2 mixed-asset target 2050+ fund for the 12 months ended October 31, 2011. Over the same period, all share classes underperformed the 8.09% return of the S&P 500® Index.3 The S&P 500® Index is the Fund’s broad-based securities-market index. All share classes outperformed the −4.08% return of the MSCI EAFE® Index,4 which is the secondary benchmark for the Fund. All share classes underperformed the 5.00% return of the Barclays Capital U.S. Aggregate Bond Index,5 which is an additional benchmark for the Fund. See page 73 for Fund returns with sales charges.
Were any changes made to the Fund’s day-to-day management during the reporting period?
Effective January 1, 2011, New York Life Investments assumed day-to-day portfolio management of the Fund. Also, effective January 1, 2011, Jae S. Yoon replaced Tony Elavia as a portfolio manager for the Fund. Jonathan Swaney continues to serve as a portfolio manager for the Fund.
What factors affected the Fund’s relative performance during the reporting period?
The Fund invests primarily in mutual funds managed by New York Life Investments, mutual funds managed by an advisor not affiliated with New York Life Investments or exchange traded funds (“ETFs”) if a New York Life Investments managed mutual fund in a particular asset class is not available (collectively, “Underlying Funds”). The Underlying Funds may invest in fixed-income securities or in domestic or international equities at various capitalization levels. The Fund’s primary benchmark, on the other hand, consists entirely of U.S. large cap equities.
Our efforts to manage the Fund’s risk posture through its allocation to stocks and bonds contributed positively, but only marginally, to the Fund’s relative performance. Within the target allocations outlined in the Prospectus, we maintained a slightly higher-than-normal allocation to stocks and a slightly lower-than-normal allocation to bonds through the early part of 2011, before softer economic conditions led us to retreat to a more normal mix.
In late summer, with equities having sold off considerably in response to the growing debt crisis, we again began to overweight equities slightly in relation to the target allocation on the belief that conditions were better than many investors perceived them to be. Although our timing was by no means perfect, the repositioning added to returns.
We were less successful within the fixed-income portion of the Fund. Being wary of the very low yields available on U.S. Treasury securities and mindful of the improving health of corporate balance sheets (which should translate into low default rates), we preferred shorter-duration6 lower-credit-quality bonds over longer-dated government-backed bonds. We have maintained this preference, but the positioning detracted from performance during the summer. During the summer months, investors flocked to U.S. Treasury securities for their perceived safety, which drove interest rates down and caused spreads7 to widen.
By far the largest factor affecting relative returns was the weak performance of a few Underlying Funds in which the Fund invested. Several prominent Fund holdings experienced significant challenges relative to their benchmarks and peers. Included among these were MainStay Flexible Bond Opportunities Fund, MainStay MAP Fund and MainStay Epoch International Small Cap Fund.
How did you allocate the Fund’s assets during the reporting period and why?
In managing the Fund, we considered a variety of information, including the portfolio-level characteristics of the Underlying Funds, such as capitalization, style biases, sector exposure, credit quality and duration. We also examined the attributes of the Underlying Funds’ holdings, such as valuation metrics, earnings data and technical indicators. Finally, we evaluated the historical success of the portfolio managers responsible for the Underlying Funds.
As previously noted, the Fund’s allocation to stocks and bonds varied slightly over the course of the reporting period in response to the changing environment. Within equities, we gave mild emphasis to three themes. First, we viewed large-capitalization stocks favorably relative to their small-capitalization counterparts, as we perceived the former to be more attractively valued, to have superior access to capital and to be better positioned to benefit from growth in the developing world. Second, the Fund reflected a preference for growth stocks
1. New York Life Investments is a service mark used by New York Life Investment Management LLC.
2. See footnote on page 74 for more information on Lipper Inc.
3. See footnote on page 74 for more information on the S&P 500® Index.
4. See footnote on page 74 for more information on the MSCI EAFE® Index.
5. See footnote on page 74 for more information on the Barclays Capital U.S. Aggregate Bond Index.
6. Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.
7. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
mainstayinvestments.com 77
over value stocks, as we anticipated a slower rate of earnings increases and greater investor appreciation for companies with a continued ability to drive profitability higher. Third, embedded in the Fund was a bias for U.S. stocks over those of developed markets that face greater deleveraging issues.
The fixed-income portion of the Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index, its Fund’s fixed-income benchmark. The Fund was also heavily tilted toward corporate bonds instead of government-backed issues. This positioning reflected our view that corporations have improved the quality of their balance sheets significantly in recent years by reducing leverage, accumulating cash and controlling operating costs. We anticipated that corporate default rates would remain low for the next few years. If this happens, we believe that the higher yields available on corporate bonds may prove attractive.
How did the Fund’s allocations change over the course of the reporting period?
Among the changes during the reporting period was a shift out of MainStay Indexed Bond Fund, MainStay Intermediate Term Bond Fund and MainStay High Yield Opportunities Fund into MainStay Flexible Bond Opportunities Fund.
We also reduced exposure to quantitatively managed strategies by reallocating assets from MainStay Common Stock Fund and MainStay 130/30 Core Fund into MainStay Large Cap Growth Fund and MainStay MAP Fund. Historically, the Fund has had rather substantial holdings among quantitatively managed Underlying Funds. Over the past several months, however, those positions have been further diversified across Underlying Funds with nonquantitative management styles.
Also noteworthy was a new position in MainStay Cash Reserves Fund. We established the position to shorten the duration of the fixed-income portion of the Fund as protection against a potential rise in interest rates. The new position also served as a liquidity facility to adjust the Fund’s overall mix of exposure to stocks and bonds.
The Fund’s allocation to MainStay International Equity Fund was reduced, and the proceeds redirected to MainStay ICAP International Fund and a variety of domestic equity funds. This was done to address considerations of beta (or risk relative to the market as a whole) and style within the international portion
of the Fund and to implement the intended bias toward U.S. equities.
of the Fund and to implement the intended bias toward U.S. equities.
Were there any other significant allocation changes during the reporting period?
In several cases, we exited positions in actively managed non-MainStay Funds in favor of low-cost ETFs that invest in similar market segments.
During the reporting period, which Underlying Equity Funds had the highest total returns and which Under-lying Equity Funds had the lowest total returns?
Among the Underlying Equity Funds in which the Fund invested, the highest total returns came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund. The lowest total returns came from MainStay International Equity Fund and MainStay Epoch International Small Cap Fund.
Which Underlying Equity Funds made the strongest contributions to the Fund’s overall performance, and which Underlying Equity Funds were the greatest detractors?
The strongest contributions to the Fund’s overall performance came from MainStay Large Cap Growth Fund and MainStay 130/30 Core Fund, both of which had strong returns and substantial allocations. (Contributions take weightings and total returns into account.) Among the most substantial detractors from performance were Vanguard MSCI Emerging Market ETF and MainStay Epoch International Small Cap Fund.
What factors and risks affected the Fund’s Underlying Fixed Income Fund investments during the reporting period?
The Fund had a slightly shorter duration than the Barclays Capital U.S. Aggregate Bond Index. We favored credit instruments over government bonds throughout the reporting period. While this was an advantageous posture at times, the flight to quality by investors to U.S. Treasury securities and higer-quality corporate bonds over the summer in response to the escalating European sovereign debt crisis caused this positioning to be generally unproductive. We found this especially true during the final few months of the reporting period. We continued to maintain a positive outlook on corporate bonds over U.S. Treasurys at the end of the reporting period.
During the reporting period, which fixed-income market segments were strong performers and which segments were particularly weak?
Interest rates finished the reporting period markedly lower than they were when the fiscal year began. Accordingly, Underlying Funds that invested in long-maturity bonds generally did better than those that focused on securities with shorter durations. The return on cash investments was little more than zero and most Underlying Funds that invest primarily in short-term bonds failed to deliver returns much greater than that. Credit instruments and investment-grade bonds diverged sharply at points during the reporting period, but the differences ended up being relatively small over the entire period.
78 MainStay Retirement 2050 Fund
Which Underlying Fixed Income Funds made the strongest contributions to the Fund’s overall per-
formance, and which Underlying Fixed Income Funds were the greatest detractors?
formance, and which Underlying Fixed Income Funds were the greatest detractors?
The strongest fixed-income contributions to overall performance came from positions in MainStay Convertible Fund and MainStay High Yield Corporate Bond Fund. At the other end of the spectrum, a small position in American Century International Bond Fund and a larger position in MainStay Flexible Bond Opportunities Fund were the greatest fixed-income detractors from the Fund’s overall performance. The Fund’s position in American Century International Bond Fund has been sold.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 79
Portfolio of Investments October 31, 2011
Shares | Value | |||||||
Affiliated Investment Companies 89.5%† | ||||||||
Equity Funds 81.8% | ||||||||
MainStay 130/30 Core Fund Class I | 205,116 | $ | 1,624,519 | |||||
MainStay 130/30 International Fund Class I | 83,761 | 534,397 | ||||||
MainStay Common Stock Fund Class I | 120,117 | 1,366,928 | ||||||
MainStay Epoch Global Choice Fund Class I | 62,000 | 905,194 | ||||||
MainStay Epoch International Small Cap Fund Class I | 123,489 | 2,078,314 | ||||||
MainStay Epoch U.S. All Cap Fund Class I | 258,940 | 6,030,724 | ||||||
MainStay Growth Equity Fund Class I (a)(b) | 20,306 | 228,850 | ||||||
MainStay ICAP Equity Fund Class I | 71,674 | 2,517,205 | ||||||
MainStay ICAP International Fund Class I | 129,161 | 3,559,686 | ||||||
MainStay ICAP Select Equity Fund Class I | 59,409 | 1,988,418 | ||||||
MainStay International Equity Fund Class I | 105,492 | 1,148,809 | ||||||
MainStay Large Cap Growth Fund Class I (a) | 689,142 | 5,134,108 | ||||||
MainStay MAP Fund Class I | 277,207 | 8,621,147 | ||||||
MainStay U.S. Small Cap Fund Class I | 176,144 | 2,911,659 | ||||||
Total Equity Funds (Cost $39,868,979) | 38,649,958 | |||||||
Fixed Income Funds 7.7% | ||||||||
MainStay Cash Reserves Fund Class I | 732,714 | 732,714 | ||||||
MainStay Convertible Fund Class I | 11,290 | 170,819 | ||||||
MainStay Flexible Bond Opportunities Fund Class I | 197,649 | 1,725,474 | ||||||
MainStay Floating Rate Fund Class I | 50,540 | 470,524 | ||||||
MainStay Global High Income Fund Class I | 27,052 | 320,295 | ||||||
MainStay High Yield Corporate Bond Fund Class I | 416 | 2,427 | ||||||
MainStay High Yield Opportunities Fund Class I | 74 | 840 | ||||||
MainStay Indexed Bond Fund Class I | 561 | 6,549 | ||||||
MainStay Intermediate Term Bond Fund Class I | 16,945 | 183,852 | ||||||
Total Fixed Income Funds (Cost $3,653,251) | 3,613,494 | |||||||
Total Affiliated Investment Companies (Cost $43,522,230) | 42,263,452 | |||||||
Unaffiliated Investment Companies 10.3% | ||||||||
Equity Funds 10.3% | ||||||||
Columbia Funds Series Trust-Columbia SmallCap Index Fund | 84,687 | 1,413,422 | ||||||
iShares Russell 2000 Index ETF | 11,979 | 886,087 | ||||||
SPDR S&P Emerging Markets ETF | 4,963 | 316,937 | ||||||
Vanguard Emerging Markets ETF | 54,100 | 2,244,609 | ||||||
Total Equity Funds (Cost $5,194,643) | 4,861,055 | |||||||
Fixed Income Funds 0.0%‡ | ||||||||
iShares Barclays TIPS Bond Fund | 4 | 466 | ||||||
SPDR Barclays Capital International Treasury Bond ETF | 10 | 611 | ||||||
Total Fixed Income Funds (Cost $1,014) | 1,077 | |||||||
Total Unaffiliated Investment Companies (Cost $5,195,657) | 4,862,132 | |||||||
Total Investments (Cost $48,717,887) (c) | 99.8 | % | 47,125,584 | |||||
Other Assets, Less Liabilities | 0.2 | 113,600 | ||||||
Net Assets | 100.0 | % | $ | 47,239,184 | ||||
† | Percentages indicated are based on Fund net assets. | |
‡ | Less than one-tenth of a percent. | |
(a) | Non-income producing Underlying Fund. | |
(b) | The Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. (See Note 3) | |
(c) | At October 31, 2011, cost is $48,945,895 for federal income tax purposes and net unrealized depreciation is as follows: |
Gross unrealized appreciation | $ | 147,734 | ||
Gross unrealized depreciation | (1,968,045 | ) | ||
Net unrealized depreciation | $ | (1,820,311 | ) | |
The following abbreviations are used in the above portfolio:
ETF—Exchange Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
TIPS—Treasury Inflation Protected Security
The notes to the financial statements are an integral part of,
80 MainStay Retirement 2050 Fund | and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Affiliated Investment Companies | ||||||||||||||||
Equity Funds | $ | 38,649,958 | $ | — | $ | — | $ | 38,649,958 | ||||||||
Fixed Income Funds | 3,613,494 | — | — | 3,613,494 | ||||||||||||
Total Affiliated Investment Companies | 42,263,452 | — | — | 42,263,452 | ||||||||||||
Unaffiliated Investment Companies | ||||||||||||||||
Equity Funds | 4,861,055 | — | — | 4,861,055 | ||||||||||||
Fixed Income Funds | 1,077 | — | — | 1,077 | ||||||||||||
Total Unaffiliated Investment Companies | 4,862,132 | — | — | 4,862,132 | ||||||||||||
Total Investments in Securities | $ | 47,125,584 | $ | — | $ | — | $ | 47,125,584 | ||||||||
(a) | For a complete listing of investments, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 81 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in affiliated investment companies, at value (identified cost $43,522,230) | $ | 42,263,452 | ||
Investments in unaffiliated investment companies, at value (identified cost $5,195,657) | 4,862,132 | |||
Receivables: | ||||
Fund shares sold | 139,159 | |||
Manager (See Note 3) | 15,879 | |||
Other assets | 28,443 | |||
Total assets | 47,309,065 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 29,621 | |||
Transfer agent (See Note 3) | 19,293 | |||
Professional fees | 8,800 | |||
Shareholder communication | 4,722 | |||
NYLIFE Distributors (See Note 3) | 2,527 | |||
Custodian | 824 | |||
Trustees | 174 | |||
Accrued expenses | 3,920 | |||
Total liabilities | 69,881 | |||
Net assets | $ | 47,239,184 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 5,475 | ||
Additional paid-in capital | 45,652,350 | |||
45,657,825 | ||||
Undistributed net investment income | 144,671 | |||
Accumulated net realized gain (loss) on investments | 3,028,991 | |||
Net unrealized appreciation (depreciation) on investments | (1,592,303 | ) | ||
Net assets | $ | 47,239,184 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 1,010,344 | ||
Shares of beneficial interest outstanding | 117,701 | |||
Net asset value per share outstanding | $ | 8.58 | ||
Maximum sales charge (5.50% of offering price) | 0.50 | |||
Maximum offering price per share outstanding | $ | 9.08 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 2,422,851 | ||
Shares of beneficial interest outstanding | 282,050 | |||
Net asset value per share outstanding | $ | 8.59 | ||
Maximum sales charge (5.50% of offering price) | 0.50 | |||
Maximum offering price per share outstanding | $ | 9.09 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 37,721,156 | ||
Shares of beneficial interest outstanding | 4,365,062 | |||
Net asset value and offering price per share outstanding | $ | 8.64 | ||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 3,064,823 | ||
Shares of beneficial interest outstanding | 356,700 | |||
Net asset value and offering price per share outstanding | $ | 8.59 | ||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 3,020,010 | ||
Shares of beneficial interest outstanding | 353,017 | |||
Net asset value and offering price per share outstanding | $ | 8.55 | ||
The notes to the financial statements are an integral part of,
82 MainStay Retirement 2050 Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividend distributions from affiliated investment companies | $ | 448,058 | ||
Dividend distributions from unaffiliated investment companies | 27,769 | |||
Total income | 475,827 | |||
Expenses | ||||
Transfer agent (See Note 3) | 110,954 | |||
Registration | 74,137 | |||
Manager (See Note 3) | 42,255 | |||
Distribution/Service—Investor Class (See Note 3) | 2,061 | |||
Distribution/Service—Class A (See Note 3) | 5,759 | |||
Distribution/Service—Class R2 (See Note 3) | 5,405 | |||
Distribution/Service—Class R3 (See Note 3) | 14,918 | |||
Professional fees | 28,094 | |||
Shareholder communication | 12,366 | |||
Custodian | 9,603 | |||
Shareholder service (See Note 3) | 5,145 | |||
Trustees | 1,186 | |||
Miscellaneous | 6,708 | |||
Total expenses before waiver/reimbursement | 318,591 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (231,659 | ) | ||
Expense reimbursement from Transfer agent (See Note 3) | (826 | ) | ||
Net expenses | 86,106 | |||
Net investment income (loss) | 389,721 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Affiliated investment company transactions | 2,948,115 | |||
Unaffiliated investment company transactions | 437,892 | |||
Realized capital gain distributions from affiliated investment companies | 16,350 | |||
Realized capital gain distributions from unaffiliated investment companies | 49,527 | |||
Net realized gain (loss) on investments from affiliated and unaffiliated investment companies | 3,451,884 | |||
Net change in unrealized appreciation (depreciation) on investments | (3,954,008 | ) | ||
Net realized and unrealized gain (loss) on investments | (502,124 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (112,403 | ) | |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 83 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 389,721 | $ | 188,723 | ||||
Net realized gain (loss) on investments from affiliated and unaffiliated investment company transactions | 3,451,884 | 1,913,073 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (3,954,008 | ) | 982,359 | |||||
Net increase (decrease) in net assets resulting from operations | (112,403 | ) | 3,084,155 | |||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (7,257 | ) | (3,360 | ) | ||||
Class A | (26,807 | ) | (17,225 | ) | ||||
Class I | (247,508 | ) | (169,995 | ) | ||||
Class R2 | (18,222 | ) | (5,289 | ) | ||||
Class R3 | (23,326 | ) | (17,594 | ) | ||||
(323,120 | ) | (213,463 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (4,929 | ) | — | |||||
Class A | (17,022 | ) | — | |||||
Class I | (131,391 | ) | — | |||||
Class R2 | (12,949 | ) | — | |||||
Class R3 | (19,929 | ) | — | |||||
(186,220 | ) | — | ||||||
Total dividends and distributions to shareholders | (509,340 | ) | (213,463 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 39,227,894 | 8,896,209 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 509,276 | 213,435 | ||||||
Cost of shares redeemed | (17,131,693 | ) | (5,445,050 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | 22,605,477 | 3,664,594 | ||||||
Net increase (decrease) in net assets | 21,983,734 | 6,535,286 | ||||||
Net Assets | ||||||||
Beginning of year | 25,255,450 | 18,720,164 | ||||||
End of year | $ | 47,239,184 | $ | 25,255,450 | ||||
Undistributed net investment income at end of year | $ | 144,671 | $ | 66,194 | ||||
The notes to the financial statements are an integral part of,
84 MainStay Retirement 2050 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.55 | $ | 7.50 | $ | 6.57 | $ | 9.46 | ||||||||||
Net investment income (loss) (a) | 0.08 | 0.04 | 0.09 | 0.05 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | (b) | 1.08 | 0.99 | (2.94 | ) | ||||||||||||
Total from investment operations | 0.18 | 1.12 | 1.08 | (2.89 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.09 | ) | (0.07 | ) | (0.11 | ) | — | |||||||||||
From net realized gain on investments | (0.06 | ) | — | (0.04 | ) | — | ||||||||||||
Total dividends and distributions | (0.15 | ) | (0.07 | ) | (0.15 | ) | — | |||||||||||
Net asset value at end of period | $ | 8.58 | $ | 8.55 | $ | 7.50 | $ | 6.57 | ||||||||||
Total investment return (c) | 2.10 | % | 15.08 | % | 16.92 | % | (30.55 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 0.87 | % | 0.55 | % | 1.30 | % | 0.81 | % †† | ||||||||||
Net expenses (e) | 0.47 | % | 0.47 | % | 0.47 | % | 0.46 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (e) | 1.51 | % | 2.17 | % | 2.31 | % | 2.86 | % †† | ||||||||||
Portfolio turnover rate | 139 | % | 70 | % | 67 | % | 138 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 1,010 | $ | 650 | $ | 299 | $ | 80 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 85 |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.55 | $ | 7.49 | $ | 6.58 | $ | 10.62 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.10 | 0.06 | 0.11 | 0.09 | 0.01 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | (b) | 1.08 | 0.97 | (4.05 | ) | 0.61 | |||||||||||||||
Total from investment operations | 0.20 | 1.14 | 1.08 | (3.96 | ) | 0.62 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.10 | ) | (0.08 | ) | (0.13 | ) | (0.07 | ) | — | |||||||||||||
From net realized gain on investments | (0.06 | ) | — | (0.04 | ) | (0.01 | ) | — | ||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.08 | ) | (0.17 | ) | (0.08 | ) | — | |||||||||||||
Net asset value at end of period | $ | 8.59 | $ | 8.55 | $ | 7.49 | $ | 6.58 | $ | 10.62 | ||||||||||||
Total investment return (c) | 2.28 | % | 15.30 | % | 16.84 | % | (37.60 | %) | 6.30 | %(d) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.11 | % | 0.72 | % | 1.62 | % | 0.97 | % | 0.29 | %†† | ||||||||||||
Net expenses (e) | 0.37 | % | 0.37 | % | 0.37 | % | 0.38 | % | 0.38 | %†† | ||||||||||||
Expenses (before waiver/reimbursement) (e) | 0.91 | % | 1.29 | % | 1.58 | % | 3.52 | % | 39.60 | %†† | ||||||||||||
Portfolio turnover rate | 139 | % | 70 | % | 67 | % | 138 | % | 24 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 2,423 | $ | 2,224 | $ | 1,571 | $ | 721 | $ | 270 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(d) | Total investment return is not annualized. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
86 MainStay Retirement 2050 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
June 29, | ||||||||||||||||||||||
2007** | ||||||||||||||||||||||
through | ||||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.60 | $ | 7.53 | $ | 6.59 | $ | 10.63 | $ | 10.00 | ||||||||||||
Net investment income (loss) (a) | 0.08 | 0.08 | 0.13 | 0.09 | 0.02 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.14 | (b) | 1.08 | 0.98 | (4.03 | ) | 0.61 | |||||||||||||||
Total from investment operations | 0.22 | 1.16 | 1.11 | (3.94 | ) | 0.63 | ||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.12 | ) | (0.09 | ) | (0.13 | ) | (0.09 | ) | — | |||||||||||||
From net realized gain on investments | (0.06 | ) | — | (0.04 | ) | (0.01 | ) | — | ||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.09 | ) | (0.17 | ) | (0.10 | ) | — | |||||||||||||
Net asset value at end of period | $ | 8.64 | $ | 8.60 | $ | 7.53 | $ | 6.59 | $ | 10.63 | ||||||||||||
Total investment return (c) | 2.49 | % | 15.56 | % | 17.31 | % | (37.49 | %) | 6.40 | %(d) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 0.94 | % | 1.01 | % | 1.99 | % | 1.08 | % | 0.55 | %†† | ||||||||||||
Net expenses (e) | 0.12 | % | 0.12 | % | 0.12 | % | 0.13 | % | 0.13 | %†† | ||||||||||||
Expenses (before reimbursement/waiver) (e) | 0.66 | % | 1.04 | % | 1.34 | % | 3.18 | % | 39.11 | %†† | ||||||||||||
Portfolio turnover rate | 139 | % | 70 | % | 67 | % | 138 | % | 24 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 37,721 | $ | 17,917 | $ | 14,283 | $ | 7,191 | $ | 273 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 87 |
Financial Highlights selected per share data and ratios
Class R2 | ||||||||||||||||||||
January 8, | ||||||||||||||||||||
2009** | ||||||||||||||||||||
through | ||||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.55 | $ | 7.49 | $ | 6.22 | ||||||||||||||
Net investment income (loss) (a) | 0.07 | 0.04 | 0.04 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.12 | (b) | 1.09 | 1.23 | ||||||||||||||||
Total from investment operations | 0.19 | 1.13 | 1.27 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.09 | ) | (0.07 | ) | — | |||||||||||||||
From net realized gain on investments | (0.06 | ) | — | — | ||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.07 | ) | — | |||||||||||||||
Net asset value at end of period | $ | 8.59 | $ | 8.55 | $ | 7.49 | ||||||||||||||
Total investment return (c) | 2.16 | % | 15.10 | % | 20.42 | %(d)(e) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.84 | % | 0.47 | % | 0.66 | %†† | ||||||||||||||
Net expenses (f) | 0.47 | % | 0.47 | % | 0.47 | %†† | ||||||||||||||
Expenses (before waiver/reimbursement) (f) | 1.01 | % | 1.39 | % | 1.64 | %†† | ||||||||||||||
Portfolio turnover rate | 139 | % | 70 | % | 67 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,065 | $ | 1,735 | $ | 419 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | Total investment returns may reflect adjustments to conform to generally accepted accounting principles. | |
(f) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
88 MainStay Retirement 2050 Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R3 | ||||||||||||||||||
May 1, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 8.52 | $ | 7.48 | $ | 6.56 | $ | 9.61 | ||||||||||
Net investment income (loss) (a) | 0.06 | 0.03 | 0.10 | 0.01 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.10 | (b) | 1.07 | 0.96 | (3.06 | ) | ||||||||||||
Total from investment operations | 0.16 | 1.10 | 1.06 | (3.05 | ) | |||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.07 | ) | (0.06 | ) | (0.10 | ) | — | |||||||||||
From net realized gain on investments | (0.06 | ) | — | (0.04 | ) | — | ||||||||||||
Total dividends and distributions | (0.13 | ) | (0.06 | ) | (0.14 | ) | — | |||||||||||
Net asset value at end of period | $ | 8.55 | $ | 8.52 | $ | 7.48 | $ | 6.56 | ||||||||||
Total investment return (c) | 2.00 | % | 14.78 | % | 16.66 | % | (31.74 | %)(d) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 0.68 | % | 0.39 | % | 1.49 | % | 0.28 | % †† | ||||||||||
Net expenses (e) | 0.72 | % | 0.72 | % | 0.72 | % | 0.73 | % †† | ||||||||||
Expenses (before waiver/reimbursement) (e) | 1.26 | % | 1.64 | % | 1.94 | % | 2.99 | % †† | ||||||||||
Portfolio turnover rate | 139 | % | 70 | % | 67 | % | 138 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 3,020 | $ | 2,729 | $ | 2,149 | $ | 1,473 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | The per share amount may differ with the change in aggregate gains (losses) as shown in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values during the year. | |
(c) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. | |
(d) | Total investment return is not annualized. | |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 89 |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds” and each individually, referred to as a “Fund”). These financial statements and notes relate to the MainStay Retirement 2010 Fund, MainStay Retirement 2020 Fund, MainStay Retirement 2030 Fund, MainStay Retirement 2040 Fund and MainStay Retirement 2050 Fund (collectively referred to as the “Retirement Funds” and each individually referred to as a “Retirement Fund”). Each is a diversified fund. Each Retirement Fund is the successor of a series of Eclipse Funds Inc. with the same name (each a “Predecessor Fund”). The reorganizations of the Predecessor Funds with and into the respective Retirement Funds occurred on February 26, 2010. All information and references to periods prior to February 26, 2010 relate to the respective Predecessor Fund.
