UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number 811-04550
THE MAINSTAY FUNDS
(Exact name of Registrant as specified in charter)
51 Madison Avenue, New York, NY 10010
(Address of principal executive offices) (Zip code)
J. Kevin Gao, Esq.
30 Hudson Street
Jersey City, New Jersey 07302
(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: April 30, 2016
Item 1. | Reports to Stockholders. |
MainStay Unconstrained Bond Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
This Page Intentionally Left Blank
Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Table of Contents
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –4.11 0.41 | %
|
| –7.26 –2.89 | %
|
| 2.14 3.09 | %
|
| 4.59 5.07 | %
|
| 1.01 1.01 | %
| |||||||
Investor Class Shares3 | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –4.00 0.52 |
|
| –7.25 –2.88 |
|
| 2.04 2.99 |
|
| 4.49 4.97 |
|
| 1.03 1.03 |
| |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges |
| –4.89 0.03 |
|
| –8.32 –3.65 |
|
| 1.86 2.21 |
|
| 4.18 4.18 |
|
| 1.78 1.78 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within | With sales charges Excluding sales charges |
| –0.95 0.03 |
|
| –4.59 –3.65 |
|
| 2.19 2.19 |
|
| 4.17 4.17 |
|
| 1.78 1.78 |
| |||||||
Class I Shares | No Sales Charge | 0.65 | –2.64 | 3.34 | 5.37 | 0.76 | ||||||||||||||||||
Class R2 Shares4 | No Sales Charge | 0.36 | –3.00 | 2.98 | 4.96 | 1.11 | ||||||||||||||||||
Class R3 Shares5 | No Sales Charge | 0.35 | –3.12 | 2.75 | 4.71 | 1.36 |
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, changes 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 may 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 (if any), 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 would likely have been different. |
4. | Performance figures for Class R2 shares, first offered on February 28, 2014, include the historical performance of Class A shares through February 27, 2014, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R2 shares would likely have been different. |
5. | Performance figures for Class R3 shares, first offered on February 29, 2016, include the historical performance of Class A shares through February 28, 2016. Performance for Class R3 shares would likely have been different because of differences in expenses attributable to each share class. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Barclays U.S. Aggregate Bond Index6 | 2.82 | % | 2.72 | % | 3.60 | % | 4.95 | % | ||||||||
BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index7 | 0.21 | 0.35 | 0.33 | 1.59 | ||||||||||||
Morningstar Nontraditional Bond Category Average8 | 0.57 | –0.94 | 1.51 | 3.34 |
6. | The Barclays 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. The Barclays U.S. Aggregate Bond Index is the Fund’s primary 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. |
7. | The BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index represents the London InterBank Offered Rate (“LIBOR”) with a constant 3-month average maturity and is the Fund’s secondary benchmark. LIBOR is |
a composite of interest rates at which banks borrow from one another in the London market, and it is a widely used benchmark for short-term interest rates. An investment cannot be made directly in an index. |
8. | The Morningstar Nontraditional Bond Category Average contains funds that pursue strategies divergent in one or more ways from conventional practice in the broader bond-fund universe. Morningstar category averages are equal-weighted returns based on constituents of the category at the end of the period. The Fund has selected the Morningstar nontraditional bond category average as an additional benchmark. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
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 Unconstrained Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay Unconstrained Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,004.10 | $ | 5.83 | $ | 1,019.00 | $ | 5.87 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,005.20 | $ | 5.93 | $ | 1,018.90 | $ | 5.97 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,000.30 | $ | 9.65 | $ | 1,015.20 | $ | 9.72 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,000.30 | $ | 9.65 | $ | 1,015.20 | $ | 9.72 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,006.50 | $ | 4.59 | $ | 1,020.30 | $ | 4.62 | ||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,003.60 | $ | 6.33 | $ | 1,018.50 | $ | 6.37 | ||||||||||
Class R3 Shares2,3 | $ | 1,000.00 | $ | 1,053.30 | $ | 2.64 | $ | 1,005.80 | $ | 2.57 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.17% for Class A, 1.19% for Investor Class, 1.94% for Class B and Class C, 0.92% for Class I, 1.27% for Class R2 and 1.54% for Class R3) multiplied by the average account value over the period, divided by 366 and multiplied by 182 days for Class A, Investor Class, Class B, Class C, Class I and R2 (to reflect the six-month period) and 61 days for Class R3 to (to reflect the since-inception period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses paid during the period reflect ongoing costs for the period from inception through April 30, 2016. Had these shares been offered for the full six-month period ended April 30, 2016, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $7.72 for Class R3 and the ending account value would have been $1,017.20 for Class R3. |
3. | The inception date for Class R3 shares was February 29, 2016. |
7 |
Portfolio Composition as of April 30, 2016 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings or Issuers Held as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | Bank of America Corp., 3.30%–8.57%, due 6/1/19–12/29/49 |
2. | Morgan Stanley, 4.875%–5.45%, due 11/1/22–7/29/49 |
3. | USAGM HoldCo LLC, 4.75%–9.50%, due 7/28/22–7/28/23 |
4. | Scientific Games International, Inc., 6.00%–10.00%, due 10/18/20–12/1/22 |
5. | MPH Acquisition Holdings LLC, 3.75%–6.625%, due 3/31/21–4/1/22 |
6. | CITGO Petroleum Corp., 4.50%–6.25%, due 7/29/21–8/15/22 |
7. | Quikrete Holdings, Inc., 4.00%–7.00%, due 9/28/20–3/26/21 |
8. | Dollar Tree, Inc., 3.50%–5.75%, due 7/6/22–3/1/23 |
9. | Ortho-Clinical Diagnostics, Inc., 4.75%, due 6/30/21 |
10. | FirstEnergy Transmission LLC, 5.45%, due 7/15/44 |
8 | MainStay Unconstrained Bond Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Michael Kimble, CFA, Louis N. Cohen, CFA, and Taylor Wagenseil of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay Unconstrained Bond Fund perform relative to its benchmarks and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay Unconstrained Bond Fund returned 0.41% for Class A shares, 0.52% for Investor Class shares and 0.03% for Class B and Class C shares for the six months ended April 30, 2016. Over the same period, the Fund returned 0.65% for Class I shares, 0.36% for Class R2 shares and 0.35% for Class R3 shares.1 For the six months ended April 30, 2016, all share classes underperformed the 2.82% return of the Barclays U.S. Aggregate Bond Index,2 which is the Fund’s primary benchmark. Over the same period, Class B and Class C shares underperformed—and all other share classes outperformed—the 0.21% return of the BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index,2 which is the Fund’s secondary benchmark. For the six months ended April 30, 2016, Class I shares outperformed—and all other share classes underperformed—the 0.57% return of the Morningstar Nontraditional Bond Category Average,3 which is an additional benchmark for the Fund. See page 5 for Fund returns with applicable sales charges.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
In order to manage the Fund’s duration,4 the Fund held a sizeable short position in two-year U.S. Treasury securities through the use of U.S. Treasury futures. This position made a negative contribution to the Fund’s performance. (Contributions take weightings and total returns into account.)