The Retirement Funds each currently offer six classes of shares. Class A and Class I shares commenced operations on June 29, 2007. Class R1 shares were first offered to the public on June 29, 2007, but have not commenced operations as of the date of this report. Class R2 and Class R3 shares were first offered to the public on June 29, 2007, but did not commence operations until January 8, 2009 and May 1, 2008, respectively. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class I, Class R1, Class R2 and Class R3 shares are offered at NAV and are not subject to a sales charge. Depending on eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The six classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Class R3 shares are subject to higher distribution and/or service fee rates than the Investor Class, Class A and Class R2 shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I and Class R1 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee. This is in addition to any fees paid under a distribution plan, where applicable.
The investment objective for each of the Retirement Funds is as follows:
Each Retirement Fund seeks to maximize total return over time consistent with its current investment allocation. Total return is defined as a combination of long-term growth of capital and current income. The years in the Funds’ names refer to the approximate year an investor in the Fund would plan to retire and likely would stop making new investments in the Retirement Fund.
The MainStay Retirement 2010 Fund is designed for an investor who has retired or is seeking to retire between 2010 and 2015, and who plans to withdraw the value of the investor’s account in the Fund gradually after retirement.
The MainStay Retirement 2020 Fund is designed for an investor who is seeking to retire between the years 2016 and 2025, and who plans to withdraw the value of the investor’s account in the Fund gradually after retirement.
The MainStay Retirement 2030 Fund is designed for an investor who is seeking to retire between the years 2026 and 2035, and who plans to withdraw the value of the investor’s account in the Fund gradually after retirement.
The MainStay Retirement 2040 Fund is designed for an investor who is seeking to retire between the years 2036 and 2045, and who plans to withdraw the value of the investor’s account in the Fund gradually after retirement.
The MainStay Retirement 2050 Fund is designed for an investor who is seeking to retire between the years 2046 and 2055, and who plans to withdraw the value of the investor’s account in the Fund gradually after retirement.
The Retirement Funds are “funds of funds,” meaning that they seek to achieve their investment objectives by investing primarily in mutual funds managed by New York Life Investment Management LLC (“New York Life Investments” or “Manager”) (“Affiliated Underlying Funds”), mutual funds managed by an advisor not affiliated with New York Life Investments or exchange traded funds (“ETFs”) (“Unaffiliated Underlying Funds”) if a New York Life Investments managed mutual fund in a particular asset class is not available (Affiliated Underlying Funds collectively with Unaffiliated Funds, the “Underlying Funds”).
Note 2–Significant Accounting Policies
The Retirement Funds prepare their financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follow the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Retirement Funds are open for business (“valuation date”).
“Fair value” is defined as the price that a Retirement Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Retirement Funds. Unobservable inputs reflect each Retirement
90 MainStay Retirement Fund
Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including each Retirement Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Retirement Funds to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Retirement Funds may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Retirement Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Retirement Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Retirement Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for each Retirement Fund’s investments is included at the end of each Retirement Fund’s Portfolio of Investments.
Investments in Underlying Funds are valued at their NAV at the close of business each day. These securities are generally categorized as Level 1 in the hierarchy.
The Retirement Funds’ other investments and securities held by the Affiliated Underlying Funds are valued as described below. Equity securities and ETFs are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Options contracts are valued at the last posted settlement price on the market where such options are principally traded.
Debt securities are valued at the evaluated bid prices supplied by a pricing agent or brokers selected by the Affiliated Underlying Fund’s manager in consultation with the Affiliated Underlying Fund’s subadvisor whose prices reflect broker/dealer supplied valuations and electronic data processing techniques, if such prices are deemed by the Affiliated Underlying Fund’s manager, in consultation with the Affiliated Underlying Fund’s subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities include corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, Yankee bonds, convertible bonds, asset-backed securities, and mortgage-backed securities.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market.
Foreign currency forward contracts are valued at their fair market values determined on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from a pricing service. The Affiliated Underlying Funds have engaged an independent pricing service to provide market value quotations from dealers in loans.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Retirement Funds’ Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Retirement Funds’ Manager (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Retirement Funds did not hold any securities that were fair valued in such a manager.
(B) Income Taxes. Each of the Retirement Funds is treated as a separate entity for federal income tax purposes. The Retirement Funds’ policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of each Retirement Fund within the
mainstayinvestments.com 91
Notes to Financial Statements (continued)
allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Retirement Funds’ tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Retirement Funds’ financial statements. The Retirement Funds’ federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Retirement Funds intend to declare and pay dividends of net investment income and distributions of net realized capital gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the respective Retirement Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Retirement Funds record security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividends and distributions received by the Retirement Funds from the Underlying Funds are recorded on the ex-dividend date.
Investment income and realized and unrealized gains and losses on investments of the Retirement Funds are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Retirement Funds in proportion to the net assets of the respective Retirement Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by each Retirement Fund, including those of related parties to the Retirement Funds, are shown in the Statement of Operations.
In addition, the Retirement Funds bear a pro rata share of the fees and expenses of the Underlying Funds in which they invest. Because the Underlying Funds have varied expense and fee levels and the Retirement Funds may own different proportions of the Underlying Funds at different times, the amount of fees and expenses incurred indirectly by each Retirement Fund may vary.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Retirement Funds enter into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Retirement Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Retirement Funds that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Retirement Funds.
Note 3–Fees and Related Party Transactions
(A) Manager. New York Life Investment Management LLC (“New York Life Investments” or “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Retirement Funds’ Manager, pursuant to a Management Agreement (“Management Agreement”) and is responsible for the day-to-day portfolio management of the Retirement Funds. The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Retirement Funds. Except for the portion of salaries and expenses that are the responsibility of the Retirement Funds, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Retirement Funds which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Retirement Funds and certain operational expenses of the Retirement Funds. Prior to January 1, 2011, Madison Square Investors LLC (“MSI” or “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, served as Subadvisor to the Retirement Funds and was responsible for the day-to-day portfolio management of the Retirement Funds. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MSI, New York Life Investments paid for the services of the Subadvisor.
Each Retirement Fund is contractually obligated to pay the Manager a monthly fee for services performed and facilities furnished at an annual rate of 0.10% of the average daily net assets of the respective Retirement Fund. The Manager has contractually agreed to waive this fee so that the effective management fee is 0.00%. This waiver may be amended or terminated only with Board approval. Each Retirement Fund also indirectly pays a proportionate share of the management fees paid to the managers of the Underlying Funds in which each Retirement Fund invests.
The Manager has contractually agreed to waive fees and/or reimburse the expenses so that Total Annual Fund Operating Expenses do not
92 MainStay Retirement Fund
exceed the following percentages of average daily net assets: Investor Class, 0.475%; Class A, 0.375%; Class I, 0.125%; Class R1, 0.225%; Class R2, 0.475% and Class R3, 0.725%. This agreement expires on February 28, 2012 and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes expense reimbursement from transfer agent, taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Retirement Funds as follows:
Total | ||||
MainStay Retirement 2010 Fund | $ | 54,622 | ||
MainStay Retirement 2020 Fund | 81,960 | |||
MainStay Retirement 2030 Fund | 122,471 | |||
MainStay Retirement 2040 Fund | 73,132 | |||
MainStay Retirement 2050 Fund | 42,255 | |||
For the year ended October 31, 2011, New York Life Investments waived its fees and/or reimbursed expenses of the Retirement Funds as follows:
Total | ||||
MainStay Retirement 2010 Fund | $ | 221,660 | ||
MainStay Retirement 2020 Fund | 241,132 | |||
MainStay Retirement 2030 Fund | 341,109 | |||
MainStay Retirement 2040 Fund | 304,893 | |||
MainStay Retirement 2050 Fund | 231,659 | |||
State Street Bank and Trust Company (“State Street”), 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Retirement Funds pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Retirement Funds, maintaining the general ledger and sub-ledger accounts for the calculation of the Retirement Funds’ respective NAVs, and assisting New York Life Investments in conducting various aspects of the Retirement Funds’ administrative operations. For providing these services to the Retirement Funds, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Retirement Funds, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Retirement Funds have adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class, Class A and Class R2 Plans, the Distributor receives a monthly distribution fee from the Investor Class, Class A and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Investor Class, Class A and Class R2 shares for distribution or service activities as designated by the Distributor. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% (0.25% for distribution and 0.25% for service activities as designated by the Distributor) of the average daily net assets of the Class R3 shares. Class I and Class R1 shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Retirement Funds’ shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager is entitled to a Shareholder Service Fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets attributable to the Class R1, Class R2 and Class R3 shares. This is in addition to any fees paid under a distribution plan, where applicable.
Shareholder Service Fees incurred by each Retirement Fund for the year ended October 31, 2011, were as follows:
MainStay Retirement 2010 Fund | ||||
Class R2 | $ | 4,242 | ||
Class R3 | 796 | |||
MainStay Retirement 2020 Fund | ||||
Class R2 | $ | 5,394 | ||
Class R3 | 2,015 | |||
MainStay Retirement 2030 Fund | ||||
Class R2 | $ | 5,387 | ||
Class R3 | 6,253 | |||
MainStay Retirement 2040 Fund | ||||
Class R2 | $ | 4,733 | ||
Class R3 | 5,036 | |||
MainStay Retirement 2050 Fund | ||||
Class R2 | $ | 2,162 | ||
Class R3 | 2,983 | |||
mainstayinvestments.com 93
Notes to Financial Statements (continued)
(C) Sales Charges. The Retirement Funds were advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares for the year ended October 31, 2011 were as follows:
MainStay Retirement 2010 Fund | ||||
Investor Class | $ | 1,693 | ||
Class A | 490 | |||
MainStay Retirement 2020 Fund | ||||
Investor Class | $ | 7,747 | ||
Class A | 2,722 | |||
MainStay Retirement 2030 Fund | ||||
Investor Class | $ | 10,271 | ||
Class A | 3,372 | |||
MainStay Retirement 2040 Fund | ||||
Investor Class | $ | 8,609 | ||
Class A | 1,923 | |||
MainStay Retirement 2050 Fund | ||||
Investor Class | $ | 3,960 | ||
Class A | 849 | |||
The Retirement Funds were also advised that the Distributor retained CDSCs on redemptions of Investor Class, and Class A shares, for the year ended October 31, 2011 were as follows:
MainStay Retirement 2010 Fund | ||||
Class A | $ | 9 | ||
MainStay Retirement 2020 Fund | ||||
Class A | $ | 68 | ||
MainStay Retirement 2030 Fund | ||||
Investor Class | $ | 21 | ||
Class A | 116 | |||
MainStay Retirement 2040 Fund | ||||
Class A | $ | 55 | ||
MainStay Retirement 2050 Fund | ||||
Class A | $ | 15 | ||
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Retirement Funds’ transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent offset arrangements represent reimbursements of a portion of the transfer agency fees from Unaffiliated Underlying Funds. Transfer agent expenses incurred by the Retirement Funds for the year ended October 31, 2011, were as follows:
MainStay Retirement 2010 Fund | ||||
Investor Class | $ | 4,665 | ||
Class A | 12,354 | |||
Class I | 75,803 | |||
Class R2 | 7,629 | |||
Class R3 | 1,432 | |||
MainStay Retirement 2020 Fund | ||||
Investor Class | $ | 8,913 | ||
Class A | 19,929 | |||
Class I | 81,450 | |||
Class R2 | 7,588 | |||
Class R3 | 2,834 | |||
MainStay Retirement 2030 Fund | ||||
Investor Class | $ | 11,845 | ||
Class A | 23,435 | |||
Class I | 161,538 | |||
Class R2 | 9,186 | |||
Class R3 | 10,662 | |||
MainStay Retirement 2040 Fund | ||||
Investor Class | $ | 11,185 | ||
Class A | 17,542 | |||
Class I | 130,988 | |||
Class R2 | 11,435 | |||
Class R3 | 12,170 | |||
MainStay Retirement 2050 Fund | ||||
Investor Class | $ | 7,017 | ||
Class A | 5,779 | |||
Class I | 85,250 | |||
Class R2 | 5,424 | |||
Class R3 | 7,484 | |||
94 MainStay Retirement Fund
For the year ended October 31, 2011, the Retirement Funds were reimbursed transfer agent fees as follows:
Total | ||||
MainStay Retirement 2010 Fund | $ | 1,088 | ||
MainStay Retirement 2020 Fund | 1,951 | |||
MainStay Retirement 2030 Fund | 3,477 | |||
MainStay Retirement 2040 Fund | 1,748 | |||
MainStay Retirement 2050 Fund | 826 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Retirement Funds have implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, the Retirement Funds held the following percentages of outstanding shares of affiliated investment companies:
MainStay Retirement 2010 Fund | ||||
MainStay 130/30 Core Fund Class I | 0.35 | % | ||
MainStay 130/30 International Fund Class I | 0.02 | |||
MainStay Cash Reserves Fund Class I | 0.37 | |||
MainStay Common Stock Fund Class I | 1.73 | |||
MainStay Convertible Fund Class I | 0.40 | |||
MainStay Epoch International Small Cap Fund Class I | 0.67 | |||
MainStay Epoch U.S. All Cap Fund Class I | 1.01 | |||
MainStay Flexible Bond Opportunities Fund Class I | 3.21 | |||
MainStay Floating Rate Fund Class I | 0.41 | |||
MainStay Global High Income Fund Class I | 2.56 | |||
MainStay Growth Equity Fund Class I | 1.58 | |||
MainStay High Yield Corporate Bond Fund Class I | 0.10 | |||
MainStay High Yield Opportunities Fund Class I | 0.10 | |||
MainStay ICAP Equity Fund Class I | 0.45 | |||
MainStay ICAP International Fund Class I | 0.35 | |||
MainStay ICAP Select Equity Fund Class I | 0.08 | |||
MainStay Indexed Bond Fund Class I | 2.08 | |||
MainStay Intermediate Term Bond Fund Class I | 1.95 | |||
MainStay International Equity Fund Class I | 0.00‡ | |||
MainStay Large Cap Growth Fund Class I | 0.06 | |||
MainStay MAP Fund Class I | 0.54 | |||
MainStay U.S. Small Cap Fund Class I | 0.33 | |||
MainStay Retirement 2020 Fund | ||||
MainStay 130/30 Core Fund Class I | 0.69 | % | ||
MainStay 130/30 International Fund Class I | 0.22 | |||
MainStay Cash Reserves Fund Class I | 0.58 | |||
MainStay Common Stock Fund Class I | 3.85 | |||
MainStay Convertible Fund Class I | 0.57 | |||
MainStay Epoch Global Choice Fund Class I | 0.83 | |||
MainStay Epoch International Small Cap Fund Class I | 1.34 | |||
MainStay Epoch U.S. All Cap Fund Class I | 1.88 | |||
MainStay Flexible Bond Opportunities Fund Class I | 5.20 | |||
MainStay Floating Rate Fund Class I | 0.64 | |||
MainStay Global High Income Fund Class I | 4.29 | |||
MainStay Growth Equity Fund Class I | 10.95 | |||
MainStay High Yield Corporate Bond Fund Class I | 0.14 | |||
MainStay High Yield Opportunities Fund Class I | 0.11 | |||
MainStay ICAP Equity Fund Class I | 0.89 | |||
MainStay ICAP International Fund Class I | 0.73 | |||
MainStay ICAP Select Equity Fund Class I | 0.15 | |||
MainStay Indexed Bond Fund Class I | 1.17 | |||
MainStay Intermediate Term Bond Fund Class I | 2.23 | |||
MainStay International Equity Fund Class I | 0.23 | |||
MainStay Large Cap Growth Fund Class I | 0.10 | |||
MainStay MAP Fund Class I | 1.08 | |||
MainStay U.S. Small Cap Fund Class I | 0.58 | |||
MainStay Retirement 2030 Fund | ||||
MainStay 130/30 Core Fund Class I | 1.09 | % | ||
MainStay 130/30 International Fund Class I | 0.70 | |||
MainStay Cash Reserves Fund Class I | 0.82 | |||
MainStay Common Stock Fund Class I | 4.45 | |||
MainStay Convertible Fund Class I | 0.58 | |||
MainStay Epoch Global Choice Fund Class I | 3.78 | |||
MainStay Epoch International Small Cap Fund Class I | 2.08 | |||
MainStay Epoch U.S. All Cap Growth Fund Class I | 2.94 | |||
MainStay Flexible Bond Opportunities Fund Class I | 8.00 | |||
MainStay Floating Rate Fund Class I | 1.05 | |||
MainStay Global High Income Fund Class I | 7.74 | |||
MainStay Growth Equity Fund Class I | 28.12 | |||
MainStay High Yield Corporate Bond Fund Class I | 0.17 | |||
MainStay High Yield Opportunities Fund Class I | 0.03 | |||
MainStay ICAP Equity Fund Class I | 1.55 | |||
MainStay ICAP International Fund Class I | 1.28 | |||
MainStay ICAP Select Equity Fund Class I | 0.20 | |||
MainStay Indexed Bond Fund Class I | 0.05 | |||
MainStay Intermediate Term Bond Fund Class I | 0.15 | |||
mainstayinvestments.com 95
Notes to Financial Statements (continued)
MainStay Retirement 2030 Fund (Continued) | ||||
MainStay International Equity Fund Class I | 1.07 | % | ||
MainStay Large Cap Growth Fund Class I | 0.16 | |||
MainStay MAP Fund Class I | 1.86 | |||
MainStay U.S. Small Cap Fund Class I | 1.03 | |||
MainStay Retirement 2040 Fund | ||||
MainStay 130/30 Core Fund Class I | 0.73 | % | ||
MainStay 130/30 International Fund Class I | 0.55 | |||
MainStay Cash Reserves Fund Class I | 0.36 | |||
MainStay Common Stock Fund Class I | 2.37 | |||
MainStay Convertible Fund Class I | 0.20 | |||
MainStay Epoch Global Choice Fund Class I | 2.20 | |||
MainStay Epoch International Small Cap Fund Class I | 1.34 | |||
MainStay Epoch U.S. All Cap Fund Class I | 1.84 | |||
MainStay Flexible Bond Opportunities Fund Class I | 2.96 | |||
MainStay Floating Rate Fund Class I | 0.38 | |||
MainStay Global High Income Fund Class I | 2.65 | |||
MainStay Growth Equity Fund Class I | 19.23 | |||
MainStay High Yield Corporate Bond Fund Class I | 0.06 | |||
MainStay ICAP Equity Fund Class I | 0.82 | |||
MainStay ICAP International Fund Class I | 0.84 | |||
MainStay ICAP Select Equity Fund Class I | 0.13 | |||
MainStay International Equity Fund Class I | 0.90 | |||
MainStay Large Cap Growth Fund Class I | 0.10 | |||
MainStay MAP Fund Class I | 1.22 | |||
MainStay U.S. Small Cap Fund Class I | 1.51 | |||
MainStay Retirement 2050 Fund | ||||
MainStay 130/30 Core Fund Class I | 0.43 | % | ||
MainStay 130/30 International Fund Class I | 0.37 | |||
MainStay Cash Reserves Fund Class I | 0.17 | |||
MainStay Common Stock Fund Class I | 1.22 | |||
MainStay Convertible Fund Class I | 0.07 | |||
MainStay Epoch Global Choice Fund Class I | 1.23 | |||
MainStay Epoch International Small Cap Fund Class I | 0.81 | |||
MainStay Epoch U.S. All Cap Fund Class I | 1.03 | |||
MainStay Flexible Bond Opportunities Fund Class I | 1.06 | |||
MainStay Floating Rate Fund Class I | 0.13 | |||
MainStay Global High Income Fund Class I | 0.89 | |||
MainStay Growth Equity Fund Class I | 10.91 | |||
MainStay High Yield Corporate Bond Fund Class I | 0.00 | ‡ | ||
MainStay High Yield Opportunities Fund Class I | 0.00 | ‡ | ||
MainStay ICAP Equity Fund Class I | 0.35 | |||
MainStay ICAP International Fund Class I | 0.52 | |||
MainStay ICAP Select Equity Fund Class I | 0.07 | |||
MainStay Indexed Bond Fund Class I | 0.00�� | |||
MainStay Intermediate Term Bond Fund Class I | 0.03 | |||
MainStay International Equity Fund Class I | 0.62 | |||
MainStay Large Cap Growth Fund Class I | 0.06 | |||
MainStay MAP Fund Class I | 0.73 | |||
MainStay U.S. Small Cap Fund Class I | 1.68 | |||
‡ | Less than one-hundredth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Retirement Funds by the Office of the General Counsel of New York Life Investments was payable directly by the Retirement Funds through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were as follows:
MainStay Retirement 2010 Fund | $ | 685 | ||
MainStay Retirement 2020 Fund | 1,025 | |||
MainStay Retirement 2030 Fund | 1,573 | |||
MainStay Retirement 2040 Fund | 946 | |||
MainStay Retirement 2050 Fund | 546 | |||
Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Retirement Funds are no longer directly responsible for any portion of the cost of legal services.
96 MainStay Retirement Fund
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||||
MainStay Retirement 2010 Fund | $ | 1,803,740 | $ | 2,768,782 | $ | — | $ | 163,674 | $ | 4,736,196 | ||||||||||
MainStay Retirement 2020 Fund | 2,102,962 | 4,796,250 | — | 883,986 | 7,783,198 | |||||||||||||||
MainStay Retirement 2030 Fund | 3,002,844 | 8,017,746 | — | (1,413,694 | ) | 9,606,896 | ||||||||||||||
MainStay Retirement 2040 Fund | 1,489,330 | 4,591,873 | — | (1,447,828 | ) | 4,633,375 | ||||||||||||||
MainStay Retirement 2050 Fund | 1,059,258 | 2,342,412 | — | (1,820,311 | ) | 1,581,359 | ||||||||||||||
The difference between book-basis and tax basis unrealized appreciations is primarily due to wash sale deferrals.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized gain (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated Net | ||||||||||||
Undistributed | Realized Gain | Additional | ||||||||||
Net Investment | (Loss) on | Paid-In | ||||||||||
Income (Loss) | Investments | Capital | ||||||||||
MainStay Retirement 2010 Fund | $ | 156,424 | $ | (156,424 | ) | $ | — | |||||
MainStay Retirement 2020 Fund | 149,321 | (149,321 | ) | — | ||||||||
MainStay Retirement 2030 Fund | 79,122 | (79,122 | ) | — | ||||||||
MainStay Retirement 2040 Fund | 31,577 | (31,577 | ) | — | ||||||||
MainStay Retirement 2050 Fund | 11,876 | (11,876 | ) | — | ||||||||
The reclassifications for the Funds are primarily due to reclassification of distributions.
Under the Regulated Investment Company Modernization Act of 2010, the Retirement Funds will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||||||||||||||||||
Tax Based | Tax Based | Tax Based | Tax Based | |||||||||||||||||||||
Distributions | Distributions | Distributions | Distributions | |||||||||||||||||||||
from Ordinary | from Long-Term | from Ordinary | from Long-Term | |||||||||||||||||||||
Income | Capital Gains | Total | Income | Capital Gains | Total | |||||||||||||||||||
MainStay Retirement 2010 Fund | $ | 1,191,872 | $ | 647,838 | $ | 1,839,710 | $ | 935,726 | $ | — | $ | 935,726 | ||||||||||||
MainStay Retirement 2020 Fund | 1,562,398 | 936,898 | 2,499,296 | 1,082,428 | — | 1,082,428 | ||||||||||||||||||
MainStay Retirement 2030 Fund | 1,531,946 | 492,859 | 2,024,805 | 1,051,998 | — | 1,051,998 | ||||||||||||||||||
MainStay Retirement 2040 Fund | 816,612 | 483,139 | 1,299,751 | 488,651 | — | 488,651 | ||||||||||||||||||
MainStay Retirement 2050 Fund | 323,120 | 186,220 | 509,340 | 213,463 | — | 213,463 | ||||||||||||||||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Retirement Funds. Custodial fees are charged to the Retirement Funds based on the market value of securities in the Retirement Funds and the number of certain cash transactions incurred by the Retirement Funds.
mainstayinvestments.com 97
Notes to Financial Statements (continued)
Note 6–Line of Credit
The Retirement Funds and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Retirement Funds on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities were as follows:
MainStay Retirement 2010 Fund | MainStay Retirement 2020 Fund | MainStay Retirement 2030 Fund | ||||||||||||||||||||||
Purchases | Sales | Purchases | Sales | Purchases | Sales | |||||||||||||||||||
U.S. Government Securities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
All Others | 79,500 | 58,784 | 117,760 | 80,499 | 182,903 | 127,862 | ||||||||||||||||||
Total | $ | 79,500 | $ | 58,784 | $ | 117,760 | $ | 80,499 | $ | 182,903 | $ | 127,862 | ||||||||||||
MainStay Retirement 2040 Fund | MainStay Retirement 2050 Fund | |||||||||||||||
Purchases | Sales | Purchases | Sales | |||||||||||||
U.S. Government Securities | $ | — | $ | — | $ | — | $ | — | ||||||||
All Others | 115,471 | 81,219 | 80,494 | 58,001 | ||||||||||||
Total | $ | 115,471 | $ | 81,219 | $ | 80,494 | $ | 58,001 | ||||||||
Note 8–Capital Share Transactions
MainStay Retirement 2010 Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 27,054 | $ | 271,863 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,884 | 18,630 | ||||||
Shares redeemed | (15,476 | ) | (155,604 | ) | ||||
Net increase (decrease) | 13,462 | $ | 134,889 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 32,781 | $ | 312,399 | |||||
Shares issued to shareholders in reinvestment of dividends | 434 | 4,024 | ||||||
Shares redeemed | (4,545 | ) | (42,911 | ) | ||||
Net increase (decrease) | 28,670 | $ | 273,512 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 172,746 | $ | 1,744,750 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 26,839 | 264,628 | ||||||
Shares redeemed | (254,597 | ) | (2,550,776 | ) | ||||
Net increase (decrease) | (55,012 | ) | $ | (541,398 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 144,380 | $ | 1,372,805 | |||||
Shares issued to shareholders in reinvestment of dividends | 15,415 | 142,596 | ||||||
Shares redeemed | (189,531 | ) | (1,790,461 | ) | ||||
Net increase (decrease) | (29,736 | ) | $ | (275,060 | ) | |||
98 MainStay Retirement Fund
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,351,644 | $ | 23,609,054 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 147,181 | 1,458,560 | ||||||
Shares redeemed | (1,596,428 | ) | (16,030,600 | ) | ||||
Net increase (decrease) | 902,397 | $ | 9,037,014 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,181,700 | $ | 11,220,848 | |||||
Shares issued to shareholders in reinvestment of dividends | 79,405 | 737,674 | ||||||
Shares redeemed | (1,397,657 | ) | (13,213,481 | ) | ||||
Net increase (decrease) | (136,552 | ) | $ | (1,254,959 | ) | |||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,520,362 | $ | 14,713,011 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,898 | 68,157 | ||||||
Shares redeemed | (217,681 | ) | (2,117,994 | ) | ||||
Net increase (decrease) | 1,309,579 | $ | 12,663,174 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 45,714 | $ | 434,695 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,533 | 32,713 | ||||||
Shares redeemed | (71,595 | ) | (680,293 | ) | ||||
Net increase (decrease) | (22,348 | ) | $ | (212,885 | ) | |||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 6,519 | $ | 65,735 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,905 | 28,728 | ||||||
Shares redeemed | (22,146 | ) | (222,516 | ) | ||||
Net increase (decrease) | (12,722 | ) | $ | (128,053 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 7,655 | $ | 72,183 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,019 | 18,719 | ||||||
Shares redeemed | (32,534 | ) | (301,647 | ) | ||||
Net increase (decrease) | (22,860 | ) | $ | (210,745 | ) | |||
MainStay Retirement 2020 Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 141,352 | $ | 1,366,956 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 7,679 | 72,955 | ||||||
Shares redeemed | (26,677 | ) | (256,563 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 122,354 | 1,183,348 | ||||||
Shares converted into Investor Class (See Note 1) | 4,212 | 37,569 | ||||||
Shares converted from Investor Class (See Note 1) | (16,375 | ) | (156,569 | ) | ||||
Net increase (decrease) | 110,191 | $ | 1,064,348 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 134,132 | $ | 1,197,146 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,000 | 17,599 | ||||||
Shares redeemed | (25,731 | ) | (231,819 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 110,401 | 982,926 | ||||||
Shares converted into Investor Class (See Note 1) | 1,161 | 10,587 | ||||||
Shares converted from Investor Class (See Note 1) | (16,630 | ) | (150,114 | ) | ||||
Net increase (decrease) | 94,932 | $ | 843,399 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 276,675 | $ | 2,684,969 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 51,748 | 490,568 | ||||||
Shares redeemed | (268,219 | ) | (2,559,360 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 60,204 | 616,177 | ||||||
Shares converted into Class A (See Note 1) | 16,402 | 156,569 | ||||||
Shares converted from Class A (See Note 1) | (4,216 | ) | (37,569 | ) | ||||
Net increase (decrease) | 72,390 | $ | 735,177 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 285,232 | $ | 2,527,707 | |||||
Shares issued to shareholders in reinvestment of dividends | 22,685 | 199,170 | ||||||
Shares redeemed | (205,000 | ) | (1,827,517 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 102,917 | 899,360 | ||||||
Shares converted into Class A (See Note 1) | 16,653 | 150,114 | ||||||
Shares converted from Class A (See Note 1) | (1,163 | ) | (10,587 | ) | ||||
Net increase (decrease) | 118,407 | $ | 1,038,887 | |||||
mainstayinvestments.com 99
Notes to Financial Statements (continued)
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 3,161,575 | $ | 30,262,267 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 189,958 | 1,806,497 | ||||||
Shares redeemed | (1,569,857 | ) | (15,097,874 | ) | ||||
Net increase (decrease) | 1,781,676 | $ | 16,970,890 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,741,398 | $ | 15,618,479 | |||||
Shares issued to shareholders in reinvestment of dividends | 93,163 | 820,771 | ||||||
Shares redeemed | (1,901,355 | ) | (16,942,828 | ) | ||||
Net increase (decrease) | (66,794 | ) | $ | (503,578 | ) | |||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,307,363 | $ | 21,048,617 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,375 | 60,502 | ||||||
Shares redeemed | (236,224 | ) | (2,135,588 | ) | ||||
Net increase (decrease) | 2,077,514 | $ | 18,973,531 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 73,783 | $ | 671,682 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,091 | 18,380 | ||||||
Shares redeemed | (19,324 | ) | (175,261 | ) | ||||
Net increase (decrease) | 56,550 | $ | 514,801 | |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 24,705 | $ | 236,409 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,860 | 65,105 | ||||||
Shares redeemed | (14,971 | ) | (145,302 | ) | ||||
Net increase (decrease) | 16,594 | $ | 156,212 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 17,087 | $ | 152,566 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,016 | 26,508 | ||||||
Shares redeemed | (19,394 | ) | (172,971 | ) | ||||
Net increase (decrease) | 709 | $ | 6,103 | |||||
MainStay Retirement 2030 Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 171,838 | $ | 1,584,084 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,349 | 39,973 | ||||||
Shares redeemed | (62,529 | ) | (566,603 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 113,658 | 1,057,454 | ||||||
Shares converted into Investor Class (See Note 1) | 3,713 | 32,019 | ||||||
Shares converted from Investor Class (See Note 1) | (9,449 | ) | (86,557 | ) | ||||
Net increase (decrease) | 107,922 | $ | 1,002,916 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 149,946 | $ | 1,258,688 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,219 | 10,126 | ||||||
Shares redeemed | (17,737 | ) | (148,742 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 133,428 | 1,120,072 | ||||||
Shares converted into Investor Class (See Note 1) | 2,882 | 24,961 | ||||||
Shares converted from Investor Class (See Note 1) | (13,656 | ) | (116,287 | ) | ||||
Net increase (decrease) | 122,654 | $ | 1,028,746 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 340,621 | $ | 3,126,191 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 30,274 | 277,315 | ||||||
Shares redeemed | (289,800 | ) | (2,628,352 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 81,095 | 775,154 | ||||||
Shares converted into Class A (See Note 1) | 9,469 | 86,557 | ||||||
Shares converted from Class A (See Note 1) | (3,722 | ) | (32,019 | ) | ||||
Net increase (decrease) | 86,842 | $ | 829,692 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 282,839 | $ | 2,358,816 | |||||
Shares issued to shareholders in reinvestment of dividends | 18,191 | 150,443 | ||||||
Shares redeemed | (189,735 | ) | (1,585,647 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 111,295 | 923,612 | ||||||
Shares converted into Class A (See Note 1) | 13,689 | 116,287 | ||||||
Shares converted from Class A (See Note 1) | (2,889 | ) | (24,961 | ) | ||||
Net increase (decrease) | 122,095 | $ | 1,014,938 | |||||
100 MainStay Retirement Fund
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 6,941,387 | $ | 64,715,093 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 166,847 | 1,538,330 | ||||||
Shares redeemed | (2,719,008 | ) | (25,559,900 | ) | ||||
Net increase (decrease) | 4,389,226 | $ | 40,693,523 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 2,224,743 | $ | 18,725,669 | |||||
Shares issued to shareholders in reinvestment of dividends | 97,231 | 808,959 | ||||||
Shares redeemed | (1,572,241 | ) | (13,182,775 | ) | ||||
Net increase (decrease) | 749,733 | $ | 6,351,853 | |||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,606,235 | $ | 13,889,257 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,388 | 58,514 | ||||||
Shares redeemed | (212,741 | ) | (1,859,259 | ) | ||||
Net increase (decrease) | 1,399,882 | $ | 12,088,512 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 230,106 | $ | 1,950,994 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,734 | 22,641 | ||||||
Shares redeemed | (102,375 | ) | (843,645 | ) | ||||
Net increase (decrease) | 130,465 | $ | 1,129,990 | |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 48,998 | $ | 451,326 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 11,857 | 108,961 | ||||||
Shares redeemed | (44,884 | ) | (419,681 | ) | ||||
Net increase (decrease) | 15,971 | $ | 140,606 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 67,869 | $ | 569,152 | |||||
Shares issued to shareholders in reinvestment of dividends | 7,208 | 59,829 | ||||||
Shares redeemed | (28,024 | ) | (236,349 | ) | ||||
Net increase (decrease) | 47,053 | $ | 392,632 | |||||
MainStay Retirement 2040 Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 138,385 | $ | 1,250,395 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,929 | 35,404 | ||||||
Shares redeemed | (28,002 | ) | (253,824 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 114,312 | 1,031,975 | ||||||
Shares converted into Investor Class (See Note 1) | 173 | 1,623 | ||||||
Shares converted from Investor Class (See Note 1) | (4,012 | ) | (37,313 | ) | ||||
Net increase (decrease) | 110,473 | $ | 996,285 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 88,883 | $ | 728,276 | |||||
Shares issued to shareholders in reinvestment of dividends | 994 | 8,084 | ||||||
Shares redeemed | (16,886 | ) | (139,458 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 72,991 | 596,902 | ||||||
Shares converted into Investor Class (See Note 1) | 483 | 4,085 | ||||||
Shares converted from Investor Class (See Note 1) | (637 | ) | (5,376 | ) | ||||
Net increase (decrease) | 72,837 | $ | 595,611 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 199,090 | $ | 1,793,032 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 18,734 | 168,043 | ||||||
Shares redeemed | (183,602 | ) | (1,635,474 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 34,222 | 325,601 | ||||||
Shares converted into Class A (See Note 1) | 4,029 | 37,313 | ||||||
Shares converted from Class A (See Note 1) | (173 | ) | (1,623 | ) | ||||
Net increase (decrease) | 38,078 | $ | 361,291 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 171,077 | $ | 1,392,600 | |||||
Shares issued to shareholders in reinvestment of dividends | 8,087 | 65,427 | ||||||
Shares redeemed | (108,115 | ) | (890,542 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 71,049 | 567,485 | ||||||
Shares converted into Class A (See Note 1) | 639 | 5,376 | ||||||
Shares converted from Class A (See Note 1) | (485 | ) | (4,085 | ) | ||||
Net increase (decrease) | 71,203 | $ | 568,776 | |||||
mainstayinvestments.com 101
Notes to Financial Statements (continued)
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 4,563,834 | $ | 41,695,068 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 101,169 | 913,557 | ||||||
Shares redeemed | (1,712,364 | ) | (15,735,517 | ) | ||||
Net increase (decrease) | 2,952,639 | $ | 26,873,108 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,242,546 | $ | 10,231,009 | |||||
Shares issued to shareholders in reinvestment of dividends | 44,430 | 361,660 | ||||||
Shares redeemed | (968,618 | ) | (7,905,780 | ) | ||||
Net increase (decrease) | 318,358 | $ | 2,686,889 | |||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 824,731 | $ | 6,975,427 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 9,022 | 81,106 | ||||||
Shares redeemed | (130,231 | ) | (1,147,849 | ) | ||||
Net increase (decrease) | 703,522 | $ | 5,908,684 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 246,911 | $ | 2,066,813 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,286 | 18,538 | ||||||
Shares redeemed | (47,016 | ) | (385,515 | ) | ||||
Net increase (decrease) | 202,181 | $ | 1,699,836 | |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 51,373 | $ | 463,137 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 11,201 | 100,695 | ||||||
Shares redeemed | (12,913 | ) | (116,393 | ) | ||||
Net increase (decrease) | 49,661 | $ | 447,439 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 58,272 | $ | 475,421 | |||||
Shares issued to shareholders in reinvestment of dividends | 4,277 | 34,687 | ||||||
Shares redeemed | (11,297 | ) | (92,671 | ) | ||||
Net increase (decrease) | 51,252 | $ | 417,437 | |||||
MainStay Retirement 2050 Fund
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 61,500 | $ | 544,969 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,378 | 12,186 | ||||||
Shares redeemed | (18,211 | ) | (161,226 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 44,667 | 395,929 | ||||||
Shares converted from Investor Class (See Note 1) | (2,978 | ) | (26,741 | ) | ||||
Net increase (decrease) | 41,689 | $ | 369,188 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 40,499 | $ | 321,366 | |||||
Shares issued to shareholders in reinvestment of dividends | 425 | 3,360 | ||||||
Shares redeemed | (4,749 | ) | (38,188 | ) | ||||
Net increase (decrease) | 36,175 | $ | 286,538 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 95,936 | $ | 845,398 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,951 | 43,765 | ||||||
Shares redeemed | (81,914 | ) | (727,984 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 18,973 | 161,179 | ||||||
Shares converted into Class A (See Note 1) | 2,978 | 26,741 | ||||||
Net increase (decrease) | 21,951 | $ | 187,920 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 67,378 | $ | 534,027 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,180 | 17,197 | ||||||
Shares redeemed | (19,037 | ) | (149,462 | ) | ||||
Net increase (decrease) | 50,521 | $ | 401,762 | |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 3,983,430 | $ | 35,840,871 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 42,717 | 378,899 | ||||||
Shares redeemed | (1,744,436 | ) | (15,753,731 | ) | ||||
Net increase (decrease) | 2,281,711 | $ | 20,466,039 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 797,895 | $ | 6,381,929 | |||||
Shares issued to shareholders in reinvestment of dividends | 21,464 | 169,995 | ||||||
Shares redeemed | (632,521 | ) | (5,040,806 | ) | ||||
Net increase (decrease) | 186,838 | $ | 1,511,118 | |||||
102 MainStay Retirement Fund
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 191,100 | $ | 1,617,398 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,522 | 31,171 | ||||||
Shares redeemed | (40,797 | ) | (359,862 | ) | ||||
Net increase (decrease) | 153,825 | $ | 1,288,707 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 160,749 | $ | 1,314,761 | |||||
Shares issued to shareholders in reinvestment of dividends | 669 | 5,289 | ||||||
Shares redeemed | (14,551 | ) | (115,325 | ) | ||||
Net increase (decrease) | 146,867 | $ | 1,204,725 | |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 43,016 | $ | 379,258 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,899 | 43,255 | ||||||
Shares redeemed | (15,057 | ) | (128,890 | ) | ||||
Net increase (decrease) | 32,858 | $ | 293,623 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 43,337 | $ | 344,126 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,230 | 17,594 | ||||||
Shares redeemed | (12,741 | ) | (101,269 | ) | ||||
Net increase (decrease) | 32,826 | $ | 260,451 | |||||
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Retirement Funds as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Retirement Funds’ management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 103
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the MainStay Retirement 2010 Fund, MainStay Retirement 2020 Fund, MainStay Retirement 2030 Fund, MainStay Retirement 2040 Fund, and MainStay Retirement 2050 Fund (“the Funds”), five of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended. These financial statements and the financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian, transfer agent of the underlying funds and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Retirement 2010 Fund, MainStay Retirement 2020 Fund, MainStay Retirement 2030 Fund, MainStay Retirement 2040 Fund, and MainStay Retirement 2050 Fund of MainStay Funds Trust as of October 31, 2011, the results of their operations for the year then ended, the changes in their net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
104 MainStay Retirement Fund
Federal Income Tax Information (Unaudited)
The Retirement Funds are required under the Internal Revenue Code to advise shareholders within 60 days of the Retirement Funds’ fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Retirement Funds during such fiscal years. Accordingly, the Retirement Funds paid the following as long term capital gain distributions.
MainStay Retirement 2010 Fund | $ | 647,838 | ||
MainStay Retirement 2020 Fund | 936,898 | |||
MainStay Retirement 2030 Fund | 492,859 | |||
MainStay Retirement 2040 Fund | 483,139 | |||
MainStay Retirement 2050 Fund | 186,220 | |||
For the fiscal year ended October 31, 2011, the Retirement Funds designated approximately the following amounts under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
MainStay Retirement 2010 Fund | $ | 287,252 | ||
MainStay Retirement 2020 Fund | 545,519 | |||
MainStay Retirement 2030 Fund | 796,127 | |||
MainStay Retirement 2040 Fund | 617,688 | |||
MainStay Retirement 2050 Fund | 345,336 | |||
The dividends paid by the following Retirement Funds during the fiscal year ended October 31, 2011, which are not designated as capital gain distributions should be multiplied by the following percentages to arrive at the amount eligible for the corporate dividend-received deduction.
DRD% | ||||
MainStay Retirement 2010 Fund | 9.8 | % | ||
MainStay Retirement 2020 Fund | 14.2 | |||
MainStay Retirement 2030 Fund | 18.1 | |||
MainStay Retirement 2040 Fund | 22.3 | |||
MainStay Retirement 2050 Fund | 20.1 | |||
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Retirement Funds’ fiscal year end October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Retirement Funds’ securities is available without charge, upon request, (i) by visiting the Retirement Funds’ website at mainstayinvestments.com; and (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The Retirement Funds are required to file with the SEC their proxy voting records for each Retirement Fund for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
Each Retirement Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. Each Retirement Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 105
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
106 MainStay Retirement Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 107
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
108 MainStay Retirement Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 109
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
110 MainStay Retirement Fund
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24937 MS284-11 | MSRF11-12/11 |
NC1
MainStay S&P 500 Index Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 10 | |
Financial Statements | 19 | |
Notes to Financial Statements | 24 | |
Report of Independent Registered Public Accounting Firm | 31 | |
Federal Income Tax Information | 32 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 32 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 32 | |
Board Members and Officers | 33 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||||
Expense | ||||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 3% Initial Sales Charge | With sales charges | 4 | .13% | –0 | .94% | 2 | .80% | 1 | .01% | ||||||||||
Excluding sales charges | 7 | .35 | –0 | .33 | 3 | .11 | 1 | .01 | ||||||||||||
Class A Shares4 | Maximum 3% Initial Sales Charge | With sales charges | 4 | .23 | –0 | .90 | 2 | .82 | 0 | .74 | ||||||||||
Excluding sales charges | 7 | .46 | –0 | .29 | 3 | .13 | 0 | .74 | ||||||||||||
Class I Shares | No Sales Charge | 7 | .75 | –0 | .01 | 3 | .44 | 0 | .49 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Performance figures for Class A shares, first offered on January 2, 2004, include the historical performance of Class I shares through January 1, 2004, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class A shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
S&P 500® Index5 | 8 | .09% | 0 | .25% | 3 | .69% | ||||||
Average Lipper S&P 500 Index Objective Fund6 | 7 | .46 | –0 | .28 | 3 | .15 | ||||||
5. | S&P 500® Index is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. The S&P 500® Index is the Fund’s broad-based securities market index for comparison purposes. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The average Lipper S&P 500 Index objective fund is representative of funds that are passively managed and commit by prospectus language to replicate the performance of the S&P 500® Index (including reinvested basis dividends). In addition, S&P 500 Index objective funds have limited expenses (advisor fee no higher than 0.50%). This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay S&P 500 Index Fund
Cost in Dollars of a $1,000 Investment in MainStay S&P 500 Index Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 925.90 | $ | 3.40 | $ | 1,021.70 | $ | 3.57 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 926.20 | $ | 2.91 | $ | 1,022.20 | $ | 3.06 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 927.80 | $ | 1.70 | $ | 1,023.40 | $ | 1.79 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.70% for Investor Class, 0.60% for Class A and 0.35% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Industry Composition as of October 31, 2011 (Unaudited)
Oil, Gas & Consumable Fuels | 9.6 | % | ||
Pharmaceuticals | 5.5 | |||
Computers & Peripherals | 4.5 | |||
IT Services | 3.7 | |||
Software | 3.7 | |||
Insurance | 3.5 | |||
Diversified Financial Services | 2.9 | |||
Media | 2.9 | |||
Diversified Telecommunication Services | 2.6 | |||
Aerospace & Defense | 2.5 | |||
Beverages | 2.5 | |||
Commercial Banks | 2.4 | |||
Industrial Conglomerates | 2.3 | |||
Semiconductors & Semiconductor Equipment | 2.3 | |||
Food & Staples Retailing | 2.2 | |||
Chemicals | 2.1 | |||
Household Products | 2.1 | |||
Communications Equipment | 2.0 | |||
Energy Equipment & Services | 2.0 | |||
Health Care Providers & Services | 2.0 | |||
Capital Markets | 1.9 | |||
Electric Utilities | 1.9 | |||
Hotels, Restaurants & Leisure | 1.9 | |||
Machinery | 1.9 | |||
Food Products | 1.8 | |||
Internet Software & Services | 1.8 | |||
Specialty Retail | 1.8 | |||
Health Care Equipment & Supplies | 1.7 | |||
Real Estate Investment Trusts | 1.7 | |||
Tobacco | 1.7 | |||
Multi-Utilities | 1.3 | |||
Biotechnology | 1.2 | |||
Air Freight & Logistics | 1.0 | |||
Metals & Mining | 1.0 | |||
Internet & Catalog Retail | 0.9 | |||
Consumer Finance | 0.8 | |||
Road & Rail | 0.8 | |||
Multiline Retail | 0.7 | |||
Textiles, Apparel & Luxury Goods | 0.6 | |||
Electronic Equipment & Instruments | 0.5 | |||
Automobiles | 0.4 | |||
Commercial Services & Supplies | 0.4 | |||
Electrical Equipment | 0.4 | |||
Life Sciences Tools & Services | 0.4 | |||
Wireless Telecommunication Services | 0.3 | |||
Auto Components | 0.2 | |||
Construction & Engineering | 0.2 | |||
Household Durables | 0.2 | |||
Independent Power Producers & Energy Traders | 0.2 | |||
Personal Products | 0.2 | |||
Trading Companies & Distributors | 0.2 | |||
Airlines | 0.1 | |||
Containers & Packaging | 0.1 | |||
Distributors | 0.1 | |||
Diversified Consumer Services | 0.1 | |||
Gas Utilities | 0.1 | |||
Health Care Technology | 0.1 | |||
Leisure Equipment & Products | 0.1 | |||
Office Electronics | 0.1 | |||
Paper & Forest Products | 0.1 | |||
Professional Services | 0.1 | |||
Thrifts & Mortgage Finance | 0.1 | |||
Building Products | 0.0 | ‡ | ||
Construction Materials | 0.0 | ‡ | ||
Real Estate Management & Development | 0.0 | ‡ | ||
Short-Term Investments | 5.6 | |||
Investments Sold Short | –0.0 | ‡ | ||
Other Assets, Less Liabilities | –0.0 | ‡ | ||
100.0 | % | |||
See Portfolio of Investments beginning on page 10 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings as of October 31, 2011 (excluding short-term investments)
1. | ExxonMobil Corp. | |
2. | Apple, Inc. | |
3. | International Business Machines Corp. | |
4. | Chevron Corp. | |
5. | Microsoft Corp. | |
6. | General Electric Co. | |
7. | Johnson & Johnson | |
8. | Procter & Gamble Co. (The) | |
9. | AT&T, Inc. | |
10. | Coca-Cola Co. (The) |
8 MainStay S&P 500 Index Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Francis J. Ok and Lee Baker of Madison Square Investors LLC, the Fund’s Subadvisor.
How did MainStay S&P 500 Index Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay S&P 500 Index Fund returned 7.35% for Investor Class shares and 7.46% for Class A shares for the 12 months ended October 31, 2011. Over the same period, the Fund’s Class I shares returned 7.75%. Class I shares outperformed, Class A shares performed in line with, and Investor Class shares underperformed the 7.46% return of the average Lipper1 S&P 500 Index objective fund for the 12 months ended October 31, 2011. All share classes underperformed the 8.09% return of the S&P 500® Index2 for the 12 months ended October 31, 2011. Because the Fund incurs operating expenses that the Index does not, the Fund’s net performance will typically lag that of the Index. The S&P 500® Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
The Fund invests in futures contracts to provide an efficient means of maintaining liquidity while remaining fully invested in the market. Since these futures track the performance of the S&P 500® Index closely, they had a positive impact on the Fund’s overall performance.
During the reporting period, which S&P 500® industries had the highest total returns and which industries had the lowest total returns?
During the reporting period, the S&P 500® industries with the highest total returns were gas utilities, trading companies & distributors, and health care technology. The S&P 500® industries with the lowest total returns were airlines, office electronics, and thrifts & mortgage finance.
During the reporting period, which industries made
the strongest contributions to the Fund’s absolute performance and which industries made the weakest contributions?
the strongest contributions to the Fund’s absolute performance and which industries made the weakest contributions?
During the reporting period, the S&P 500® industries that made the strongest positive contributions to the Fund’s absolute performance were oil, gas & consumable fuels; computers & peripherals; and IT services. (Contributions take weightings and total returns into account.) Over the same period, the industries that made the weakest contributions to the Fund’s performance were diversified financial services, capital markets and communications equipment.
During the reporting period, which individual stocks in the S&P 500® Index had the highest total returns and which stocks had the lowest total returns?
During the reporting period, the S&P 500® Index stocks with the highest total returns were oil, gas & consumable fuels companies Cabot Oil & Gas, Tesoro and El Paso. Over the same period, the S&P 500® Index stocks with the lowest total returns were leisure equipment & products company Eastman Kodak and two manufacturers of semiconductors & semiconductor equipment, First Solar and MEMC Electronic Materials. Eastman Kodak was deleted from the S&P 500® Index in December 2010.
During the reporting period, which S&P 500® Index stocks made the strongest contributions to the Fund’s absolute performance and which stocks made the weakest contributions?
The S&P 500® Index stocks that made the strongest contributions to the Fund’s absolute performance were computers & peripherals company Apple; oil, gas & consumable fuels company ExxonMobil; and IT services company International Business Machines.
Over the same period, the S&P 500® Index stocks that made the weakest contributions to the Fund’s absolute performance were diversified financial services company Bank of America, computers & peripherals company Hewlett-Packard, and capital markets firm Goldman Sachs Group.
Were there any changes in the S&P 500® Index during the reporting period?
During the reporting period, there were 19 additions to and 19 deletions from the S&P 500® Index. In terms of Index weight, significant additions to the Index included management and technology consulting services company Accenture and health care equipment & supplies company Covidien. Significant deletions included biotechnology company Genzyme and diversified telecommunication services company Qwest Communications.
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the S&P 500® Index.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
2. See footnote on page 6 for more information on the S&P 500® Index.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
mainstayinvestments.com 9
Portfolio of Investments††† October 31, 2011
Shares | Value | |||||||
Common Stocks 94.4%† | ||||||||
Aerospace & Defense 2.5% | ||||||||
Boeing Co. (The) | 81,160 | $ | 5,339,516 | |||||
General Dynamics Corp. | 39,614 | 2,542,823 | ||||||
Goodrich Corp. | 13,694 | 1,679,295 | ||||||
Honeywell International, Inc. | 85,682 | 4,489,737 | ||||||
ITT Corp. | 20,288 | 925,133 | ||||||
L-3 Communications Holdings, Inc. | 11,543 | 782,385 | ||||||
Lockheed Martin Corp. | 30,135 | 2,287,246 | ||||||
Northrop Grumman Corp. | 30,447 | 1,758,314 | ||||||
Precision Castparts Corp. | 15,773 | 2,573,365 | ||||||
Raytheon Co. | 38,719 | 1,710,993 | ||||||
Rockwell Collins, Inc. | 16,821 | 939,116 | ||||||
Textron, Inc. | 30,378 | 589,941 | ||||||
United Technologies Corp. | 99,523 | 7,760,803 | ||||||
33,378,667 | ||||||||
Air Freight & Logistics 1.0% | ||||||||
C.H. Robinson Worldwide, Inc. | 18,052 | 1,253,350 | ||||||
Expeditors International of Washington, Inc. | 23,217 | 1,058,695 | ||||||
FedEx Corp. | 34,714 | 2,840,647 | ||||||
United Parcel Service, Inc. Class B | 107,406 | 7,544,198 | ||||||
12,696,890 | ||||||||
Airlines 0.1% | ||||||||
Southwest Airlines Co. | 88,116 | 753,392 | ||||||
Auto Components 0.2% | ||||||||
Goodyear Tire & Rubber Co. (The) (a) | 26,797 | 384,805 | ||||||
Johnson Controls, Inc. | 74,432 | 2,451,046 | ||||||
2,835,851 | ||||||||
Automobiles 0.4% | ||||||||
Ford Motor Co. (a) | 416,170 | 4,860,866 | ||||||
Harley-Davidson, Inc. | 25,901 | 1,007,549 | ||||||
5,868,415 | ||||||||
Beverages 2.5% | ||||||||
Beam, Inc. | 16,919 | 836,306 | ||||||
Brown-Forman Corp. Class B | 11,048 | 825,617 | ||||||
X Coca-Cola Co. (The) | 251,453 | 17,179,269 | ||||||
Coca-Cola Enterprises, Inc. | 34,948 | 937,305 | ||||||
Constellation Brands, Inc. Class A (a) | 19,091 | 386,020 | ||||||
Dr. Pepper Snapple Group, Inc. | 23,752 | 889,513 | ||||||
Molson Coors Brewing Co. Class B | 17,850 | 755,769 | ||||||
PepsiCo., Inc. | 173,320 | 10,910,494 | ||||||
32,720,293 | ||||||||
Biotechnology 1.2% | ||||||||
Amgen, Inc. | 101,210 | 5,796,297 | ||||||
Biogen Idec, Inc. (a) | 26,568 | 3,091,452 | ||||||
Celgene Corp. (a) | 50,242 | 3,257,189 | ||||||
Gilead Sciences, Inc. (a) | 84,482 | 3,519,520 | ||||||
15,664,458 | ||||||||
Building Products 0.0%‡ | ||||||||
Masco Corp. | 39,204 | 376,358 | ||||||
Capital Markets 1.9% | ||||||||
Ameriprise Financial, Inc. | 25,853 | 1,206,818 | ||||||
Bank of New York Mellon Corp. (The) | 134,974 | 2,872,247 | ||||||
BlackRock, Inc. | 10,982 | 1,732,850 | ||||||
Charles Schwab Corp. (The) | 118,018 | 1,449,261 | ||||||
E*TRADE Financial Corp. (a) | 27,802 | 301,652 | ||||||
Federated Investors, Inc. Class B | 10,165 | 198,624 | ||||||
Franklin Resources, Inc. | 15,944 | 1,700,109 | ||||||
Goldman Sachs Group, Inc. (The) | 55,390 | 6,067,974 | ||||||
Invesco, Ltd. | 49,408 | 991,619 | ||||||
Janus Capital Group, Inc. | 20,394 | 133,785 | ||||||
Legg Mason, Inc. | 14,358 | 394,845 | ||||||
Morgan Stanley | 162,596 | 2,868,193 | ||||||
Northern Trust Corp. | 26,380 | 1,067,599 | ||||||
State Street Corp. | 55,204 | 2,229,689 | ||||||
T. Rowe Price Group, Inc. | 28,085 | 1,484,011 | ||||||
24,699,276 | ||||||||
Chemicals 2.1% | ||||||||
Air Products & Chemicals, Inc. | 23,342 | 2,010,680 | ||||||
Airgas, Inc. | 7,446 | 513,402 | ||||||
CF Industries Holdings, Inc. | 7,859 | 1,275,280 | ||||||
Dow Chemical Co. (The) | 129,380 | 3,607,114 | ||||||
E.I. du Pont de Nemours & Co. | 102,125 | 4,909,149 | ||||||
Eastman Chemical Co. | 15,364 | 603,651 | ||||||
Ecolab, Inc. | 25,394 | 1,367,213 | ||||||
FMC Corp. | 7,849 | 619,208 | ||||||
International Flavors & Fragrances, Inc. | 8,850 | 535,956 | ||||||
Monsanto Co. | 58,568 | 4,260,822 | ||||||
Mosaic Co. (The) | 30,295 | 1,774,075 | ||||||
PPG Industries, Inc. | 17,258 | 1,491,264 | ||||||
Praxair, Inc. | 33,093 | 3,364,565 | ||||||
Sherwin-Williams Co. (The) | 9,660 | 798,979 | ||||||
Sigma-Aldrich Corp. | 13,365 | 875,140 | ||||||
28,006,498 | ||||||||
Commercial Banks 2.4% | ||||||||
BB&T Corp. | 76,355 | 1,782,126 | ||||||
Comerica, Inc. | 22,023 | 562,688 | ||||||
Fifth Third Bancorp | 100,791 | 1,210,500 | ||||||
First Horizon National Corp. | 28,921 | 202,158 | ||||||
Huntington Bancshares, Inc. | 94,459 | 489,298 | ||||||
KeyCorp | 104,265 | 736,111 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest holdings, as of October 31, 2011, excluding short-term investments. May be subject to change daily. |
The notes to the financial statements are an integral part of,
10 MainStay S&P 500 Index Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Commercial Banks (continued) | ||||||||
M&T Bank Corp. | 13,754 | $ | 1,046,817 | |||||
PNC Financial Services Group, Inc. | 57,629 | 3,095,253 | ||||||
Regions Financial Corp. | 137,950 | 542,143 | ||||||
SunTrust Banks, Inc. | 58,800 | 1,160,124 | ||||||
U.S. Bancorp | 210,395 | 5,384,008 | ||||||
Wells Fargo & Co. | 578,229 | 14,981,913 | ||||||
Zions Bancorp | 20,217 | 350,967 | ||||||
31,544,106 | ||||||||
Commercial Services & Supplies 0.4% | ||||||||
Avery Dennison Corp. | 11,617 | 309,012 | ||||||
Cintas Corp. | 12,196 | 364,539 | ||||||
Iron Mountain, Inc. | 22,254 | 688,316 | ||||||
Pitney Bowes, Inc. | 22,132 | 451,050 | ||||||
R.R. Donnelley & Sons Co. | 20,591 | 335,633 | ||||||
Republic Services, Inc. | 35,039 | 997,210 | ||||||
Stericycle, Inc. (a) | 9,429 | 788,076 | ||||||
Waste Management, Inc. | 51,691 | 1,702,185 | ||||||
5,636,021 | ||||||||
Communications Equipment 2.0% | ||||||||
Cisco Systems, Inc. | 602,381 | 11,162,120 | ||||||
F5 Networks, Inc. (a) | 8,837 | 918,606 | ||||||
Harris Corp. | 13,176 | 497,394 | ||||||
JDS Uniphase Corp. (a) | 25,003 | 300,036 | ||||||
Juniper Networks, Inc. (a) | 58,376 | 1,428,461 | ||||||
Motorola Mobility Holdings, Inc. (a) | 28,647 | 1,113,795 | ||||||
Motorola Solutions, Inc. | 33,072 | 1,551,408 | ||||||
QUALCOMM, Inc. | 183,960 | 9,492,336 | ||||||
Tellabs, Inc. | 39,889 | 172,719 | ||||||
26,636,875 | ||||||||
Computers & Peripherals 4.5% | ||||||||
X Apple, Inc. (a) | 101,529 | 41,096,908 | ||||||
Dell, Inc. (a) | 169,830 | 2,685,012 | ||||||
EMC Corp. (a) | 226,139 | 5,542,667 | ||||||
Hewlett-Packard Co. | 227,129 | 6,043,903 | ||||||
Lexmark International, Inc. Class A (a) | 8,689 | 275,441 | ||||||
NetApp, Inc. (a) | 40,359 | 1,653,105 | ||||||
SanDisk Corp. (a) | 26,204 | 1,327,757 | ||||||
Western Digital Corp. (a) | 25,530 | 680,119 | ||||||
59,304,912 | ||||||||
Construction & Engineering 0.2% | ||||||||
Fluor Corp. | 19,036 | 1,082,197 | ||||||
Jacobs Engineering Group, Inc. (a) | 13,958 | 541,570 | ||||||
Quanta Services, Inc. (a) | 23,254 | 485,776 | ||||||
2,109,543 | ||||||||
Construction Materials 0.0%‡ | ||||||||
Vulcan Materials Co. | 14,163 | 443,160 | ||||||
Consumer Finance 0.8% | ||||||||
American Express Co. | 113,742 | 5,757,620 | ||||||
Capital One Financial Corp. | 50,314 | 2,297,337 | ||||||
Discover Financial Services | 59,755 | 1,407,828 | ||||||
SLM Corp. | 56,365 | 770,510 | ||||||
10,233,295 | ||||||||
Containers & Packaging 0.1% | ||||||||
Ball Corp. | 17,915 | 619,322 | ||||||
Bemis Co., Inc. | 11,319 | 318,177 | ||||||
Owens-Illinois, Inc. (a) | 17,952 | 360,476 | ||||||
Sealed Air Corp. | 17,686 | 314,811 | ||||||
1,612,786 | ||||||||
Distributors 0.1% | ||||||||
Genuine Parts Co. | 17,167 | 985,901 | ||||||
Diversified Consumer Services 0.1% | ||||||||
Apollo Group, Inc. Class A (a) | 12,732 | 602,860 | ||||||
DeVry, Inc. | 6,755 | 254,528 | ||||||
H&R Block, Inc. | 33,513 | 512,414 | ||||||
1,369,802 | ||||||||
Diversified Financial Services 2.9% | ||||||||
Bank of America Corp. | 1,109,926 | 7,580,795 | ||||||
Citigroup, Inc. | 319,570 | 10,095,216 | ||||||
CME Group, Inc. | 7,322 | 2,017,650 | ||||||
IntercontinentalExchange, Inc. (a) | 8,046 | 1,045,015 | ||||||
JPMorgan Chase & Co. | 426,994 | 14,842,311 | ||||||
Leucadia National Corp. | 21,709 | 582,452 | ||||||
Moody’s Corp. | 22,050 | 782,555 | ||||||
NASDAQ OMX Group, Inc. (The) (a) | 13,945 | 349,322 | ||||||
NYSE Euronext | 28,664 | 761,603 | ||||||
38,056,919 | ||||||||
Diversified Telecommunication Services 2.6% | ||||||||
X AT&T, Inc. | 648,985 | 19,021,750 | ||||||
CenturyLink, Inc. | 67,502 | 2,380,121 | ||||||
Frontier Communications Corp. | 108,994 | 682,302 | ||||||
Verizon Communications, Inc. | 309,996 | 11,463,652 | ||||||
Windstream Corp. | 55,828 | 679,427 | ||||||
34,227,252 | ||||||||
Electric Utilities 1.9% | ||||||||
American Electric Power Co., Inc. | 52,812 | 2,074,455 | ||||||
Duke Energy Corp. | 145,876 | 2,978,788 | ||||||
Edison International | 35,697 | 1,449,298 | ||||||
Entergy Corp. | 19,364 | 1,339,408 | ||||||
Exelon Corp. | 72,578 | 3,221,738 | ||||||
FirstEnergy Corp. | 45,797 | 2,059,033 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Electric Utilities (continued) | ||||||||
NextEra Energy, Inc. | 46,248 | $ | 2,608,387 | |||||
Northeast Utilities | 19,368 | 669,552 | ||||||
Pepco Holdings, Inc. | 24,780 | 490,644 | ||||||
Pinnacle West Capital Corp. | 11,954 | 544,863 | ||||||
PPL Corp. | 63,286 | 1,858,710 | ||||||
Progress Energy, Inc. | 32,255 | 1,680,486 | ||||||
Southern Co. | 93,930 | 4,057,776 | ||||||
25,033,138 | ||||||||
Electrical Equipment 0.4% | ||||||||
Emerson Electric Co. | 81,560 | 3,924,667 | ||||||
Rockwell Automation, Inc. | 15,693 | 1,061,631 | ||||||
Roper Industries, Inc. | 10,515 | 852,767 | ||||||
5,839,065 | ||||||||
Electronic Equipment & Instruments 0.5% | ||||||||
Amphenol Corp. Class A | 18,611 | 883,837 | ||||||
Corning, Inc. | 172,059 | 2,458,723 | ||||||
FLIR Systems, Inc. | 17,487 | 459,908 | ||||||
Jabil Circuit, Inc. | 19,943 | 410,028 | ||||||
Molex, Inc. | 14,970 | 369,609 | ||||||
TE Connectivity, Ltd. | 47,441 | 1,686,528 | ||||||
6,268,633 | ||||||||
Energy Equipment & Services 2.0% | ||||||||
Baker Hughes, Inc. | 47,778 | 2,770,646 | ||||||
Cameron International Corp. (a) | 26,834 | 1,318,623 | ||||||
Diamond Offshore Drilling, Inc. | 7,604 | 498,366 | ||||||
FMC Technologies, Inc. (a) | 26,301 | 1,178,811 | ||||||
Halliburton Co. | 100,722 | 3,762,974 | ||||||
Helmerich & Payne, Inc. | 11,729 | 623,748 | ||||||
Nabors Industries, Ltd. (a) | 31,454 | 576,552 | ||||||
National-Oilwell Varco, Inc. | 46,391 | 3,309,070 | ||||||
Noble Corp. (a) | 27,646 | 993,597 | ||||||
Rowan Cos., Inc. (a) | 13,953 | 481,239 | ||||||
Schlumberger, Ltd. | 147,779 | 10,857,323 | ||||||
26,370,949 | ||||||||
Food & Staples Retailing 2.2% | ||||||||
Costco Wholesale Corp. | 47,952 | 3,992,004 | ||||||
CVS Caremark Corp. | 147,281 | 5,346,300 | ||||||
Kroger Co. (The) | 66,286 | 1,536,510 | ||||||
Safeway, Inc. | 38,318 | 742,220 | ||||||
SUPERVALU, Inc. | 23,274 | 186,657 | ||||||
Sysco Corp. | 64,892 | 1,798,806 | ||||||
Wal-Mart Stores, Inc. | 192,496 | 10,918,373 | ||||||
Walgreen Co. | 99,159 | 3,292,079 | ||||||
Whole Foods Market, Inc. | 17,271 | 1,245,585 | ||||||
29,058,534 | ||||||||
Food Products 1.8% | ||||||||
Archer-Daniels-Midland Co. | 74,021 | 2,142,168 | ||||||
Campbell Soup Co. | 19,689 | 654,659 | ||||||
ConAgra Foods, Inc. | 45,427 | 1,150,666 | ||||||
Dean Foods Co. (a) | 20,147 | 195,829 | ||||||
General Mills, Inc. | 70,820 | 2,728,694 | ||||||
H.J. Heinz Co. | 35,150 | 1,878,416 | ||||||
Hershey Co. (The) | 16,943 | 969,648 | ||||||
Hormel Foods Corp. | 15,212 | 448,298 | ||||||
J.M. Smucker Co. (The) | 12,468 | 960,285 | ||||||
Kellogg Co. | 27,348 | 1,482,535 | ||||||
Kraft Foods, Inc. Class A | 193,417 | 6,804,410 | ||||||
McCormick & Co., Inc. | 14,479 | 703,100 | ||||||
Mead Johnson Nutrition Co. | 22,328 | 1,604,267 | ||||||
Sara Lee Corp. | 64,470 | 1,147,566 | ||||||
Tyson Foods, Inc. Class A | 32,462 | 626,517 | ||||||
23,497,058 | ||||||||
Gas Utilities 0.1% | ||||||||
Nicor, Inc. | 4,981 | 280,181 | ||||||
ONEOK, Inc. | 11,333 | 861,875 | ||||||
1,142,056 | ||||||||
Health Care Equipment & Supplies 1.7% | ||||||||
Baxter International, Inc. | 62,237 | 3,421,790 | ||||||
Becton, Dickinson & Co. | 23,815 | 1,863,048 | ||||||
Boston Scientific Corp. (a) | 167,603 | 987,182 | ||||||
C.R. Bard, Inc. | 9,491 | 815,751 | ||||||
CareFusion Corp. (a) | 24,494 | 627,046 | ||||||
Covidien PLC | 54,036 | 2,541,853 | ||||||
DENTSPLY International, Inc. | 15,473 | 571,882 | ||||||
Edwards Lifesciences Corp. (a) | 12,597 | 950,066 | ||||||
Intuitive Surgical, Inc. (a) | 4,281 | 1,857,355 | ||||||
Medtronic, Inc. | 115,660 | 4,018,028 | ||||||
St. Jude Medical, Inc. | 36,090 | 1,407,510 | ||||||
Stryker Corp. | 36,160 | 1,732,426 | ||||||
Varian Medical Systems, Inc. (a) | 12,835 | 753,671 | ||||||
Zimmer Holdings, Inc. (a) | 20,858 | 1,097,757 | ||||||
22,645,365 | ||||||||
Health Care Providers & Services 2.0% | ||||||||
Aetna, Inc. | 40,830 | 1,623,401 | ||||||
AmerisourceBergen Corp. | 29,479 | 1,202,743 | ||||||
Cardinal Health, Inc. | 37,733 | 1,670,440 | ||||||
CIGNA Corp. | 29,582 | 1,311,666 | ||||||
Coventry Health Care, Inc. (a) | 16,269 | 517,517 | ||||||
DaVita, Inc. (a) | 10,223 | 715,610 | ||||||
Express Scripts, Inc. (a) | 53,461 | 2,444,772 | ||||||
Humana, Inc. | 18,273 | 1,551,195 | ||||||
Laboratory Corp. of America Holdings (a) | 11,095 | 930,316 | ||||||
McKesson Corp. | 26,973 | 2,199,648 | ||||||
Medco Health Solutions, Inc. (a) | 42,222 | 2,316,299 | ||||||
Patterson Cos., Inc. | 10,246 | 322,442 |
The notes to the financial statements are an integral part of,
12 MainStay S&P 500 Index Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Health Care Providers & Services (continued) | ||||||||
Quest Diagnostics, Inc. | 17,328 | $ | 966,902 | |||||
Tenet Healthcare Corp. (a) | 51,777 | 244,905 | ||||||
UnitedHealth Group, Inc. | 117,854 | 5,655,813 | ||||||
WellPoint, Inc. | 39,497 | 2,721,343 | ||||||
26,395,012 | ||||||||
Health Care Technology 0.1% | ||||||||
Cerner Corp. (a) | 15,924 | 1,010,059 | ||||||
Hotels, Restaurants & Leisure 1.9% | ||||||||
Carnival Corp. | 50,620 | 1,782,330 | ||||||
Chipotle Mexican Grill, Inc. Class A (a) | 3,433 | 1,153,900 | ||||||
Darden Restaurants, Inc. | 14,740 | 705,751 | ||||||
International Game Technology | 32,661 | 574,507 | ||||||
Marriott International, Inc. Class A | 29,362 | 924,903 | ||||||
McDonald’s Corp. | 112,996 | 10,491,679 | ||||||
Starbucks Corp. | 81,714 | 3,459,771 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 21,047 | 1,054,665 | ||||||
Wyndham Worldwide Corp. | 17,984 | 605,521 | ||||||
Wynn Resorts, Ltd. | 8,757 | 1,162,930 | ||||||
Yum! Brands, Inc. | 50,863 | 2,724,731 | ||||||
24,640,688 | ||||||||
Household Durables 0.2% | ||||||||
D.R. Horton, Inc. | 30,402 | 338,374 | ||||||
Harman International Industries, Inc. | 7,650 | 330,174 | ||||||
Leggett & Platt, Inc. | 15,524 | 339,976 | ||||||
Lennar Corp. Class A | 17,571 | 290,624 | ||||||
Newell Rubbermaid, Inc. | 31,869 | 471,661 | ||||||
Pulte Group, Inc. (a) | 36,946 | 191,380 | ||||||
Whirlpool Corp. | 8,370 | 425,280 | ||||||
2,387,469 | ||||||||
Household Products 2.1% | ||||||||
Clorox Co. (The) | 14,395 | 963,601 | ||||||
Colgate-Palmolive Co. | 53,274 | 4,814,372 | ||||||
Kimberly-Clark Corp. | 42,910 | 2,991,256 | ||||||
X Procter & Gamble Co. (The) | 300,922 | 19,255,999 | ||||||
28,025,228 | ||||||||
Independent Power Producers & Energy Traders 0.2% | ||||||||
AES Corp. (The) (a) | 72,020 | 808,064 | ||||||
Constellation Energy Group, Inc. | 22,061 | 875,822 | ||||||
NRG Energy, Inc. (a) | 26,435 | 566,238 | ||||||
2,250,124 | ||||||||
Industrial Conglomerates 2.3% | ||||||||
3M Co. | 77,698 | 6,139,696 | ||||||
Danaher Corp. | 62,318 | 3,013,075 | ||||||
X General Electric Co. | 1,160,933 | 19,399,191 | ||||||
Tyco International, Ltd. | 50,857 | 2,316,536 | ||||||
30,868,498 | ||||||||
Insurance 3.5% | ||||||||
ACE, Ltd. | 37,022 | 2,671,137 | ||||||
Aflac, Inc. | 51,177 | 2,307,571 | ||||||
Allstate Corp. (The) | 56,568 | 1,490,001 | ||||||
American International Group, Inc. (a) | 47,825 | 1,180,799 | ||||||
AON Corp. | 35,782 | 1,668,157 | ||||||
Assurant, Inc. | 10,353 | 399,005 | ||||||
Berkshire Hathaway, Inc. Class B (a) | 192,595 | 14,995,447 | ||||||
Chubb Corp. (The) | 31,307 | 2,099,134 | ||||||
Cincinnati Financial Corp. | 17,882 | 517,505 | ||||||
Genworth Financial, Inc. Class A (a) | 53,654 | 342,313 | ||||||
Hartford Financial Services Group, Inc. (The) | 48,814 | 939,669 | ||||||
Lincoln National Corp. | 33,743 | 642,804 | ||||||
Loews Corp. | 34,077 | 1,352,857 | ||||||
Marsh & McLennan Cos., Inc. | 59,314 | 1,816,195 | ||||||
MetLife, Inc. | 115,808 | 4,071,809 | ||||||
Principal Financial Group, Inc. | 34,315 | 884,641 | ||||||
Progressive Corp. (The) | 69,941 | 1,329,578 | ||||||
Prudential Financial, Inc. | 53,225 | 2,884,795 | ||||||
Torchmark Corp. | 11,493 | 470,408 | ||||||
Travelers Cos., Inc. (The) | 45,855 | 2,675,639 | ||||||
Unum Group | 33,246 | 792,585 | ||||||
XL Group PLC | 35,955 | 781,662 | ||||||
46,313,711 | ||||||||
Internet & Catalog Retail 0.9% | ||||||||
Amazon.com, Inc. (a) | 39,773 | 8,491,933 | ||||||
Expedia, Inc. | 21,323 | 559,942 | ||||||
Netflix, Inc. (a) | 5,757 | 472,534 | ||||||
Priceline.com, Inc. (a) | 5,451 | 2,767,582 | ||||||
12,291,991 | ||||||||
Internet Software & Services 1.8% | ||||||||
Akamai Technologies, Inc. (a) | 20,203 | 544,269 | ||||||
eBay, Inc. (a) | 125,628 | 3,998,739 | ||||||
Google, Inc. Class A (a) | 27,581 | 16,345,604 | ||||||
Monster Worldwide, Inc. (a) | 14,126 | 130,383 | ||||||
VeriSign, Inc. | 18,223 | 584,776 | ||||||
Yahoo!, Inc. (a) | 138,265 | 2,162,465 | ||||||
23,766,236 | ||||||||
IT Services 3.7% | ||||||||
Accenture PLC Class A | 70,577 | 4,252,970 | ||||||
Automatic Data Processing, Inc. | 53,635 | 2,806,720 | ||||||
Cognizant Technology Solutions Corp. Class A (a) | 33,251 | 2,419,010 | ||||||
Computer Sciences Corp. | 16,960 | 533,562 | ||||||
Fidelity National Information Services, Inc. | 27,151 | 710,813 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
IT Services (continued) | ||||||||
Fiserv, Inc. (a) | 15,496 | $ | 912,249 | |||||
X International Business Machines Corp. | 130,789 | 24,147,573 | ||||||
MasterCard, Inc. Class A | 11,690 | 4,059,236 | ||||||
Paychex, Inc. | 35,288 | 1,028,292 | ||||||
SAIC, Inc. (a) | 30,258 | 376,107 | ||||||
Teradata Corp. (a) | 18,429 | 1,099,474 | ||||||
Total System Services, Inc. | 17,949 | 357,006 | ||||||
Visa, Inc. Class A | 56,018 | 5,224,239 | ||||||
Western Union Co. (The) | 68,750 | 1,201,062 | ||||||
49,128,313 | ||||||||
Leisure Equipment & Products 0.1% | ||||||||
Hasbro, Inc. | 13,231 | 503,572 | ||||||
Mattel, Inc. | 37,539 | 1,060,101 | ||||||
1,563,673 | ||||||||
Life Sciences Tools & Services 0.4% | ||||||||
Agilent Technologies, Inc. (a) | 38,023 | 1,409,513 | ||||||
Life Technologies Corp. (a) | 19,762 | 803,720 | ||||||
PerkinElmer, Inc. | 12,402 | 256,349 | ||||||
Thermo Fisher Scientific, Inc. (a) | 41,829 | 2,102,744 | ||||||
Waters Corp. (a) | 9,999 | 801,120 | ||||||
5,373,446 | ||||||||
Machinery 1.9% | ||||||||
Caterpillar, Inc. | 70,755 | 6,683,517 | ||||||
Cummins, Inc. | 21,323 | 2,120,146 | ||||||
Deere & Co. | 45,332 | 3,440,699 | ||||||
Dover Corp. | 20,379 | 1,131,646 | ||||||
Eaton Corp. | 37,353 | 1,674,162 | ||||||
Flowserve Corp. | 6,102 | 565,594 | ||||||
Illinois Tool Works, Inc. | 53,830 | 2,617,753 | ||||||
Ingersoll-Rand PLC | 36,257 | 1,128,680 | ||||||
Joy Global, Inc. | 11,514 | 1,004,021 | ||||||
PACCAR, Inc. | 40,023 | 1,730,595 | ||||||
Pall Corp. | 12,742 | 652,008 | ||||||
Parker Hannifin Corp. | 16,982 | 1,384,882 | ||||||
Snap-On, Inc. | 6,379 | 342,361 | ||||||
Stanley Black & Decker, Inc. | 18,445 | 1,177,713 | ||||||
25,653,777 | ||||||||
Media 2.9% | ||||||||
Cablevision Systems Corp. Class A | 24,674 | 357,033 | ||||||
CBS Corp. Class B | 73,375 | 1,893,809 | ||||||
Comcast Corp. Class A | 301,084 | 7,060,420 | ||||||
DIRECTV Class A (a) | 80,858 | 3,675,805 | ||||||
Discovery Communications, Inc. Class A (a) | 29,961 | 1,302,105 | ||||||
Gannett Co., Inc. | 26,414 | 308,780 | ||||||
Interpublic Group of Cos., Inc. (The) | 52,368 | 496,448 | ||||||
McGraw-Hill Cos., Inc. (The) | 32,985 | 1,401,862 | ||||||
News Corp. Class A | 250,293 | 4,385,133 | ||||||
Omnicom Group, Inc. | 30,596 | 1,360,910 | ||||||
Scripps Networks Interactive Class A | 10,809 | 459,166 | ||||||
Time Warner Cable, Inc. | 35,613 | 2,268,192 | ||||||
Time Warner, Inc. | 114,429 | 4,003,871 | ||||||
Viacom, Inc. Class B | 62,927 | 2,759,349 | ||||||
Walt Disney Co. (The) | 203,244 | 7,089,151 | ||||||
Washington Post Co. Class B | 547 | 186,067 | ||||||
39,008,101 | ||||||||
Metals & Mining 1.0% | ||||||||
AK Steel Holding Corp. | 12,061 | 100,468 | ||||||
Alcoa, Inc. | 116,554 | 1,254,121 | ||||||
Allegheny Technologies, Inc. | 11,651 | 540,606 | ||||||
Cliffs Natural Resources, Inc. | 15,990 | 1,090,838 | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 103,795 | 4,178,787 | ||||||
Newmont Mining Corp. | 54,120 | 3,616,840 | ||||||
Nucor Corp. | 34,652 | 1,309,152 | ||||||
Titanium Metals Corp. | 9,121 | 152,777 | ||||||
United States Steel Corp. | 15,758 | 399,623 | ||||||
12,643,212 | ||||||||
Multi-Utilities 1.3% | ||||||||
Ameren Corp. | 26,465 | 843,704 | ||||||
CenterPoint Energy, Inc. | 46,663 | 972,457 | ||||||
CMS Energy Corp. | 27,577 | 574,153 | ||||||
Consolidated Edison, Inc. | 32,082 | 1,856,585 | ||||||
Dominion Resources, Inc. | 62,333 | 3,215,759 | ||||||
DTE Energy Co. | 18,544 | 966,328 | ||||||
Integrys Energy Group, Inc. | 8,524 | 451,005 | ||||||
NiSource, Inc. | 30,733 | 678,892 | ||||||
PG&E Corp. | 44,065 | 1,890,388 | ||||||
Public Service Enterprise Group, Inc. | 55,408 | 1,867,250 | ||||||
SCANA Corp. | 12,564 | 531,206 | ||||||
Sempra Energy | 26,235 | 1,409,607 | ||||||
TECO Energy, Inc. | 23,611 | 438,456 | ||||||
Wisconsin Energy Corp. | 25,582 | 829,624 | ||||||
Xcel Energy, Inc. | 53,063 | 1,371,679 | ||||||
17,897,093 | ||||||||
Multiline Retail 0.7% | ||||||||
Big Lots, Inc. (a) | 7,172 | 270,313 | ||||||
Family Dollar Stores, Inc. | 13,175 | 772,450 | ||||||
J.C. Penney Co., Inc. | 15,668 | 502,629 | ||||||
Kohl’s Corp. | 30,780 | 1,631,648 | ||||||
Macy’s, Inc. | 46,779 | 1,428,163 | ||||||
Nordstrom, Inc. | 17,936 | 909,176 | ||||||
Sears Holdings Corp. (a) | 4,220 | 329,919 | ||||||
Target Corp. | 73,940 | 4,048,215 | ||||||
9,892,513 | ||||||||
The notes to the financial statements are an integral part of,
14 MainStay S&P 500 Index Fund | and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Office Electronics 0.1% | ||||||||
Xerox Corp. | 153,680 | $ | 1,257,102 | |||||
Oil, Gas & Consumable Fuels 9.6% | ||||||||
Alpha Natural Resources, Inc. (a) | 24,807 | 596,360 | ||||||
Anadarko Petroleum Corp. | 54,517 | 4,279,584 | ||||||
Apache Corp. | 42,050 | 4,189,442 | ||||||
Cabot Oil & Gas Corp. | 11,439 | 889,039 | ||||||
Chesapeake Energy Corp. | 72,354 | 2,034,594 | ||||||
X Chevron Corp. | 219,357 | 23,043,453 | ||||||
ConocoPhillips | 150,361 | 10,472,644 | ||||||
CONSOL Energy, Inc. | 24,820 | 1,061,303 | ||||||
Denbury Resources, Inc. (a) | 44,026 | 691,208 | ||||||
Devon Energy Corp. | 45,605 | 2,962,045 | ||||||
El Paso Corp. | 84,364 | 2,109,944 | ||||||
EOG Resources, Inc. | 29,413 | 2,630,405 | ||||||
EQT Corp. | 16,369 | 1,039,432 | ||||||
X ExxonMobil Corp. | 532,480 | 41,581,363 | ||||||
Hess Corp. | 33,124 | 2,072,237 | ||||||
Marathon Oil Corp. | 78,176 | 2,034,921 | ||||||
Marathon Petroleum Corp. | 39,048 | 1,401,823 | ||||||
Murphy Oil Corp. | 21,197 | 1,173,678 | ||||||
Newfield Exploration Co. (a) | 14,491 | 583,408 | ||||||
Noble Energy, Inc. | 19,325 | 1,726,496 | ||||||
Occidental Petroleum Corp. | 89,005 | 8,272,125 | ||||||
Peabody Energy Corp. | 29,649 | 1,285,877 | ||||||
Pioneer Natural Resources Co. | 12,797 | 1,073,668 | ||||||
QEP Resources, Inc. | 19,391 | 689,350 | ||||||
Range Resources Corp. | 17,633 | 1,213,856 | ||||||
Southwestern Energy Co. (a) | 38,117 | 1,602,439 | ||||||
Spectra Energy Corp. | 71,218 | 2,038,971 | ||||||
Sunoco, Inc. | 11,835 | 440,617 | ||||||
Tesoro Corp. (a) | 15,762 | 408,866 | ||||||
Valero Energy Corp. | 62,684 | 1,542,026 | ||||||
Williams Cos., Inc. | 64,505 | 1,942,246 | ||||||
127,083,420 | ||||||||
Paper & Forest Products 0.1% | ||||||||
International Paper Co. | 47,878 | 1,326,221 | ||||||
MeadWestvaco Corp. | 18,689 | 521,610 | ||||||
1,847,831 | ||||||||
Personal Products 0.2% | ||||||||
Avon Products, Inc. | 47,165 | 862,176 | ||||||
Estee Lauder Cos., Inc. (The) Class A | 12,387 | 1,219,500 | ||||||
2,081,676 | ||||||||
Pharmaceuticals 5.5% | ||||||||
Abbott Laboratories | 170,475 | 9,183,488 | ||||||
Allergan, Inc. | 33,678 | 2,832,993 | ||||||
Bristol-Myers Squibb Co. | 186,786 | 5,900,570 | ||||||
Eli Lilly & Co. | 111,563 | 4,145,681 | ||||||
Forest Laboratories, Inc. (a) | 30,055 | 940,721 | ||||||
Hospira, Inc. (a) | 18,042 | 567,421 | ||||||
X Johnson & Johnson | 300,115 | 19,324,405 | ||||||
Merck & Co., Inc. | 337,393 | 11,640,058 | ||||||
Mylan, Inc. (a) | 46,673 | 913,391 | ||||||
Pfizer, Inc. | 854,476 | 16,457,208 | ||||||
Watson Pharmaceuticals, Inc. (a) | 13,772 | 924,928 | ||||||
72,830,864 | ||||||||
Professional Services 0.1% | ||||||||
Dun & Bradstreet Corp. | 5,380 | 359,707 | ||||||
Equifax, Inc. | 13,411 | 471,397 | ||||||
Robert Half International, Inc. | 15,849 | 418,889 | ||||||
1,249,993 | ||||||||
Real Estate Investment Trusts 1.7% | ||||||||
Apartment Investment & Management Co. Class A | 13,232 | 326,433 | ||||||
AvalonBay Communities, Inc. | 10,304 | 1,377,542 | ||||||
Boston Properties, Inc. | 16,085 | 1,592,254 | ||||||
Equity Residential | 32,476 | 1,905,692 | ||||||
HCP, Inc. | 44,597 | 1,777,191 | ||||||
Health Care REIT, Inc. | 19,438 | 1,024,188 | ||||||
Host Hotels & Resorts, Inc. | 77,325 | 1,103,428 | ||||||
Kimco Realty Corp. | 44,594 | 779,057 | ||||||
Plum Creek Timber Co., Inc. | 17,742 | 668,164 | ||||||
ProLogis, Inc. | 50,283 | 1,496,422 | ||||||
Public Storage | 15,515 | 2,002,211 | ||||||
Simon Property Group, Inc. | 32,153 | 4,129,731 | ||||||
Ventas, Inc. | 31,543 | 1,754,106 | ||||||
Vornado Realty Trust | 20,198 | 1,672,596 | ||||||
Weyerhaeuser Co. | 59,000 | 1,060,820 | ||||||
22,669,835 | ||||||||
Real Estate Management & Development 0.0%‡ | ||||||||
CBRE Group, Inc. (a) | 35,583 | 632,666 | ||||||
Road & Rail 0.8% | ||||||||
CSX Corp. | 119,961 | 2,664,334 | ||||||
Norfolk Southern Corp. | 38,085 | 2,817,909 | ||||||
Ryder System, Inc. | 5,609 | 285,722 | ||||||
Union Pacific Corp. | 53,451 | 5,322,116 | ||||||
11,090,081 | ||||||||
Semiconductors & Semiconductor Equipment 2.3% | ||||||||
Advanced Micro Devices, Inc. (a) | 63,608 | 370,835 | ||||||
Altera Corp. | 35,477 | 1,345,288 | ||||||
Analog Devices, Inc. | 32,784 | 1,198,911 | ||||||
Applied Materials, Inc. | 144,324 | 1,778,072 | ||||||
Broadcom Corp. Class A (a) | 52,715 | 1,902,484 | ||||||
First Solar, Inc. (a) | 6,425 | 319,772 |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Portfolio of Investments††† October 31, 2011 (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Semiconductors & Semiconductor Equipment (continued) | ||||||||
Intel Corp. | 575,087 | $ | 14,112,635 | |||||
KLA-Tencor Corp. | 18,288 | 861,182 | ||||||
Linear Technology Corp. | 24,975 | 806,942 | ||||||
LSI Corp. (a) | 62,662 | 391,637 | ||||||
MEMC Electronic Materials, Inc. (a) | 25,281 | 151,433 | ||||||
Microchip Technology, Inc. | 20,887 | 755,274 | ||||||
Micron Technology, Inc. (a) | 110,037 | 615,107 | ||||||
Novellus Systems, Inc. (a) | 7,614 | 263,064 | ||||||
NVIDIA Corp. (a) | 66,110 | 978,428 | ||||||
Teradyne, Inc. (a) | 20,429 | 292,543 | ||||||
Texas Instruments, Inc. | 126,520 | 3,887,960 | ||||||
Xilinx, Inc. | 29,025 | 971,176 | ||||||
31,002,743 | ||||||||
Software 3.7% | ||||||||
Adobe Systems, Inc. (a) | 54,104 | 1,591,199 | ||||||
Autodesk, Inc. (a) | 25,070 | 867,422 | ||||||
BMC Software, Inc. (a) | 19,227 | 668,331 | ||||||
CA, Inc. | 41,481 | 898,478 | ||||||
Citrix Systems, Inc. (a) | 20,611 | 1,501,099 | ||||||
Compuware Corp. (a) | 23,923 | 202,149 | ||||||
Electronic Arts, Inc. (a) | 36,610 | 854,844 | ||||||
Intuit, Inc. | 33,285 | 1,786,406 | ||||||
X Microsoft Corp. | 816,631 | 21,746,884 | ||||||
Oracle Corp. | 432,708 | 14,179,841 | ||||||
Red Hat, Inc. (a) | 21,151 | 1,050,147 | ||||||
Salesforce.com, Inc. (a) | 14,843 | 1,976,642 | ||||||
Symantec Corp. (a) | 82,099 | 1,396,504 | ||||||
48,719,946 | ||||||||
Specialty Retail 1.8% | ||||||||
Abercrombie & Fitch Co. Class A | 9,519 | 708,214 | ||||||
AutoNation, Inc. (a) | 5,413 | 210,782 | ||||||
AutoZone, Inc. (a) | 3,188 | 1,031,605 | ||||||
Bed Bath & Beyond, Inc. (a) | 26,791 | 1,656,755 | ||||||
Best Buy Co., Inc. | 33,168 | 869,997 | ||||||
Carmax, Inc. (a) | 24,779 | 744,857 | ||||||
GameStop Corp. Class A (a) | 15,255 | 390,070 | ||||||
Gap, Inc. (The) | 38,008 | 718,351 | ||||||
Home Depot, Inc. (The) | 171,331 | 6,133,650 | ||||||
Limited Brands, Inc. | 27,130 | 1,158,722 | ||||||
Lowe’s Cos., Inc. | 138,075 | 2,902,336 | ||||||
O’Reilly Automotive, Inc. (a) | 14,891 | 1,132,461 | ||||||
Ross Stores, Inc. | 12,658 | 1,110,486 | ||||||
Staples, Inc. | 77,685 | 1,162,168 | ||||||
Tiffany & Co. | 13,939 | 1,111,356 | ||||||
TJX Cos., Inc. | 41,727 | 2,458,972 | ||||||
Urban Outfitters, Inc. (a) | 12,974 | 353,542 | ||||||
23,854,324 | ||||||||
Textiles, Apparel & Luxury Goods 0.6% | ||||||||
Coach, Inc. | 31,644 | 2,059,075 | ||||||
NIKE, Inc. Class B | 41,600 | 4,008,160 | ||||||
Ralph Lauren Corp. | 7,089 | 1,125,662 | ||||||
VF Corp. | 9,488 | 1,311,432 | ||||||
8,504,329 | ||||||||
Thrifts & Mortgage Finance 0.1% | ||||||||
Hudson City Bancorp, Inc. | 57,696 | 360,600 | ||||||
People’s United Financial, Inc. | 41,193 | 525,211 | ||||||
885,811 | ||||||||
Tobacco 1.7% | ||||||||
Altria Group, Inc. | 226,829 | 6,249,139 | ||||||
Lorillard, Inc. | 15,160 | 1,677,606 | ||||||
Philip Morris International, Inc. | 192,367 | 13,440,682 | ||||||
Reynolds American, Inc. | 37,036 | 1,432,552 | ||||||
22,799,979 | ||||||||
Trading Companies & Distributors 0.2% | ||||||||
Fastenal Co. | 32,317 | 1,230,955 | ||||||
W.W. Grainger, Inc. | 6,656 | 1,140,239 | ||||||
2,371,194 | ||||||||
Wireless Telecommunication Services 0.3% | ||||||||
American Tower Corp. Class A (a) | 43,350 | 2,388,585 | ||||||
MetroPCS Communications, Inc. (a) | 32,127 | 273,079 | ||||||
Sprint Nextel Corp. (a) | 327,807 | 842,464 | ||||||
3,504,128 | ||||||||
Total Common Stocks (Cost $868,307,310) | 1,250,510,534 | (b) | ||||||
Principal | ||||||||
Amount | ||||||||
Short-Term Investments 5.6% | ||||||||
Repurchase Agreement 0.0%‡ | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $66,920 (Collateralized by a Federal Home Loan Bank Corp. security with a rate of 0.90% and a maturity date of 9/12/14, with a Principal Amount of $70,000 and a Market Value of $70,141) | $ | 66,920 | 66,920 | |||||
Total Repurchase Agreement (Cost $66,920) | 66,920 | |||||||
The notes to the financial statements are an integral part of,
16 MainStay S&P 500 Index Fund | and should be read in conjunction with, the financial statements. |
Principal | ||||||||
Amount | Value | |||||||
Short-Term Investments (continued) | ||||||||
U.S. Government 5.6% | ||||||||
United States Treasury Bills 0.011%, due 1/26/12 (c)(d) | $ | 5,000,000 | $ | 4,999,874 | ||||
0.015%, due 1/12/12 (c)(d) | 69,100,000 | 69,097,927 | ||||||
Total U.S. Government (Cost $74,099,530) | 74,097,801 | |||||||
Total Short-Term Investments (Cost $74,166,450) | 74,164,721 | |||||||
Total Investments, Before Investments Sold Short (Cost $942,473,760) (g) | 100.0 | % | 1,324,675,255 | |||||
Shares | ||||||||
Investments Sold Short (0.0%)‡(e) | ||||||||
Common Stocks Sold Short (0.0%)‡ | ||||||||
Aerospace & Defense (0.0%)‡ | ||||||||
Exelis, Inc. | (7,304 | ) | (82,535 | ) | ||||
ITT Corp. | (3,652 | ) | (64,020 | ) | ||||
Total Investments Sold Short (Proceeds $136,599) | (0.0 | )%‡ | (146,555 | ) | ||||
Total Investments, Net of Investments Sold Short (Cost $942,337,161) | 100.0 | 1,324,528,700 | ||||||
Other Assets, Less Liabilities | (0.0 | )‡ | (315,496 | ) | ||||
Net Assets | 100.0 | % | $ | 1,324,213,204 | ||||
Unrealized | ||||||||
Contracts | Appreciation | |||||||
Long | (Depreciation) (f) | |||||||
Futures Contracts 0.4% | ||||||||
Standard & Poor’s 500 Index Mini December 2011 | 1,161 | $ | 5,502,852 | |||||
Total Futures Contracts (Settlement Value $72,521,865) (b) | $ | 5,502,852 | ||||||
††† | On a daily basis New York Life Investments confirms that the value of the Fund’s liquid assets (liquid portfolio securities and cash) is sufficient to cover its potential senior securities (e.g., futures, swaps, options). | |
‡ | Less than one-tenth of a percent. | |
(a) | Non-income producing security. | |
(b) | The combined market value of common stocks and settlement value of Standard & Poor’s 500 Index futures contracts represents 100.0% of net assets. | |
(c) | Interest rate presented is yield to maturity. | |
(d) | Represents a security, or a portion thereof, which is maintained at the broker as collateral for futures contracts. | |
(e) | Represents securities sold short on a when-issued basis. At October 31, 2011 total proceeds from investments sold short on a when-issued basis was $136,599. | |
(f) | Represents the difference between the value of the contracts at the time they were opened and the value at October 31, 2011. | |
(g) | At October 31, 2011, cost is $988,723,188 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 429,644,042 | ||
Gross unrealized depreciation | (93,691,975 | ) | ||
Net unrealized appreciation | $ | 335,952,067 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Portfolio of Investments††† October 31, 2011 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 1,250,510,534 | $ | — | $ | — | $ | 1,250,510,534 | ||||||||
Short-Term Investments | ||||||||||||||||
Repurchase Agreement | — | 66,920 | — | 66,920 | ||||||||||||
U.S. Government | — | 74,097,801 | — | 74,097,801 | ||||||||||||
Total Short-Term Investments | — | 74,164,721 | — | 74,164,721 | ||||||||||||
Total Investments in Securities | 1,250,510,534 | 74,164,721 | — | 1,324,675,255 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts Long (b) | 5,502,852 | — | — | 5,502,852 | ||||||||||||
Total Investments in Securities and Other Financial Instruments | $ | 1,256,013,386 | $ | 74,164,721 | $ | — | $ | 1,330,178,107 | ||||||||
Liability Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities Sold Short (a) | ||||||||||||||||
Common Stocks Sold Short | $ | (146,555 | ) | $ | — | $ | — | $ | (146,555 | ) | ||||||
Total Investments in Securities Sold Short | $ | (146,555 | ) | $ | — | $ | — | $ | (146,555 | ) | ||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
18 MainStay S&P 500 Index Fund | and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $942,473,760) | $ | 1,324,675,255 | ||
Receivables: | ||||
Fund shares sold | 2,149,364 | |||
Dividends and interest | 1,422,939 | |||
Investment securities sold | 169,853 | |||
Other assets | 23,250 | |||
Total assets | 1,328,440,661 | |||
Liabilities | ||||
Investments sold short (proceeds $136,599) | 146,555 | |||
Payables: | ||||
Variation margin on futures contracts | 1,813,158 | |||
Fund shares redeemed | 1,489,159 | |||
Transfer agent (See Note 3) | 366,243 | |||
Manager (See Note 3) | 189,245 | |||
Professional fees | 70,614 | |||
Shareholder communication | 47,851 | |||
NYLIFE Distributors (See Note 3) | 44,013 | |||
Trustees | 5,014 | |||
Custodian | 2,730 | |||
Accrued expenses | 52,875 | |||
Total liabilities | 4,227,457 | |||
Net assets | $ | 1,324,213,204 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 45,304 | ||
Additional paid-in capital | 1,090,509,827 | |||
1,090,555,131 | ||||
Undistributed net investment income | 17,230,997 | |||
Accumulated net realized gain (loss) on investments, futures transactions and investments sold short | (171,267,315 | ) | ||
Net unrealized appreciation (depreciation) on investments and futures contracts | 387,704,347 | |||
Net unrealized appreciation (depreciation) on investments sold short | (9,956 | ) | ||
Net assets | $ | 1,324,213,204 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 20,133,927 | ||
Shares of beneficial interest outstanding | 694,761 | |||
Net asset value per share outstanding | $ | 28.98 | ||
Maximum sales charge (3.00% of offering price) | 0.90 | |||
Maximum offering price per share outstanding | $ | 29.88 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 195,006,332 | ||
Shares of beneficial interest outstanding | 6,726,008 | |||
Net asset value per share outstanding | $ | 28.99 | ||
Maximum sales charge (3.00% of offering price) | 0.90 | |||
Maximum offering price per share outstanding | $ | 29.89 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 1,109,072,945 | ||
Shares of beneficial interest outstanding | 37,883,442 | |||
Net asset value and offering price per share outstanding | $ | 29.28 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 27,475,547 | ||
Interest | 17,749 | |||
Total income | 27,493,296 | |||
Expenses | ||||
Manager (See Note 3) | 3,354,175 | |||
Transfer agent (See Note 3) | 2,297,537 | |||
Distribution/Service—Investor Class (See Note 3) | 50,795 | |||
Distribution/Service—Class A (See Note 3) | 506,592 | |||
Professional fees | 161,430 | |||
Shareholder communication | 82,410 | |||
Registration | 68,598 | |||
Custodian | 41,235 | |||
Trustees | 37,985 | |||
Miscellaneous | 81,222 | |||
Total expenses before waiver/reimbursement | 6,681,979 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (1,275,945 | ) | ||
Net expenses | 5,406,034 | |||
Net investment income (loss) | 22,087,262 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on: | ||||
Security transactions | (9,070,692 | ) | ||
Futures transactions | 3,869,674 | |||
Net realized gain (loss) on investments and futures transactions | (5,201,018 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 84,236,831 | |||
Investments sold short | (9,956 | ) | ||
Futures contracts | 5,281,093 | |||
Net change in unrealized appreciation (depreciation) on investments, investments sold short and futures contracts | 89,507,968 | |||
Net realized and unrealized gain (loss) on investments, futures transactions and investments sold short | 84,306,950 | |||
Net increase (decrease) in net assets resulting from operations | $ | 106,394,212 | ||
(a) | Dividends recorded net of foreign withholding taxes in the amount of $141. |
The notes to the financial statements are an integral part of,
20 MainStay S&P 500 Index Fund | and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 22,087,262 | $ | 21,019,417 | ||||
Net realized gain (loss) on investments and futures transactions | (5,201,018 | ) | (34,366,895 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and investments sold short | 89,507,968 | 204,566,945 | ||||||
Net increase (decrease) in net assets resulting from operations | 106,394,212 | 191,219,467 | ||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (248,197 | ) | (254,639 | ) | ||||
Class A | (2,662,214 | ) | (2,895,095 | ) | ||||
Class I | (18,165,581 | ) | (17,697,570 | ) | ||||
Total dividends to shareholders | (21,075,992 | ) | (20,847,304 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 260,630,814 | 292,806,483 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 21,015,084 | 20,783,761 | ||||||
Cost of shares redeemed | (375,569,046 | ) | (410,338,260 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | (93,923,148 | ) | (96,748,016 | ) | ||||
Net increase (decrease) in net assets | (8,604,928 | ) | 73,624,147 | |||||
Net Assets | ||||||||
Beginning of year | 1,332,818,132 | 1,259,193,985 | ||||||
End of year | $ | 1,324,213,204 | $ | 1,332,818,132 | ||||
Undistributed net investment income at end of year | $ | 17,230,997 | $ | 16,684,839 | ||||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 21 |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 27.33 | $ | 23.93 | $ | 22.47 | $ | 31.35 | ||||||||||
Net investment income (loss) | 0.38 | 0.33 | 0.38 | 0.26 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.62 | 3.41 | 1.59 | (9.14 | ) | |||||||||||||
Total from investment operations | 2.00 | 3.74 | 1.97 | (8.88 | ) | |||||||||||||
Less dividends: | ||||||||||||||||||
From net investment income | (0.35 | ) | (0.34 | ) | (0.51 | ) | — | |||||||||||
Net asset value at end of period | $ | 28.98 | $ | 27.33 | $ | 23.93 | $ | 22.47 | ||||||||||
Total investment return (a) | 7.35 | % | 15.75 | % | 9.21 | % | (28.33 | %)(b) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 1.29 | % | 1.30 | % | 1.75 | % | 1.63 | % †† | ||||||||||
Net expenses | 0.70 | % | 0.70 | % | 0.63 | % | 0.60 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 0.91 | % | 1.01 | % | 1.15 | % | 1.06 | % †† | ||||||||||
Portfolio turnover rate | 4 | % | 11 | % | 8 | % | 5 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 20,134 | $ | 19,295 | $ | 17,822 | $ | 15,372 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(b) | Total investment return is not annualized. |
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 27.34 | $ | 23.92 | $ | 22.47 | $ | 35.79 | $ | 31.85 | ||||||||||||
Net investment income (loss) | 0.42 | 0.37 | 0.38 | 0.51 | 0.49 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.61 | 3.40 | 1.58 | (13.35 | ) | 3.87 | ||||||||||||||||
Total from investment operations | 2.03 | 3.77 | 1.96 | (12.84 | ) | 4.36 | ||||||||||||||||
Less dividends: | ||||||||||||||||||||||
From net investment income | (0.38 | ) | (0.35 | ) | (0.51 | ) | (0.48 | ) | (0.42 | ) | ||||||||||||
Net asset value at end of year | $ | 28.99 | $ | 27.34 | $ | 23.92 | $ | 22.47 | $ | 35.79 | ||||||||||||
Total investment return (a) | 7.46 | % | 15.88 | % | 9.18 | % | (36.32 | %) | 13.83 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.39 | % | 1.40 | % | 1.79 | % | 1.65 | % | 1.44 | % | ||||||||||||
Net expenses | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.69 | % | 0.74 | % | 0.86 | % | 0.79 | % | 0.78 | % | ||||||||||||
Portfolio turnover rate | 4 | % | 11 | % | 8 | % | 5 | % | 5 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 195,006 | $ | 193,335 | $ | 196,774 | $ | 182,351 | $ | 334,325 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. |
The notes to the financial statements are an integral part of,
22 MainStay S&P 500 Index Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 27.60 | $ | 24.15 | $ | 22.69 | $ | 36.14 | $ | 32.16 | ||||||||||||
Net investment income (loss) | 0.50 | 0.44 | 0.44 | 0.60 | 0.58 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.63 | 3.42 | 1.60 | (13.46 | ) | 3.93 | ||||||||||||||||
Total from investment operations | 2.13 | 3.86 | 2.04 | (12.86 | ) | 4.51 | ||||||||||||||||
Less dividends: | ||||||||||||||||||||||
From net investment income | (0.45 | ) | (0.41 | ) | (0.58 | ) | (0.59 | ) | (0.53 | ) | ||||||||||||
Net asset value at end of year | $ | 29.28 | $ | 27.60 | $ | 24.15 | $ | 22.69 | $ | 36.14 | ||||||||||||
Total investment return (a) | 7.75 | % | 16.13 | % | 9.55 | % | (36.13 | %) | 14.17 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.64 | % | 1.65 | % | 2.07 | % | 1.95 | % | 1.73 | % | ||||||||||||
Net expenses | 0.35 | % | 0.35 | % | 0.32 | % | 0.30 | % | 0.30 | % | ||||||||||||
Expenses (before reimbursement/waiver) | 0.44 | % | 0.49 | % | 0.61 | % | 0.49 | % | 0.42 | % | ||||||||||||
Portfolio turnover rate | 4 | % | 11 | % | 8 | % | 5 | % | 5 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 1,109,073 | $ | 1,120,188 | $ | 1,044,598 | $ | 919,826 | $ | 1,479,162 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 23 |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay S&P 500 Index Fund (the “Fund”), a diversified fund. The Fund is the successor of the MainStay S&P 500 Index Fund, a series of Eclipse Funds Inc. (the “Predecessor Fund”). The reorganization of the Predecessor Fund with and into the Fund occurred on February 26, 2010. All information and references to periods prior to February 26, 2010, relate to the Predecessor Fund.
The Fund currently offers three classes of shares. Class I shares commenced operations on January 2, 1991. Class A shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The three classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Investor Class and Class A shares are subject to a distribution and/or service fee. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek to provide investment results that correspond to the total return performance (reflecting reinvestment of dividends) of common stocks in the aggregate, as represented by the S&P 500® Index.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Equity securities and Exchange Traded Funds are valued at the latest quoted sales prices as of the close of regular trading on the Exchange on each 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. Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in other mutual funds are valued at their NAVs as
24 MainStay S&P 500 Index Fund
of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor (as defined in Note 3(A)) reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund did not hold any securities that were fair valued in such a manner.
Certain events may occur between the time that foreign markets close, on which securities held by the Fund principally trade, and the time at which the Fund’s NAV is calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager conclude that such events may have affected the accuracy of the last price reported on the local foreign market, the Manager or Subadvisor may, pursuant to procedures adopted by the Fund’s Board, adjust the value of the local price to reflect the impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third party vendor in accordance with the Fund’s policies and procedures and are generally categorized as Level 2 in the hierarchy. As of October 31, 2011, the Fund did not hold any foreign equity securities.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by
mainstayinvestments.com 25
the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security, or securities index). The Fund is subject to equity price risk in the normal course of investment in these transactions. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking to market” such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. Risks arise from the possible imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the terms of their contracts. However, the Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a broker that holds margin on behalf of the Fund, the Fund may not be entitled to the return of all of the margin owed to the Fund, potentially resulting in a loss. The Fund invests in futures contracts to provide an efficient means of maintaining liquidity while being fully invested in the market. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAV and may result in a loss to the Fund.
(I) Rights and Warrants. A right is a certificate that permits the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. A warrant is an instrument that entitles the holder to buy an equity security at a specific price for a specific period of time. The Fund generally enters into rights and warrants when securities are acquired through a corporate action. With respect to warrants in international markets, the securities are only purchased when the underlying security cannot be purchased due to the many restrictions an industry and/or country might place on foreign investors. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The Fund could also lose the entire value of its investment in warrants if the warrant is not exercised by the date of its expiration. The securities are sold as soon as the opportunity becomes available. The Fund is exposed to risk until each sale is completed. At October 31, 2011, the Fund did not hold any rights or warrants.
(J) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(K) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
26 MainStay S&P 500 Index Fund
(L) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. These derivatives are not accounted for as hedging instruments.
Fair value of derivatives as of October 31, 2011:
Asset Derivatives
Statement of | Equity | |||||||||
Assets and Liabilities | Contracts | |||||||||
Location | Risk | Total | ||||||||
Futures Contracts | Net Assets—Unrealized appreciation (depreciation) on investments and futures contracts (a) | $ | 5,502,852 | $ | 5,502,852 | |||||
Total Fair Value | $ | 5,502,852 | $ | 5,502,852 | ||||||
(a) | Includes cumulative appreciation of futures contracts as reported in the Portfolio of Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2011:
Realized Gain (Loss)
Statement of | Equity | |||||||||
Operations | Contracts | |||||||||
Location | Risk | Total | ||||||||
Warrants | Net realized gain (loss) on security transactions | $ | (12,524 | ) | $ | (12,524 | ) | |||
Futures Contracts | Net realized gain (loss) on futures transactions | 3,869,674 | 3,869,674 | |||||||
Total Realized Gain (Loss) | $ | 3,857,150 | $ | 3,857,150 | ||||||
Change in Unrealized Appreciation (Depreciation)
Statement of | Equity | |||||||||
Operations | Contracts | |||||||||
Location | Risk | Total | ||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | 5,281,093 | $ | 5,281,093 | |||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 5,281,093 | $ | 5,281,093 | ||||||
Number of Contracts, Notional Amounts or Shares/Units
Equity | ||||||||
Contracts | ||||||||
Risk | Total | |||||||
Warrants (1)(3) | 0-132,775 | 0-132,775 | ||||||
Futures Contracts Long (2)(3) | 803 | 803 | ||||||
(1) | Amount disclosed represents the minimum and maximum held during the year ended October 31, 2011. |
(2) | Amount disclosed represents the weighted average held during the year ended October 31, 2011. |
(3) | Amount(s) represent(s) number of contracts or number of shares/units. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of
mainstayinvestments.com 27
all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. Madison Square Investors LLC (“MSI” or “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MSI, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.25% up to $1 billion; 0.225% from $1 billion to $2 billion; 0.215% from $2 billion to $3 billion; and 0.20% in excess of $3 billion. The effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.24% for the year ended October 31, 2011.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for Class A shares do not exceed 0.60% of its average daily net assets. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of the Fund. This agreement expires on February 28, 2012, and may only be amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
Additionally, the Manager has agreed to voluntarily waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses of Investor Class shares do not exceed 0.70% of its average daily net assets. This voluntary waiver and/or reimbursement may be discontinued at any time.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $3,354,175 and waived its fees and/or reimbursed expenses in the amount of $1,275,945.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from the Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $6,021 and $3,827, respectively, for the year ended October 31, 2011. The Fund was also advised that the Distributor retained CDSCs on redemptions of Class A shares of $1,246, respectively for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 76,931 | ||
Class A | 330,988 | |||
Class I | 1,889,618 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Class I | $ | 110,989,102 | 10.0 | % | ||||
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $19,226. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
28 MainStay S&P 500 Index Fund
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 17,230,997 | $ | (119,505,035 | ) | $ | — | $ | 335,942,111 | $ | 233,658,073 | ||||||||
The difference between book-basis and tax basis unrealized depreciation is primarily due to wash sale deferrals, real estate investment trusts (“REITs”) basis adjustments, marking to market of futures contracts, return of capital distributions from non-REIT securities and basis adjustment due to class action payments.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed | Net Realized | |||||||||
Net Investment | Gain (Loss) | Additional | ||||||||
Income (Loss) | on Investments | Paid-In Capital | ||||||||
$ | (465,112 | ) | $ | 465,112 | $ | — | ||||
The reclassifications for the Fund are primarily due to return of capital and capital gain distributions from REITs and return of capital distributions from non-REIT securities.
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
At October 31, 2011, for federal income tax purposes, capital loss carryforwards of $119,515,035 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss | Capital Loss | |||||
Available Through | Amounts (000’s) | |||||
2013 | $ | 5,221 | ||||
2014 | 51,930 | |||||
2016 | 39,050 | |||||
2018 | 21,699 | |||||
2019 | 1,615 | |||||
Total | $ | 119,515 | ||||
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 21,075,992 | $ | 20,847,304 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of securities, other than short-term securities, were $50,207 and $145,077, respectively.
mainstayinvestments.com 29
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 129,662 | $ | 3,755,272 | |||||
Shares issued to shareholders in reinvestment of dividends | 8,729 | 247,544 | ||||||
Shares redeemed | (139,073 | ) | (4,033,392 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (682 | ) | (30,576 | ) | ||||
Shares converted into Investor Class (See Note 1) | 14,922 | 405,512 | ||||||
Shares converted from Investor Class (See Note 1) | (25,587 | ) | (737,416 | ) | ||||
Net increase (decrease) | (11,347 | ) | $ | (362,480 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 129,280 | $ | 3,343,567 | |||||
Shares issued to shareholders in reinvestment of dividends | 9,977 | 253,817 | ||||||
Shares redeemed | (155,312 | ) | (4,001,226 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (16,055 | ) | (403,842 | ) | ||||
Shares converted into Investor Class (See Note 1) | 11,248 | 300,230 | ||||||
Shares converted from Investor Class (See Note 1) | (33,895 | ) | (882,705 | ) | ||||
Net increase (decrease) | (38,702 | ) | $ | (986,317 | ) | |||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,292,871 | $ | 37,600,727 | |||||
Shares issued to shareholders in reinvestment of dividends | 91,844 | 2,603,786 | ||||||
Shares redeemed | (1,741,460 | ) | (50,634,720 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (356,745 | ) | (10,430,207 | ) | ||||
Shares converted into Class A (See Note 1) | 25,594 | 737,416 | ||||||
Shares converted from Class A (See Note 1) | (14,917 | ) | (405,512 | ) | ||||
Net increase (decrease) | (346,068 | ) | $ | (10,098,303 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 1,549,620 | $ | 39,887,328 | |||||
Shares issued to shareholders in reinvestment of dividends | 111,379 | 2,832,374 | ||||||
Shares redeemed | (2,835,174 | ) | (73,082,004 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (1,174,175 | ) | (30,362,302 | ) | ||||
Shares converted into Class A (See Note 1) | 33,901 | 882,705 | ||||||
Shares converted from Class A (See Note 1) | (11,246 | ) | (300,230 | ) | ||||
Shares converted from Class A (a) | (1,641 | ) | (41,706 | ) | ||||
Net increase (decrease) | (1,153,161 | ) | $ | (29,821,533 | ) | |||
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 7,504,721 | $ | 219,274,815 | |||||
Shares issued to shareholders in reinvestment of dividends | 635,986 | 18,163,754 | ||||||
Shares redeemed | (10,846,263 | ) | (320,900,934 | ) | ||||
Net increase (decrease) | (2,705,556 | ) | $ | (83,462,365 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 9,521,947 | $ | 249,575,588 | |||||
Shares issued to shareholders in reinvestment of dividends | 690,772 | 17,697,570 | ||||||
Shares redeemed | (12,887,816 | ) | (333,255,030 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (2,675,097 | ) | (65,981,872 | ) | ||||
Shares converted into Class I (a) | 1,628 | 41,706 | ||||||
Net increase (decrease) | (2,673,469 | ) | $ | (65,940,166 | ) | |||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class and Class A shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class and Class A shares that remain subject to a CDSC are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class and Class A shares. | |
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, you may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time. |
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the fiscal year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure.
No subsequent events requiring financial statement adjustment or disclosure have been identified.
30 MainStay S&P 500 Index Fund
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay S&P 500 Index Fund (“the Fund”), one of the funds constituting Mainstay Funds Trust, as of October 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay S&P 500 Index Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
mainstayinvestments.com 31
Federal Income Tax information (Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2011 the Fund designated approximately $23,522,361 under the Internal Revenue Code as Qualified dividend Income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2011, should be multiplied by 100.0% to arrive at the amount eligible for the corporate dividends received deduction.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; or (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request (i) by calling 800-MAINSTAY (624-6782); (ii) by visiting the Fund’s website at mainstayinvestments.com; or (iii) on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
32 MainStay S&P 500 Index Fund
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
mainstayinvestments.com 33
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
34 MainStay S&P 500 Index Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
mainstayinvestments.com 35
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
36 MainStay S&P 500 Index Fund
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
mainstayinvestments.com 37
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC,
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company.
NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment
advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24847 MS284-11 | MSSP11-12/11 |
NA6
MainStay Short Term Bond Fund
Message from the President and Annual Report
October 31, 2011
This page intentionally left blank
Message from the President
Volatility was the keynote of the 12 months ended October 31, 2011. U.S. stocks generally advanced, but a variety of domestic and international forces influenced the market.
Early in November 2010, the Federal Open Market Committee (FOMC) announced its intention to extend quantitative easing by purchasing additional longer-term Treasury securities. The stock market reacted positively to this news—and to the midterm elections—and stocks generally advanced through mid-February.
Beginning in December 2010, a wave of protests and civil unrest across North Africa and the Middle East led to a substantial rise in the price of oil. By mid-February, stock prices started to decline. In March, a major earthquake and tsunami in Japan caused manufacturing supply-line interruptions and further setbacks for equity investors. After a sharp decline and a rapid recovery, stocks reached their high point for the 12-month period at the end of April 2011.
Pressed by a weak economy, lackluster employment and widespread concerns about European sovereign debt, the stock market faced wide fluctuations in the coming months. The volatility included a precipitous decline at the end of July into early August. Shortly thereafter, the FOMC expressed its expectation that economic conditions were “likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
After several unsuccessful attempts to recover from their dramatic drop, U.S. stocks reached their low point for the reporting period in early October. Then, buoyed by positive economic data and progress in the European debt situation, the U.S. stock market advanced rapidly in October, to close the reporting period with its best monthly performance in nearly a decade.
International stocks suffered from the turmoil in the Middle East and North Africa, the natural disasters in Japan, the sovereign debt concerns in Europe and the added threat of an economic slowdown in China. For the 12-month period, international stocks declined overall, with particular weakness in Europe.
The bond markets felt the impact of the European debt crisis, and several European nations suffered downgrades. In July, the United States faced a congressional deadlock on raising the debt ceiling and reducing deficit spending. In early August, Standard & Poor’s downgraded the debt of the United States of America to AA+.
Slow progress in resolving the European debt situation led to a flight to quality (or a movement toward securities perceived to carry lower risk). Amid strong demand, U.S. Treasury securities saw prices rise and yields decline, despite the downgrade by Standard & Poor’s. High-grade corporate
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
bonds also benefited; and among high-yield credits, higher-rated issues advanced relative to lower-rated issues, which generally carry higher levels of risk. Toward the end of the reporting period, the high-yield market as a whole recovered as the stock market rose.
Throughout the 12-month reporting period, our portfolio managers took note of shifting market forces. But their primary focus was on the investment objectives of their respective Funds and the long-term strategies they were pursuing to achieve them. Some may have sought to capitalize on day-to-day market inefficiencies, but all remained focused on the long-term interests of our shareholders. They sought to apply time-tested investment principles consistently throughout the reporting period.
The information that follows provides specifics about the securities, decisions and market forces that affected your MainStay Fund(s) during the 12 months ended October 31, 2011. Behind the details, we hope you’ll recognize the professionalism and discipline that guided our portfolio managers during this volatile period.
We thank you for investing with MainStay and look forward to serving you for many years to come.
Sincerely,
Stephen P. Fisher
President
President
Table of Contents
Annual Report | ||
Investment and Performance Comparison | 5 | |
Portfolio Management Discussion and Analysis | 9 | |
Portfolio of Investments | 11 | |
Financial Statements | 14 | |
Notes to Financial Statements | 20 | |
Report of Independent Registered Public Accounting Firm | 26 | |
Federal Income Tax Information | 27 | |
Proxy Voting Policies and Procedures and Proxy Voting Record | 27 | |
Shareholder Reports and Quarterly Portfolio Disclosure | 27 | |
Board Members and Officers | 28 | |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 169 Lackawanna Avenue, Parsippany, New Jersey 07054 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at mainstayinvestments.com/documents. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit mainstayinvestments.com.
Average Annual Total Returns for the Year Ended October 31, 2011
Gross | ||||||||||||||||||||
Expense | ||||||||||||||||||||
Class | Sales Charge | One Year | Five Years | Ten Years | Ratio2 | |||||||||||||||
Investor Class Shares3 | Maximum 3% Initial Sales Charge | With sales charges | –2 | .88% | 2 | .83% | 2 | .35% | 1 | .60% | ||||||||||
Excluding sales charges | 0 | .13 | 3 | .46 | 2 | .66 | 1 | .60 | ||||||||||||
Class A Shares4 | Maximum 3% Initial Sales Charge | With sales charges | –2 | .49 | 3 | .05 | 2 | .46 | 1 | .15 | ||||||||||
Excluding sales charges | 0 | .53 | 3 | .68 | 2 | .77 | 1 | .15 | ||||||||||||
Class I Shares | No Sales Charge | 0 | .78 | 3 | .96 | 3 | .08 | 0 | .90 | |||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, change in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflect the deduction of all sales charges that would have applied for the periods of investment. Performance figures reflect certain fee waivers and/or expense limitations, without which total returns may have been lower. For more information on share classes and current fee waivers and/or expense limitations, please refer to the notes to the financial statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Performance figures for Investor Class shares, first offered on February 28, 2008, include the historical performance of Class A shares through February 27, 2008, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Investor Class shares might have been lower. |
4. | Performance figures for Class A shares, first offered on January 2, 2004, include the historical performance of Class I shares through January 1, 2004, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class A shares might have been lower. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
mainstayinvestments.com 5
One | Five | Ten | ||||||||||
Benchmark Performance | Year | Years | Years | |||||||||
Barclays Capital U.S. 1-3 Year Government/Credit Index5 | 1 | .21% | 4 | .11% | 3 | .60% | ||||||
Average Lipper Short U.S. Government Fund6 | 0 | .79 | 3 | .32 | 2 | .84 | ||||||
5. | The Barclays Capital U.S. 1-3 Year Government/Credit Index includes investment grade corporate debt issues as well as debt issues of U.S. government agencies and the U.S. Treasury, with maturities of one to three years. The Barclays Capital U.S. 1-3 Year Government/Credit Index is the Fund’s broad-based securities-market index for comparison purposes. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The average Lipper short U.S. government fund is representative of funds that invest primarily in securities issued or guaranteed by the U.S. government, its agencies, or its instrumentalities, with dollar-weighted average maturities of less than three years. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 MainStay Short Term Bond Fund
Cost in Dollars of a $1,000 Investment in MainStay Short Term Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2011, to October 31, 2011, and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2011, to October 31, 2011.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2011. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other Funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Ending Account | ||||||||||||||||||||||
Ending Account | Value (Based | |||||||||||||||||||||
Value (Based | on Hypothetical | |||||||||||||||||||||
Beginning | on Actual | Expenses | 5% Annualized | Expenses | ||||||||||||||||||
Account | Returns and | Paid | Return and | Paid | ||||||||||||||||||
Value | Expenses) | During | Actual Expenses) | During | ||||||||||||||||||
Share Class | 5/1/11 | 10/31/11 | Period1 | 10/31/11 | Period1 | |||||||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,002.70 | $ | 6.71 | $ | 1,018.50 | $ | 6.77 | ||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,004.70 | $ | 4.70 | $ | 1,020.50 | $ | 4.74 | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,005.90 | $ | 3.44 | $ | 1,021.80 | $ | 3.47 | ||||||||||||
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.33% for Investor Class, 0.93% for Class A and 0.68% for Class I) multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the one-half year period). The table above represents the actual expenses incurred during the one-half year period. |
mainstayinvestments.com 7
Portfolio Composition as of October 31, 2011 (Unaudited)
U.S. Government & Federal Agencies | 54.9 | |||
Corporate Bonds | 27.2 | |||
Yankee Bonds | 10.9 | |||
Mortgage-Backed Securities | 4.5 | |||
Short-Term Investment | 3.1 | |||
Other Assets, Less Liabilities | (0.6 | ) |
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Issuers Held as of October 31, 2011 (excluding short-term investment)
1. | United States Treasury Notes, 0.625%–2.25%, due 6/15/12–5/31/14 | |
2. | Federal Home Loan Bank, 2.25%, due 4/13/12 | |
3. | Shell International Finance B.V., 1.875%, due 3/25/13 | |
4. | Morgan Stanley, 4.00%, due 7/24/15 | |
5. | Abbott Laboratories, 2.70%, due 5/27/15 | |
6. | MetLife, Inc., 2.375%, due 2/6/14 | |
7. | St. Jude Medical, Inc., 2.20%, due 9/15/13 | |
8. | Rio Tinto Finance USA, Ltd., 8.95%, due 5/1/14 | |
9. | Total Capital S.A., 3.125%, due 10/2/15 | |
10. | PNC Funding Corp., 3.625%, due 2/8/15 |
8 MainStay Short Term Bond Fund
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Louis N. Cohen, Claude Athaide, PhD, CFA, and Gary Goodenough of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay Short Term Bond Fund perform relative to its peers and its benchmark during the 12 months ended October 31, 2011?
Excluding all sales charges, MainStay Short Term Bond Fund returned 0.13% for Investor Class shares and 0.53% for Class A shares for the 12 months ended October 31, 2011. Over the same period, Class I shares returned 0.78%. All share classes underperformed the 0.79% return of the average Lipper1 short U.S. government fund and the 1.21% return of the Barclays Capital U.S. 1–3 Year Government/Credit Index2 for the 12 months ended October 31, 2011. The Barclays Capital U.S. 1–3 Year Government/Credit Index is the Fund’s broad-based securities-market index. See page 5 for Fund returns with sales charges.
What factors affected the Fund’s performance during the reporting period?
The economy expanded at a slower-than-expected pace during the first half of 2011. Expectations of more robust growth came from the payroll tax holiday enacted in December 2010. Real gross domestic product (GDP) grew at an annual rate of 3.1% during the fourth quarter of 2010, but grew only 0.4% in the first quarter of 2011 and 1.3% in the second quarter. Advance estimates showed GDP growth of 2.5% in the third quarter of 2011.
In early November 2010, the Federal Open Market Commit-tee (FOMC) announced that it would purchase an additional $600 billion in Treasury securities. In August 2011, the FOMC stated that it anticipated that economic conditions were “likely to warrant exceptionally low levels of the federal funds rate at least through mid-2013.” At its next meeting in September 2011, the FOMC announced “Operation Twist,” under which it would sell $400 billion of securities with maturities of three years or less and purchase an equal amount of securities with maturities from six years to 30 years. The aim of the new program was to lower interest rates on longer maturities.
The FOMC’s November 2010 decision had been widely anticipated by market participants and contributed to rising prices for risky assets over the next few months. Treasury yields rose as economic growth reaccelerated in the last quarter of 2010. The yield on the two-year Treasury security increased from 0.33% at the beginning of the reporting period to 0.85% in February 2011. The damage from the Japanese earthquake and fears over the extent of the damage to a nuclear plant caused a sharp sell-off in equities in the middle of March. By the end of April, the major indices had reached new highs for the reporting period.
The sovereign debt problems in Europe, the negotiations over raising the debt limit in the United States, Standard & Poor’s downgrade of the U.S. credit rating and economic reports showing that the U.S. economy grew much more slowly than initially reported all contributed to another bout of risk aversion during the summer months. The resulting flight to quality (or movement toward securities perceived to have lower risk) saw Treasury yields fall to new post-September 2008 lows. The yield on the two-year Treasury note fell to 0.15% in September.
Credit spreads3 tightened during the first half of the reporting period as demand for corporate bonds remained strong in a low-Treasury-yield environment. As risk aversion increased over the summer months, spreads generally widened. For the entire reporting period, spreads widened on agency securities, mortgage-backed securities and corporate bonds.
The Fund’s overweight position relative to the Barclays Capital U.S. 1–3 Year Government/Credit Index in corporate bonds detracted from performance as the tightening in corporate bond spreads during the first half of the reporting period reversed during the summer. The Fund’s holdings in agency securities and commercial mortgage-backed securities helped relative performance.
How did the Fund’s yield-curve4 positioning affect the Fund’s performance during the reporting period?
In the fourth quarter of 2010, the Fund was positioned for a flatter yield curve. However, interest rates rose in November and December 2010 and the curve steepened, which negatively affected performance. The Fund made up this shortfall as rates declined during the second and third quarters of 2011.
During the reporting period, which market segments were particularly strong and which ones were weak?
Among one- to three-year issues, mortgage-backed securities provided the highest total return during the reporting period, followed by commercial mortgage-backed securities and corporate securities. U.S. Treasurys and agency securities provided the lowest total return, followed by asset-backed securities. All of these short-term returns were positive.
How did the Fund’s weightings change during the reporting period?
At the start of the reporting period, approximately 50% of the Fund’s total net assets were invested in U.S. Treasury securities. Corporate bonds accounted for 30% of the Fund’s net assets, and agency securities accounted for 14% of the Fund’s net assets. During the reporting period, we increased the
1. See footnote on page 6 for more information on Lipper Inc.
2. See footnote on page 6 for more information on the Barclays Capital U.S. 1–3 Year Government/Credit Index.
3. The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time.
4. The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting.
mainstayinvestments.com 9
Fund’s exposure to corporate bonds and commercial mortgage-backed securities and reduced the Fund’s exposure to U.S. Treasury securities and agency securities.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2011, U.S. Treasury securities accounted for approximately 46% of the Fund’s net assets, corporate bonds accounted for approximately 38%, agency securities represented approximately 8% and commercial mortgage-backed securities for approximately 5% of the Fund’s net assets.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 MainStay Short Term Bond Fund
Portfolio of Investments October 31, 2011
Principal | ||||||||
Amount | Value | |||||||
Long-Term Bonds 97.5%† Corporate Bonds 27.2% | ||||||||
Agriculture 1.5% | ||||||||
Philip Morris International, Inc. 6.875%, due 3/17/14 | $ | 1,070,000 | $ | 1,217,885 | ||||
Auto Manufacturers 1.5% | ||||||||
DaimlerChrysler N.A. Holding Corp. 6.50%, due 11/15/13 | 1,117,000 | 1,224,598 | ||||||
Banks 8.3% | ||||||||
Capital One Financial Corp. 2.125%, due 7/15/14 | 515,000 | 514,295 | ||||||
JPMorgan Chase & Co. 3.70%, due 1/20/15 | 1,235,000 | 1,286,677 | ||||||
X Morgan Stanley 4.00%, due 7/24/15 | 1,800,000 | 1,746,533 | ||||||
X PNC Funding Corp. 3.625%, due 2/8/15 | 1,240,000 | 1,310,184 | ||||||
U.S. Bancorp 3.15%, due 3/4/15 | 1,250,000 | 1,309,570 | ||||||
Wells Fargo & Co. 5.00%, due 11/15/14 | 780,000 | 837,396 | ||||||
7,004,655 | ||||||||
Beverages 0.5% | ||||||||
PepsiCo Inc/NC 0.80%, due 8/25/14 | 375,000 | 374,095 | ||||||
Cosmetics & Personal Care 1.1% | ||||||||
Procter & Gamble Co. (The) 0.70%, due 8/15/14 | 935,000 | 934,561 | ||||||
Diversified Financial Services 1.5% | ||||||||
General Electric Capital Corp. 3.75%, due 11/14/14 | 1,220,000 | 1,287,376 | ||||||
Electric 1.3% | ||||||||
Great Plains Energy, Inc. 2.75%, due 8/15/13 | 1,085,000 | 1,100,850 | ||||||
Health Care—Products 1.6% | ||||||||
X St. Jude Medical, Inc. 2.20%, due 9/15/13 | 1,310,000 | 1,335,609 | ||||||
Insurance 3.3% | ||||||||
Hartford Financial Services Group, Inc. 4.75%, due 3/1/14 | 1,250,000 | 1,296,581 | ||||||
X MetLife, Inc. 2.375%, due 2/6/14 | 1,455,000 | 1,492,571 | ||||||
2,789,152 | ||||||||
Miscellaneous—Manufacturing 0.8% | ||||||||
3M Co. 1.375%, due 9/29/16 | 660,000 | 661,404 | ||||||
Pharmaceuticals 4.0% | ||||||||
X Abbott Laboratories 2.70%, due 5/27/15 | 1,665,000 | 1,744,192 | ||||||
Novartis Capital Corp. 1.90%, due 4/24/13 | 1,100,000 | 1,124,701 | ||||||
Sanofi 1.20%, due 9/30/14 | 510,000 | 515,160 | ||||||
3,384,053 | ||||||||
Semiconductors 1.1% | ||||||||
Intel Corp. 1.95%, due 10/1/16 | 910,000 | 928,875 | ||||||
Telecommunications 0.7% | ||||||||
BellSouth Corp. 5.20%, due 9/15/14 | 540,000 | 598,790 | ||||||
Total Corporate Bonds (Cost $22,354,100) | 22,841,903 | |||||||
Mortgage-Backed Securities 4.5% | ||||||||
Commercial Mortgage Loans (Collateralized Mortgage Obligations) 4.5% | ||||||||
Banc of America Commercial Mortgage, Inc. Series 2007-1, Class AAB 5.422%, due 1/15/49 | 870,000 | 925,810 | ||||||
Bear Stearns Commercial Mortgage Securities Series 2004-T16, Class A6 4.75%, due 2/13/46 (a) | 200,000 | 216,200 | ||||||
GE Capital Commercial Mortgage Corp. Series 2004-C2, Class A4 4.893%, due 3/10/40 | 500,000 | 531,135 | ||||||
LB-UBS Commercial Mortgage Trust Series 2004-C1, Class A4 4.568%, due 1/15/31 | 890,000 | 941,544 | ||||||
RBSCF Trust Series 2010-MB1, Class A1 2.367%, due 4/15/24 (b) | 849,559 | 866,249 |
† | Percentages indicated are based on Fund net assets. |
X | Among the Fund’s 10 largest issuers held, as of October 31, 2011, excluding short-term investment. May be subject to change daily. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 11 |
Portfolio of Investments October 31, 2011 (continued)
Principal | ||||||||
Amount | Value | |||||||
Mortgage-Backed Securities (continued) | ||||||||
Commercial Mortgage Loans (Collateralized Mortgage Obligations) (continued) | ||||||||
Wachovia Bank Commercial Mortgage Trust Series 2004-C14, Class A4 5.088%, due 8/15/41 (a) | $ | 310,000 | $ | 333,306 | ||||
Total Mortgage-Backed Securities (Cost $3,720,742) | 3,814,244 | |||||||
U.S. Government & Federal Agencies 54.9% | ||||||||
X Federal Home Loan Bank 6.1% | ||||||||
2.25%, due 4/13/12 | 5,075,000 | 5,123,202 | ||||||
Federal Home Loan Mortgage Corp. 1.0% | ||||||||
1.00%, due 8/20/14 | 825,000 | 829,357 | ||||||
Federal National Mortgage Association 1.4% | ||||||||
1.00%, due 9/20/13 | 1,225,000 | 1,231,909 | ||||||
Federal National Mortgage Association (Mortgage Pass-Through Security) 0.3% | ||||||||
4.50%, due 11/1/18 | 218,365 | 233,972 | ||||||
X United States Treasury Notes 46.1% | ||||||||
0.625%, due 12/31/12 | 465,000 | 467,361 | ||||||
0.625%, due 1/31/13 | 13,385,000 | 13,457,681 | ||||||
1.375%, due 9/15/12 | 755,000 | 762,934 | ||||||
1.50%, due 7/15/12 | 12,580,000 | 12,700,881 | ||||||
1.875%, due 6/15/12 | 8,395,000 | 8,486,824 | ||||||
2.25%, due 5/31/14 | 2,710,000 | 2,841,267 | ||||||
38,716,948 | ||||||||
Total U.S. Government & Federal Agencies (Cost $45,653,410) | 46,135,388 | |||||||
Yankee Bonds 10.9% (c) | ||||||||
Electric 1.3% | ||||||||
Enel Finance International S.A. 3.875%, due 10/7/14 (b) | 1,120,000 | 1,121,759 | ||||||
Holding Company—Diversified 1.5% | ||||||||
Hutchison Whampoa International, Ltd. 4.625%, due 9/11/15 (b) | 1,195,000 | 1,266,955 | ||||||
Mining 3.1% | ||||||||
Anglo American Capital PLC 2.15%, due 9/27/13 (b) | 400,000 | 399,567 | ||||||
9.375%, due 4/8/14 (b) | 750,000 | 872,442 | ||||||
X Rio Tinto Finance USA, Ltd. 8.95%, due 5/1/14 | 1,115,000 | 1,321,050 | ||||||
2,593,059 | ||||||||
Oil & Gas 4.0% | ||||||||
X Shell International Finance B.V. 1.875%, due 3/25/13 | 2,000,000 | 2,042,048 | ||||||
X Total Capital S.A. 3.125%, due 10/2/15 | 1,235,000 | 1,310,515 | ||||||
3,352,563 | ||||||||
Telecommunications 1.0% | ||||||||
Telefonica Emisiones S.A.U 4.949%, due 1/15/15 | 785,000 | 806,885 | ||||||
Total Yankee Bonds (Cost $8,941,624) | 9,141,221 | |||||||
Total Long-Term Bonds (Cost $80,669,876) | 81,932,756 | |||||||
Short-Term Investment 3.1% | ||||||||
Repurchase Agreement 3.1% | ||||||||
State Street Bank and Trust Co. 0.01%, dated 10/31/11 due 11/1/11 Proceeds at Maturity $2,607,599 (Collateralized by a United States Treasury Bond with a rate of 4.625% and a maturity date of 2/15/40, with a Principal Amount of $2,095,000 and a Market Value of $2,663,248) | 2,607,598 | 2,607,598 | ||||||
Total Short-Term Investment (Cost $2,607,598) | 2,607,598 | |||||||
Total Investments (Cost $83,277,474) (d) | 100.6 | % | 84,540,354 | |||||
Other Assets, Less Liabilities | (0.6 | ) | (530,656 | ) | ||||
Net Assets | 100.0 | % | $ | 84,009,698 | ||||
(a) | Floating rate—Rate shown is the rate in effect at October 31, 2011. | |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(2) of the Securities Act of 1933, as amended. | |
(c) | Yankee Bond—dollar-denominated bond issued in the United States by a foreign bank or corporation. | |
(d) | At October 31, 2011, cost is $83,277,474 for federal income tax purposes and net unrealized appreciation is as follows: |
Gross unrealized appreciation | $ | 1,352,308 | ||
Gross unrealized depreciation | (89,428 | ) | ||
Net unrealized appreciation | $ | 1,262,880 | ||
The notes to the financial statements are an integral part of,
12 MainStay Short Term Bond Fund | and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2011, for valuing the Fund’s assets.
Asset Valuation Inputs
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Corporate Bonds | $ | — | $ | 22,841,903 | $ | — | $ | 22,841,903 | ||||||||
Mortgage-Backed Securities | — | 3,814,244 | — | 3,814,244 | ||||||||||||
U.S. Government & Federal Agencies | — | 46,135,388 | — | 46,135,388 | ||||||||||||
Yankee Bonds | — | 9,141,221 | — | 9,141,221 | ||||||||||||
Total Long-Term Bonds | — | 81,932,756 | — | 81,932,756 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 2,607,598 | — | 2,607,598 | ||||||||||||
Total Investments in Securities | $ | — | $ | 84,540,354 | $ | — | $ | 84,540,354 | ||||||||
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the year ended October 31, 2011, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
At October 31, 2011, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 13 |
Statement of Assets and Liabilities as of October 31, 2011
Assets | ||||
Investment in securities, at value (identified cost $83,277,474) | $ | 84,540,354 | ||
Receivables: | ||||
Interest | 461,128 | |||
Fund shares sold | 180,002 | |||
Other assets | 17,002 | |||
Total assets | 85,198,486 | |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 1,073,565 | |||
Manager (See Note 3) | 35,530 | |||
Shareholder communication | 26,898 | |||
Transfer agent (See Note 3) | 16,953 | |||
Professional fees | 15,392 | |||
NYLIFE Distributors (See Note 3) | 7,602 | |||
Custodian | 389 | |||
Trustees | 344 | |||
Accrued expenses | 3,576 | |||
Dividend payable | 8,539 | |||
Total liabilities | 1,188,788 | |||
Net assets | $ | 84,009,698 | ||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.001 per share) unlimited number of shares authorized | $ | 8,668 | ||
Additional paid-in capital | 82,340,992 | |||
82,349,660 | ||||
Distributions in excess of net investment income | (8,539 | ) | ||
Accumulated net realized gain (loss) on investments | 405,697 | |||
Net unrealized appreciation (depreciation) on investments | 1,262,880 | |||
Net assets | $ | 84,009,698 | ||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 4,127,828 | ||
Shares of beneficial interest outstanding | 424,705 | |||
Net asset value per share outstanding | $ | 9.72 | ||
Maximum sales charge (3.00% of offering price) | 0.30 | |||
Maximum offering price per share outstanding | $ | 10.02 | ||
Class A | ||||
Net assets applicable to outstanding shares | $ | 31,688,738 | ||
Shares of beneficial interest outstanding | 3,269,753 | |||
Net asset value per share outstanding | $ | 9.69 | ||
Maximum sales charge (3.00% of offering price) | 0.30 | |||
Maximum offering price per share outstanding | $ | 9.99 | ||
Class I | ||||
Net assets applicable to outstanding shares | $ | 48,193,132 | ||
Shares of beneficial interest outstanding | 4,973,517 | |||
Net asset value and offering price per share outstanding | $ | 9.69 | ||
The notes to the financial statements are an integral part of,
14 MainStay Short Term Bond Fund | and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2011
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 1,958,399 | ||
Expenses | ||||
Manager (See Note 3) | 543,526 | |||
Transfer agent (See Note 3) | 113,798 | |||
Distribution/Service—Investor Class (See Note 3) | 9,627 | |||
Distribution/Service—Class A (See Note 3) | 76,428 | |||
Registration | 54,339 | |||
Shareholder communication | 53,555 | |||
Professional fees | 50,080 | |||
Custodian | 6,850 | |||
Trustees | 2,369 | |||
Miscellaneous | 8,894 | |||
Total expenses before waiver/reimbursement | 919,466 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (201,625 | ) | ||
Net expenses | 717,841 | |||
Net investment income (loss) | 1,240,558 | |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 417,239 | |||
Net change in unrealized appreciation (depreciation) on investments | (1,289,247 | ) | ||
Net realized and unrealized gain (loss) on investments | (872,008 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | 368,550 | ||
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 15 |
Statements of Changes in Net Assets
for the years ended October 31, 2011 and October 31, 2010
2011 | 2010 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,240,558 | $ | 1,466,191 | ||||
Net realized gain (loss) on investments | 417,239 | 234,319 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (1,289,247 | ) | 1,087,868 | |||||
Net increase (decrease) in net assets resulting from operations | 368,550 | 2,788,378 | ||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Investor Class | (33,938 | ) | (22,387 | ) | ||||
Class A | (390,063 | ) | (443,006 | ) | ||||
Class I | (851,461 | ) | (1,007,842 | ) | ||||
(1,275,462 | ) | (1,473,235 | ) | |||||
From net realized gain on investments: | ||||||||
Investor Class | (6,757 | ) | (38,188 | ) | ||||
Class A | (57,310 | ) | (628,813 | ) | ||||
Class I | (124,038 | ) | (946,795 | ) | ||||
(188,105 | ) | (1,613,796 | ) | |||||
Total dividends and distributions to shareholders | (1,463,567 | ) | (3,087,031 | ) | ||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 36,730,120 | 72,128,908 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 1,276,100 | 2,578,293 | ||||||
Cost of shares redeemed | (70,141,279 | ) | (94,487,849 | ) | ||||
Increase (decrease) in net assets derived from capital share transactions | (32,135,059 | ) | (19,780,648 | ) | ||||
Net increase (decrease) in net assets | (33,230,076 | ) | (20,079,301 | ) | ||||
Net Assets | ||||||||
Beginning of year | 117,239,774 | 137,319,075 | ||||||
End of year | $ | 84,009,698 | $ | 117,239,774 | ||||
Undistributed (distributions in excess of) net investment income at end of year | $ | (8,539 | ) | $ | 15,143 | |||
The notes to the financial statements are an integral part of,
16 MainStay Short Term Bond Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Investor Class | ||||||||||||||||||
February 28, | ||||||||||||||||||
2008** | ||||||||||||||||||
through | ||||||||||||||||||
Year ended October 31, | October 31, | |||||||||||||||||
2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value at beginning of period | $ | 9.81 | $ | 9.81 | $ | 9.32 | $ | 9.44 | ||||||||||
Net investment income (loss) | 0.08 | 0.05 | 0.10 | 0.13 | (a) | |||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | 0.13 | 0.49 | (0.11 | ) | ||||||||||||
Total from investment operations | 0.02 | 0.18 | 0.59 | 0.02 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.09 | ) | (0.06 | ) | (0.10 | ) | (0.14 | ) | ||||||||||
From net realized gain on investments | (0.02 | ) | (0.12 | ) | — | — | ||||||||||||
Total dividends and distributions | (0.11 | ) | (0.18 | ) | (0.10 | ) | (0.14 | ) | ||||||||||
Net asset value at end of period | $ | 9.72 | $ | 9.81 | $ | 9.81 | $ | 9.32 | ||||||||||
Total investment return (b) | 0.13 | % | 1.83 | % | 6.31 | % | 0.20 | % (c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 0.83 | % | 0.63 | % | 1.00 | % | 2.10 | % †† | ||||||||||
Net expenses | 1.33 | % | 1.38 | % | 1.11 | % | 1.00 | % †† | ||||||||||
Expenses (before waiver/reimbursement) | 1.55 | % | 1.60 | % | 1.62 | % | 2.09 | % †† | ||||||||||
Portfolio turnover rate | 39 | % | 68 | % (d) | 193 | % (d) | 252 | % (d) | ||||||||||
Net assets at end of period (in 000’s) | $ | 4,128 | $ | 4,119 | $ | 3,180 | $ | 2,266 |
** | Commencement of operations. | |
†† | Annualized. | |
(a) | Per share data based on average shares outstanding during the period. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | Total investment return is not annualized. | |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 131% and 237% for the years ended October 31, 2010, 2009 and 2008, respectively. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 17 |
Financial Highlights selected per share data and ratios
Class A | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 9.78 | $ | 9.79 | $ | 9.29 | $ | 9.19 | $ | 9.08 | ||||||||||||
Net investment income (loss) | 0.11 | 0.11 | 0.10 | 0.24 | (a) | 0.35 | (a) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | 0.11 | 0.51 | 0.11 | 0.12 | ||||||||||||||||
Total from investment operations | 0.05 | 0.22 | 0.61 | 0.35 | 0.47 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.12 | ) | (0.11 | ) | (0.11 | ) | (0.25 | ) | (0.36 | ) | ||||||||||||
From net realized gain on investments | (0.02 | ) | (0.12 | ) | — | — | — | |||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.23 | ) | (0.11 | ) | (0.25 | ) | (0.36 | ) | ||||||||||||
Net asset value at end of year | $ | 9.69 | $ | 9.78 | $ | 9.79 | $ | 9.29 | $ | 9.19 | ||||||||||||
Total investment return (b) | 0.53 | % | 2.19 | % | 6.65 | % | 3.87 | % | 5.29 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.23 | % | 1.03 | % | 1.14 | % | 2.55 | % | 3.85 | % | ||||||||||||
Net expenses | 0.93 | % | 0.93 | % | 0.91 | % | 0.90 | % | 0.90 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.15 | % | 1.15 | % | 1.16 | % | 1.32 | % | 1.36 | % | ||||||||||||
Portfolio turnover rate | 39 | % | 68 | % (c) | 193 | % (c) | 252 | % (c) | 118 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 31,689 | $ | 36,665 | $ | 54,902 | $ | 20,313 | $ | 13,740 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. | |
(c) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 131% and 237% for the years ended October 31, 2010, 2009 and 2008, respectively. |
The notes to the financial statements are an integral part of,
18 MainStay Short Term Bond Fund | and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class I | ||||||||||||||||||||||
Year ended October 31, | ||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
Net asset value at beginning of year | $ | 9.78 | $ | 9.78 | $ | 9.29 | $ | 9.19 | $ | 9.08 | ||||||||||||
Net investment income (loss) | 0.14 | 0.13 | 0.15 | 0.29 | (a) | 0.38 | (a) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | 0.12 | 0.48 | 0.09 | 0.12 | ||||||||||||||||
Total from investment operations | 0.08 | 0.25 | 0.63 | 0.38 | 0.50 | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.13 | ) | (0.14 | ) | (0.28 | ) | (0.39 | ) | ||||||||||||
From net realized gain on investments | (0.02 | ) | (0.12 | ) | — | — | — | |||||||||||||||
Total dividends and distributions | (0.17 | ) | (0.25 | ) | (0.14 | ) | (0.28 | ) | (0.39 | ) | ||||||||||||
Net asset value at end of year | $ | 9.69 | $ | 9.78 | $ | 9.78 | $ | 9.29 | $ | 9.19 | ||||||||||||
Total investment return (b) | 0.78 | % | 2.55 | % | 6.83 | % | 4.17 | % | 5.59 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 1.48 | % | 1.32 | % | 1.43 | % | 3.15 | % | 4.15 | % | ||||||||||||
Net expenses | 0.68 | % | 0.68 | % | 0.63 | % | 0.60 | % | 0.60 | % | ||||||||||||
Expenses (before reimbursement/waiver) | 0.90 | % | 0.90 | % | 0.91 | % | 0.91 | % | 0.75 | % | ||||||||||||
Portfolio turnover rate | 39 | % | 68 | % (c) | 193 | % (c) | 252 | % (c) | 118 | % | ||||||||||||
Net assets at end of year (in 000’s) | $ | 48,193 | $ | 76,456 | $ | 79,237 | $ | 36,701 | $ | 87,535 |
(a) | Per share data based on average shares outstanding during the year. | |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. | |
(c) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 131% and 237% for the years ended October 31, 2010, 2009 and 2008, respectively. |
The notes to the financial statements are an integral part of,
and should be read in conjunction with, the financial statements. | mainstayinvestments.com 19 |
Notes to Financial Statements
Note 1–Organization and Business
MainStay Funds Trust (the “Trust”) was organized as a Delaware statutory trust on April 28, 2009, and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twenty-eight funds (collectively referred to as the “Funds”). These financial statements and notes relate only to the MainStay Short Term Bond Fund (the “Fund”), a diversified fund. The Fund is the successor of the Mainstay Short Term Bond Fund, a series of Eclipse Funds Inc. (the “Predecessor Fund”). The reorganization of the Predecessor Fund with and into the Fund occurred on February 26, 2010. All information and references to periods prior to February 26, 2010 relate to the Predecessor Fund.
The Fund currently offers three classes of shares. Class I shares commenced operations on January 2, 1991. Class A shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Investor Class and Class A shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain other qualified purchases) in Investor Class and Class A shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions made within one year of the date of purchase. Class I shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Investor Class shares may convert to Class A shares and Class A shares may convert to Investor Class shares. The three classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that Investor Class and Class A shares are subject to a distribution and/or service fee. Class I shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek to maximize total return, consistent with liquidity, preservation of capital and investment in short-term debt securities.
Note 2–Significant Accounting Policies
The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. Fair value measurements are determined within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in determining the fair value of investments) |
The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models, option adjusted spread pricing and estimating the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation, when there are significant events after the close of local foreign markets.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the year ended October 31, 2011, there have been no changes to the fair value methodologies.
The aggregate value by input level, as of October 31, 2011, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.
Debt securities are valued at the evaluated bid prices supplied by a pricing agent or brokers selected by the Fund’s Manager (as defined in Note 3(A)) in consultation with the Fund’s Subadvisor (as defined in Note 3(A)) whose prices reflect broker/dealer supplied valuations and electronic data processing techniques, if such prices are deemed by the Fund’s Manager, in consultation with the Fund’s Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds,
20 MainStay Short Term Bond Fund
foreign bonds, Yankee bonds, convertible bonds, asset-backed securities, and mortgage-backed securities, are generally categorized as Level 2 in the hierarchy.
Investments in other mutual funds are valued at their NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
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 which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not obtained from a quoted price in an active market. These securities are all generally categorized as Level 2 in the hierarchy.
Securities for which market quotations are not readily available are valued by methods deemed in good faith by the Fund’s Board to represent fair value. Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security the trading for which has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) 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 Manager or Subadvisor reflect the security’s market value; and (vi) 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. These securities are generally categorized as Level 3 in the hierarchy. At October 31, 2011, the Fund did not hold any securities that were fair valued in such a manner.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provision is required.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years), and has concluded that no provision for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends of net investment income monthly and distributions of net realized capital and currency gains, if any, annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method and include gains and losses from repayments of principal on mortgage-backed securities. Interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased, other than Short-Term Investments, for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities or, in the case of a callable security, over the period to the first date of call. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method. Income from payment-in-kind securities is recorded daily based on the effective interest method of accrual.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated to separate classes of shares pro rata based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements to earn income. The Fund may enter into repurchase agreements only with financial institutions that are deemed by the Manager or Subadvisor to be creditworthy, pursuant to guidelines established by the Fund’s Board. Repurchase agreements are considered under the 1940 Act to be collateralized loans by a Fund to the seller secured by the securities transferred to the Fund.
When the Fund invests in repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in such repurchase agreements. The underlying collateral is valued daily
mainstayinvestments.com 21
Notes to Financial Statements (continued)
on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default of the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Mortgage Dollar Rolls. The Fund may enter into mortgage dollar roll (“MDR”) transactions in which it sells mortgage-backed securities (“MBS”) from its portfolio to a counterparty from whom it simultaneously agrees to buy a similar security on a delayed delivery basis. The MDR transactions of the Fund are classified as purchase and sale transactions. The securities sold in connection with the MDRs are removed from the portfolio and a realized gain or loss is recognized. The securities the Fund has agreed to acquire are included at market value in the Portfolio of Investments and liabilities for such purchase commitments are included as payables for investments purchased. During the roll period, the Fund foregoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the forward price for the future as well as by the earnings on the cash proceeds of the initial sale. MDRs may be renewed without physical delivery of the securities subject to the contract. The Fund maintains liquid assets from its portfolio having a value not less than the repurchase price, including accrued interest. MDR transactions involve certain risks, including the risk that the MBS returned to the Fund at the end of the roll, while substantially similar, could be inferior to what was initially sold to the counterparty.
(I) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act, and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the Lending Agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund.
Although the Fund and New York Life Investments (as defined in Note 3(A)) have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund had no portfolio securities on loan as of October 31, 2011.
(J) Concentration of Risk. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.
(K) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, including a portion of the total compensation of the Chief Compliance Officer (“CCO”) of the Fund which is the responsibility of all investment companies for which the CCO serves, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. MacKay Shields LLC (“MacKay Shields” or the ”Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million and 0.575% in excess of $500 million. The effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.60% for the year ended October 31, 2011.
The Manager has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for Class A shares do not exceed 0.93% of its average daily net assets. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of the Fund. This agreement expires on February 28, 2012 and may only be
22 MainStay Short Term Bond Fund
amended or terminated prior to that date by action of the Board. Total Annual Fund Operating Expenses excludes taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses.
For the year ended October 31, 2011, New York Life Investments earned fees from the Fund in the amount of $543,526 and waived its fees and/or reimbursed expenses in the amount of $201,625.
State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAVs, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a Distribution Agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Investor Class and Class A Plans, the Distributor receives a monthly distribution fee from the Investor Class and Class A shares at an annual rate of 0.25% of the average daily net assets of the Investor Class and Class A shares for distribution or service activities as designated by the Distributor. Class I shares are not subject to a distribution or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. The Fund was advised by the Distributor that the amount of sales charges retained on sales of Investor Class and Class A shares were $1,682 and $3,722, respectively, for the year ended October 31, 2011.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with Boston Financial Data Services, Inc. (“BFDS”) pursuant to which BFDS performs certain transfer agent services on behalf of NYLIM Service Company LLC. Transfer agent expenses incurred by the Fund for the year ended October 31, 2011, were as follows:
Investor Class | $ | 19,409 | ||
Class A | 32,911 | |||
Class I | 61,478 | |||
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. At October 31, 2011, New York Life and its affiliates beneficially held shares of the Fund with the following values and percentages of net assets as follows:
Class A | $ | 1,234 | 0.0 | %‡ | ||||
‡ | Less than one-tenth of a percent. |
(G) Other. Pursuant to a Legal Services Agreement, a portion of the cost of legal services provided to the Fund by the Office of the General Counsel of New York Life Investments was payable directly by the Fund through March 17, 2011. For the year ended October 31, 2011, these fees, which are included in professional fees shown on the Statement of Operations, were $1,208. Effective March 18, 2011, the Legal Services Agreement expired and was not renewed. Therefore, the Fund is no longer directly responsible for any portion of the cost of legal services.
Note 4–Federal Income Tax
As of October 31, 2011, the components of accumulated gain (loss) on a tax basis were as follows:
Accumulated | ||||||||||||||||||
Capital | Other | Unrealized | Total | |||||||||||||||
Ordinary | and Other | Temporary | Appreciation | Accumulated | ||||||||||||||
Income | Gain (Loss) | Differences | (Depreciation) | Gain (Loss) | ||||||||||||||
$ | 142,935 | $ | 262,762 | $ | (8,539 | ) | $ | 1,262,880 | $ | 1,660,038 | ||||||||
Other temporary differences are primarily due to dividends payable.
The following table discloses the current year reclassifications between undistributed net investment income, accumulated net realized income (loss) on investments, and additional paid-in capital arising from permanent differences; net assets at October 31, 2011 were not affected.
Accumulated | ||||||||||
Undistributed Net | Net Realized | |||||||||
Investment | Gain (Loss) | Additional | ||||||||
Income (Loss) | on Investments | Paid-In Capital | ||||||||
$ | 11,222 | $ | (11,222 | ) | $ | — | ||||
The reclassifications for the Fund are primarily due to reclassifications of distributions.
Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their
mainstayinvestments.com 23
Notes to Financial Statements (continued)
character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The tax character of distributions paid during the years ended October 31, 2011 and October 31, 2010 shown in the Statements of Changes in Net Assets was as follows:
2011 | 2010 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 1,387,225 | $ | 2,956,375 | ||||
Long-Term Capital Gain | 76,342 | 130,656 | ||||||
Total | $ | 1,463,567 | $ | 3,087,031 | ||||
Note 5–Custodian
State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain affiliated funds maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective August 31, 2011, under an amended credit agreement, the aggregate commitment amount is $125,000,000 with an optional maximum amount of $175,000,000. The commitment rate is an annual rate of 0.08% of the average commitment amount, payable quarterly, regardless of usage, to The Bank of New York Mellon, which serves as the agent to the syndicate. The commitment fee is allocated among certain MainStay Funds based upon net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate or the one month London InterBank Offered Rate, whichever is higher. The amended credit agreement expires on August 29, 2012, although the MainStay Funds and the syndicate of banks may renew the amended credit agreement for an additional year on the same or different terms. Prior to August 31, 2011, the commitment rate was an annual rate of 0.10% of the average commitment amount, plus a 0.02% up-front payment. There were no borrowings made or outstanding with respect to the Fund on the amended credit agreement during the year ended October 31, 2011.
Note 7–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2011, purchases and sales of U.S. government securities were $26,712 and $55,306, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $7,814 and $4,666, respectively.
Note 8–Capital Share Transactions
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 152,379 | $ | 1,482,095 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,171 | 40,513 | ||||||
Shares redeemed | (154,069 | ) | (1,497,021 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 2,481 | 25,587 | ||||||
Shares converted into Investor Class (See Note 1) | 12,936 | 125,431 | ||||||
Shares converted from Investor Class (See Note 1) | (10,655 | ) | (103,641 | ) | ||||
Net increase (decrease) | 4,762 | $ | 47,377 | |||||
Year ended October 31, 2010: | ||||||||
Shares sold | 194,937 | $ | 1,898,142 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,204 | 60,332 | ||||||
Shares redeemed | (99,068 | ) | (964,661 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | 102,073 | 993,813 | ||||||
Shares converted into Investor Class (See Note 1) | 9,444 | 91,969 | ||||||
Shares converted from Investor Class (See Note 1) | (15,602 | ) | (151,364 | ) | ||||
Net increase (decrease) | 95,915 | $ | 934,418 | |||||
Class A | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 1,485,388 | $ | 14,395,718 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 38,059 | 368,657 | ||||||
Shares redeemed | (2,000,487 | ) | (19,391,442 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (477,040 | ) | (4,627,067 | ) | ||||
Shares converted into Class A (See Note 1) | 10,688 | 103,641 | ||||||
Shares converted from Class A (See Note 1) | (12,976 | ) | (125,431 | ) | ||||
Net increase (decrease) | (479,328 | ) | $ | (4,648,857 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 2,907,411 | $ | 28,220,310 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 73,258 | 710,341 | ||||||
Shares redeemed | (4,034,527 | ) | (39,176,244 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (1,053,858 | ) | (10,245,593 | ) | ||||
Shares converted into Class A (See Note 1) | 15,645 | 151,364 | ||||||
Shares converted from Class A (See Note 1) | (9,463 | ) | (91,969 | ) | ||||
Shares converted from Class A (a) | (813,781 | ) | (7,869,266 | ) | ||||
Net increase (decrease) | (1,861,457 | ) | $ | (18,055,464 | ) | |||
24 MainStay Short Term Bond Fund
Class I | Shares | Amount | ||||||
Year ended October 31, 2011: | ||||||||
Shares sold | 2,150,372 | $ | 20,852,307 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 89,514 | 866,930 | ||||||
Shares redeemed | (5,084,701 | ) | (49,252,816 | ) | ||||
Net increase (decrease) | (2,844,815 | ) | $ | (27,533,579 | ) | |||
Year ended October 31, 2010: | ||||||||
Shares sold | 4,326,886 | $ | 42,010,456 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 186,401 | 1,807,620 | ||||||
Shares redeemed | (5,607,063 | ) | (54,346,944 | ) | ||||
Net increase (decrease) in shares outstanding before conversion | (1,093,776 | ) | (10,528,868 | ) | ||||
Shares converted into Class I (a) | 813,781 | 7,869,266 | ||||||
Net increase (decrease) | (279,995 | ) | $ | (2,659,602 | ) | |||
(a) | In addition to any automatic conversion features described above in Note 1 with respect to Investor Class and Class A shares, investors generally may also elect to convert their shares on a voluntary basis into another share class of the same MainStay Fund subject to satisfying the eligibility requirements of the new share class, if any. However, the following limitations apply: |
• | Investor Class, Class A and Class C shares that remain subject to a CDSC are ineligible for a voluntary conversion. |
These limitations do not impact any automatic conversion features described elsewhere in Note 1 with respect to Investor Class and Class A shares.
An investor or an investor’s financial intermediary may contact the MainStay Funds to request a voluntary conversion between share classes of the same MainStay Fund. Investors may be required to provide sufficient information to establish eligibility to convert to the new share class. All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any sales load, fee or other charge. If an investor fails to remain eligible for the new share class, you may be converted automatically back to their original share class, or into another share class, if appropriate. Although the MainStay Funds expect that a conversion between share classes of the same MainStay Fund should not result in the recognition of a gain or loss for tax purposes, shareholders should consult with their own tax adviser with respect to the tax treatment of their investment in a MainStay Fund. The MainStay Funds may change, suspend or terminate this conversion feature at any time.
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2011, events and transactions subsequent to October 31, 2011 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
mainstayinvestments.com 25
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
MainStay Funds Trust:
MainStay Funds Trust:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MainStay Short Term Bond Fund (“the Fund”), one of the funds constituting MainStay Funds Trust, as of October 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2011, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the MainStay Short Term Bond Fund of MainStay Funds Trust as of October 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
-s- KPMG LLP
Philadelphia, Pennsylvania
December 22, 2011
December 22, 2011
26 MainStay Short Term Bond Fund
Federal Income Tax Information (Unaudited)
The Fund is required by the Internal Revenue Code to advise shareholders within 60 days of the Fund’s fiscal year end (October 31, 2011) as to the federal tax status of dividends paid by the Fund during such fiscal year. Accordingly, the Fund paid $76,342 as a long term capital gain distribution.
In February 2012, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099 which will show the federal tax status of the distributions received by shareholders in calendar year 2011. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year ended October 31, 2011.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; and (ii) on the Securities and Exchange Commission’s (SEC) website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the Fund’s website at mainstayinvestments.com; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).
mainstayinvestments.com 27
Board Members and Officers (Unaudited)
The Board Members oversee the MainStay Group of Funds (which is comprised of Funds that are series of The MainStay Funds, Eclipse Funds, Eclipse Funds Inc., MainStay Funds Trust, and MainStay VP Funds Trust) (collectively, the “Fund Complex”), the Manager and, when applicable, the Subadvisor(s). Each Board Member serves until his or her successor is elected and qualified or until his or her resignation, death or removal. The Retirement Policy provides that a Board Member shall tender his or her resignation upon reaching age 72. A Board Member reaching the age of 72 may continue for additional one-year periods with the approval of the Board’s Nominating and Governance Committee.
Officers serve a term of one year and are elected annually by the Board Members. The business address of each Board Member and officer listed below is 51 Madison Avenue, New York, New York 10010.
The Statement of Additional Information applicable to the Fund includes additional information about the Board Members and is available without charge, upon request, by calling 800-MAINSTAY (624-6782) or by going online to mainstayinvestments.com.
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Interested Board Member* | ||||||||
John Y. Kim 9/24/60 | Indefinite; Eclipse Funds: Trustee since 2008 (2 funds); Eclipse Funds Inc.: Director since 2008 (1 fund); The MainStay Funds: Trustee since 2008 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc. since 2008 (21 portfolios). | Member of the Board of Managers (since 2011) of New York Life Enterprises LLC; Chairman (since 2011), Member of the Board of Managers, Chief Executive Officer and President (since 2008) of New York Life Investment Management LLC and New York Life Investment Management Holdings LLC; Executive Vice President (since 2011) of New York Life Foundation; Member of the Board of Managers and Chairman of the Board of Private Advisors, L.L.C. (since 2010); Executive Vice President, New York Life Insurance Company (since 2008); Chairman of the Board (2008-2010) and Member of the Boards of Managers (since 2008) of MacKay Shields LLC, Institutional Capital LLC, Madison Capital Funding LLC, Madison Square Investors LLC, NYLCAP Manager LLC and McMorgan & Company LLC; Chairman of the Board and Chief Executive Officer, NYLIFE Distributors LLC (2008-2010); Executive Vice President of NYLIFE Insurance Company of Arizona and New York Life Insurance and Annuity Corporation (since 2008); President, Prudential Retirement, a business unit of Prudential Financial, Inc. (2002 to 2007) | 66 | None | ||||
* | This Board Member is considered to be an “interested person” of the MainStay Group of Funds within the meaning of the 1940 Act because of his affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During the Past Five Years.” |
28 MainStay Short Term Bond Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Susan B. Kerley 8/12/51 | Indefinite; Eclipse Funds: Chairman since 2005, and Trustee since 2000 (2 funds); Eclipse Funds Inc.: Chairman since 2005 and Director since 1990 (1 fund); The MainStay Funds: Chairman and Board Member since 2007 (14 funds); MainStay Funds Trust: Chairman and Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Chairman and Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | President, Strategic Management Advisors LLC (since 1990) | 66 | Trustee, Legg Mason Partners Funds, since 1991 (58 portfolios) | ||||
Alan R. Latshaw 3/27/51 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2006 (14 funds); MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 66 | Trustee, State Farm Associates Funds Trusts since 2005 (4 portfolios); Trustee, State Farm Mutual Fund Trust since 2005 (15 portfolios); Trustee, State Farm Variable Product Trust since 2005 (9 portfolios) | ||||
mainstayinvestments.com 29
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Peter Meenan 12/5/41 | Indefinite; Eclipse Funds: Trustee since 2002 (2 funds); Eclipse Funds Inc.: Director since 2002 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Independent Consultant; President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 66 | None | ||||
Richard H. Nolan, Jr. 11/16/46 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2006 (21 portfolios). | Managing Director, ICC Capital Management; President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 66 | None | ||||
Richard S. Trutanic 2/13/52 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 1994 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 2007 (21 portfolios). | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 66 | None | ||||
30 MainStay Short Term Bond Fund
Term of Office, | Number of | |||||||
Position(s) Held | Funds in Fund | Other | ||||||
with the Fund | Complex | Directorships | ||||||
Name and | Complex and | Principal Occupation(s) | Overseen by | Held by | ||||
Date of Birth | Length of Service | During Past Five Years | Board Member | Board Member | ||||
Non-Interested Board Members | ||||||||
Roman L. Weil 5/22/40 | Indefinite; Eclipse Funds: Trustee and Audit Committee Financial Expert since 2007 (2 funds); Eclipse Funds Inc.: Director and Audit Committee Financial Expert since 2007 (1 fund); The MainStay Funds: Trustee and Audit Committee Financial Expert since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director and Audit Committee Financial Expert since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1994 and Audit Committee Financial Expert since 2003 (21 portfolios). | Visiting Professor, NYU Stem School of Business, New York University (since 2011); President, Roman L. Weil Associates, Inc. (consulting firm) (since 1981); V. Duane Rath Professor Emeritus of Accounting, Chicago Booth School of Business, University of Chicago (1965-2008) | 66 | None | ||||
John A. Weisser 10/22/41 | Indefinite; Eclipse Funds: Trustee since 2007 (2 funds); Eclipse Funds Inc.: Director since 2007 (1 fund); The MainStay Funds: Trustee since 2007 (14 funds); MainStay Funds Trust: Trustee since 2009 (28 funds); and MainStay VP Funds Trust: Director since 2011 and its predecessor, MainStay VP Series Fund, Inc., since 1997 (21 portfolios). | Retired. Managing Director of Salomon Brothers, Inc. (1971 to 1995) | 66 | Trustee, Direxion Funds since 2007 (27 portfolios); Direxion Insurance Trust since 2007 (1 portfolio); Trustee, Direxion Shares ETF Trust, since 2008 (50 portfolios) | ||||
mainstayinvestments.com 31
The following individuals have been appointed by the Board Members to serve as Officers of the MainStay Group of Funds.
Positions(s) Held | ||||
Name and | with the Funds | Principal Occupation(s) | ||
Date of Birth | and Length of Service | During Past Five Years | ||
Officers | ||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Assistant Treasurer, New York Life Investment Management Holdings LLC (since 2008); Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007); Vice President, Prudential Investments (2000 to 2007); Assistant Treasurer, JennisonDryden Family of Funds, Target Portfolio Trust, The Prudential Series Fund and American Skandia Trust (2006 to 2007); Treasurer and Principal Financial Officer, The Greater China Fund (2007) | ||
Jeffrey A. Engelsman 9/28/67 | Vice President and Chief Compliance Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2009) | Managing Director, Compliance (since 2009), Director and Associate General Counsel, New York Life Investment Management LLC (2005 to 2008); Assistant Secretary, NYLIFE Distributors LLC (2006 to 2008); Assistant Secretary NYLIFE Distributors LLC (2006 to 2008); Vice President and Chief Compliance Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2009); Assistant Secretary, The MainStay Funds and ICAP Funds, Inc. (2006 to 2008); Assistant Secretary, Eclipse Funds, Eclipse Funds, Inc. and MainStay VP Series Fund, Inc. (2005 to 2008) | ||
Stephen P. Fisher 2/22/59 | President, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Director, Senior Vice President, New York Life Insurance and Annuity Corporation (since 2011); Manager, President and Chief Operating Officer, NYLIFE Distributors LLC (since 2007); Chairman of the Board, NYLIM Service Company LLC (since 2008); Senior Managing Director and Chief Marketing Officer, New York Life Investment Management LLC (since 2005); President, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2007) | ||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, Eclipse Funds, Eclipse Funds, Inc., The MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2010); Director and Counsel of Credit Suisse, Chief Legal Officer and Secretary of Credit Suisse Asset Management, LLC and Credit Suisse Funds (2003 to 2010) | ||
Scott T. Harrington 2/8/59 | Vice President — Administration, Eclipse Funds, Eclipse Funds, Inc. and The MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Director (since 2009), New York Life Trust Company FSB; Vice President—Administration, MainStay VP Funds Trust and its predecessor, MainStay VP Series Fund, Inc. (since 2005) | ||
* | The Officers listed above are considered to be “interested persons” of the MainStay Group of Funds within the meaning of the 1940 Act because of their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Madison Square Investors LLC, MacKay Shields LLC, Institutional Capital LLC, Epoch Investment Partners, Inc., Markston International, LLC, Winslow Capital Management, Inc., NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board to serve a one-year term. |
32 MainStay Short Term Bond Fund
This page intentionally left blank
This page intentionally left blank
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay offerings is listed here, with information about the manager, subadvisors, legal counsel, and independent registered public accounting firm.
Equity Funds
MainStay 130/30 Core Fund
MainStay Common Stock Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Fund
MainStay Equity Index Fund1
MainStay Growth Equity Fund
MainStay ICAP Equity Fund
MainStay ICAP Select Equity Fund
MainStay Large Cap Growth Fund
MainStay MAP Fund
MainStay S&P 500 Index Fund
MainStay U.S. Small Cap Fund
Income Funds
MainStay Flexible Bond Opportunities Fund
MainStay Floating Rate Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Municipal Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Intermediate Term Bond Fund
MainStay Money Market Fund
MainStay Principal Preservation Fund
MainStay Short Term Bond Fund
MainStay Tax Free Bond Fund
Blended Funds
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
International Funds
MainStay 130/30 International Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay Global High Income Fund
MainStay ICAP Global Fund
MainStay ICAP International Fund
MainStay International Equity Fund
Asset Allocation Funds
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
Retirement Funds
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC2
Chicago, Illinois
MacKay Shields LLC2
New York, New York
Madison Square Investors LLC2
New York, New York
Markston International LLC
White Plains, New York
Winslow Capital Management, Inc.
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firm
KPMG LLP
1. | Closed to new investors and new purchases as of January 1, 2002. |
2. | An affiliate of New York Life Investment Management LLC. |
mainstayinvestments.com
The MainStay Funds are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors is a Member FINRA/SIPC.
MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This report may be distributed only when preceded or accompanied by a current Fund prospectus.
© 2012 by NYLIFE Distributors LLC. All rights reserved.
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency | ||||||||
NYLIM-24964 MS284-11 | MSSB11-12/11 |
NB5
Item 2. Code of Ethics.
As of the end of the period covered by this report, the Registrant has adopted a code of ethics (the “Code”) that applies to the Registrant’s principal executive officer (“PEO”) and principal financial officer (“PFO”). A copy of the Code is filed herewith. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report.
Item 3. Audit Committee Financial Expert.
The Board of Trustees has determined that the Registrant has two audit committee financial experts serving on its Audit Committee. The Audit Committee financial experts are Alan R. Latshaw and Roman L. Weil. Messrs. Latshaw and Weil are “independent” within the meaning of that term under the Investment Company Act of 1940.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
The aggregate fees billed for the fiscal year ended October 31, 2011 for professional services rendered by KPMG LLP (“KPMG”) for the audit of the Registrant’s annual financial statements or services that are normally provided by KPMG in connection with statutory and regulatory filings or engagements for that fiscal year were $893,000.
The aggregate fees billed for the fiscal year ended October 31, 2010 for professional services rendered by KPMG LLP (“KPMG”) for the audit of the Registrant’s annual financial statements or services that are normally provided by KPMG in connection with statutory and regulatory filings or engagements for that fiscal year were $984,550.
(b) Audit-Related Fees
The aggregate fees billed for assurance and related services by KPMG that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2011. These audit-related services include review of financial highlights for Registrant’s registration statements and issuance of consents to use the auditor’s reports.
The aggregate fees billed for assurance and related services by KPMG that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $7,500 for the fiscal year ended October 31, 2010.
(c) Tax Fees
The aggregate fees billed for professional services rendered by KPMG for tax compliance, tax advice, and tax planning were $138,605 during the fiscal year ended October 31, 2011. These services primarily included preparation of federal, state and local income tax returns and excise tax returns, as well as services relating to excise tax distribution requirements.
The aggregate fees billed for professional services rendered by KPMG for tax compliance, tax advice, and tax planning were $164,330 during the fiscal year ended October 31, 2010. These services primarily included preparation of federal, state and local income tax returns and excise tax returns, as well as services relating to excise tax distribution requirements.
(d) All Other Fees
The aggregate fees billed for products and services provided by KPMG, other than the services reported in paragraphs (a) through (c) of this Item were $0 during the fiscal year ended October 31, 2011.
The aggregate fees billed for products and services provided by KPMG, other than the services reported in paragraphs (a) through (c) of this Item were $0 during the fiscal year ended October 31, 2010.
(e) Pre-Approval Policies and Procedures
(1) | The Registrant’s Audit Committee has adopted pre-approval policies and procedures (the “Procedures”) to govern the Committee’s pre-approval of (i) all audit services and permissible non-audit services to be provided to the Registrant by its independent accountant, and (ii) all permissible non-audit services to be provided by such independent accountant to the Registrant’s investment adviser and to any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant (collectively, the “Service Affiliates”) if the services directly relate to the Registrant’s operations and financial reporting. In accordance with the Procedures, the Audit Committee is responsible for the engagement of the independent accountant to certify the Registrant’s financial statements for each fiscal year. With respect to the pre-approval of non-audit services provided to the Registrant and its Service Affiliates, the Procedures provide that the Audit Committee may annually pre-approve a list of the types of services that may be provided to the Registrant or its Service Affiliates, or the Audit Committee may pre-approve such services on a project-by-project basis as they arise. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent accountant. The Procedures also permit the Audit Committee to delegate authority to one or more of its members to pre-approve any proposed non-audit services that have not been previously pre-approved by the Audit Committee, subject to the ratification by the full Audit Committee no later than its next scheduled meeting. To date, the Audit Committee has not delegated such authority. | ||
(2) | With respect to the services described in paragraphs (b) through (d) of this Item 4, no amount was approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) There were no hours expended on KPMG’s engagement to audit the Registrant’s financial statements for the most recent fiscal year was attributable to work performed by persons other than KPMG’s full-time, permanent employees.
(g) All non-audit fees billed by KPMG for services rendered to the Registrant for the fiscal year ended October 31, 2011 are disclosed in 4(b)-(d) above.
The aggregate non-audit fees billed by KPMG for services rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant were approximately $0 for the fiscal year ended October 31, 2011.
The aggregate non-audit fees billed by KPMG for services rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant were approximately $0 for the fiscal year ended October 31, 2010.
(h) The Registrant’s Audit Committee has determined that the non-audit services rendered by KPMG for the fiscal year ended October 31, 2011 to the Registrant’s investment adviser and any entity controlling, controlled by, or under common control with the Registrant’s investment adviser that provides ongoing services to the Registrant that were not required to be pre-approved by the Audit Committee because they did not relate directly to the operations and financial reporting of the registrant were compatible with maintaining the respective independence of KPMG during the relevant time period.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
The Schedule of Investments is included as part of Item 1 of this report.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not Applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Since the Registrant’s last response to this Item, there have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the Registrant’s Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) (the “Disclosure Controls”), as of a date within 90 days prior to the filing date (the “Filing Date”) of this Form N-CSR (the “Report”), the Registrant’s principal executive officer and principal financial officer have concluded that the Disclosure Controls are reasonably designed to ensure that information required to be disclosed by the Registrant in the Report is recorded, processed, summarized and reported by the Filing Date, including ensuring that
information required to be disclosed in the Report is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d)) under the Investment Company Act of 1940 that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Code of Ethics
(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2 under the Investment Company Act of 1940.
(b) Certifications of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAINSTAY FUNDS TRUST
By: | /s/ Stephen P. Fisher President and Principal Executive Officer |
Date: January 9, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Stephen P. Fisher President and Principal Executive Officer |
Date: January 9, 2012
By: | /s/ Jack R. Benintende Treasurer and Principal Financial and Accounting Officer |
Date: January 9, 2012
EXHIBIT INDEX
(a)(1) | Code of Ethics |
(a)(2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2 under the Investment Company Act of 1940. |
(b) | Certification of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002. |