What factors affected the Fund’s relative performance during the reporting period?
Throughout the reporting period, our strategy was to maintain long positions in credit, including high-yield bonds and bank loans, combined with a short duration posture and yield-curve5 flattening bias. This positioning fell out of favor during the second half of the reporting period. On average, U.S. Treasury yields declined during the reporting period. Since the Fund’s duration was shorter than that of the Barclays U.S. Aggregate Bond Index, however, the Fund was less sensitive to yield changes, which detracted from relative performance.
During the reporting period, corporate bonds trailed comparable-duration U.S. Treasury securities, with the performance gap being more pronounced for below-investment-grade securities. We believe that corporate-bond underperformance can be explained by dampened investor confidence in light of a sluggish recovery and lower commodity prices. The Fund held overweight positions relative to the Barclays U.S. Aggregate Bond Index in investment-grade and high-yield corporate bonds. Hard-asset industries, such as energy and metals/mining, were among the laggards in the Fund, while higher-quality financials and slightly longer-duration bonds performed well. During the reporting period, the Fund reduced its exposure to weaker credit profiles in the energy sector.
During the reporting period, the senior loan market was also hurt by the problems facing risky assets, including seasonal illiquidity, severe pressure in the fixed-rate high-yield market, and volatile commodity and asset prices globally. We believed that senior loans were likely to weather the energy and metals/mining storm that had challenged their high-yield bond counterparts from a default and recovery perspective.
Though spread product6 underperformed on a relative basis, there was significant spread compression in the market near the end of the reporting period, as the high-yield market rebounded off mid-February lows. This rebound coincided with a sharp turnaround in energy prices as fears abated that the United States would slip into recession or that China’s economy would grind to a halt. Because the Fund holds high-yield bonds that the Index does not, these variations in high-yield performance had a direct impact on the Fund’s relative performance.
What was the Fund’s duration strategy during the reporting period?
The Fund’s duration was shorter than that of the Barclays U.S. Aggregate Bond Index throughout the reporting period. To reduce its duration and minimize sensitivity to a move in interest rates, the Fund maintained a sizeable short position in two-year U.S. Treasury securities through U.S. Treasury futures and interest-rate swaps. At the end of the reporting period, the Fund’s duration was approximately 1.1 years, which was shorter than the 5.5-year duration of the Barclays U.S. Aggregate Bond Index.
1. | See footnote on page 5 for more information on Class R3 shares. |
2. | See footnote on page 6 for more information on this index. |
3. | See footnote on page 6 for more information on the Morningstar Nontraditional Bond Category Average. |
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 a more accurate sensitivity gauge than average maturity. |
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. |
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. The term “spread product” refers to asset classes that typically trade at a spread to comparable U.S. Treasury securities. |
9 |
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
Throughout the reporting period, a number of factors were considered in positioning the Fund. These factors included inconsistent economic data, global central-bank monetary policy, volatility in energy prices, China’s slowing economy and a flattening yield curve. Nevertheless, we believed that corporate bonds—investment-grade and high-yield—warranted an overweight position compared to government-related securities. This positioning was due to the current low-interest-rate environment, significant refinancing in the credit markets, improved balance sheet fundamentals and a favorable supply/demand balance for corporate debt.
For these reasons, no major shifts were made in the Fund’s positioning during the reporting period and the Fund maintained its credit bias. During the reporting period, however, the Fund’s position in energy was reduced. Though energy prices rallied at the end of the reporting period, prices are well off their highs and defaults were increasing.
During the reporting period, which market segments were the strongest positive contributors to the Fund’s performance and which market segments were particularly weak?
The Fund’s investment-grade credit component was its largest contributor to performance during the reporting period as longer maturities and higher-quality credits performed better than below-investment-grade credits. Bank loans also performed better than high-yield bonds.
Within the Fund’s high-yield position, contributors and detractors for the reporting period were defined by a bifurcation in the credit markets. Positions that were the weakest performers in the first half of the reporting period—such as high-yield energy and metals/mining holdings—were weakest performers overall. The rest of the market, however, held up fairly well compared to commodity-related securities. As energy and commodity prices rebounded toward the end of the reporting period, so did energy and commodity-related bonds.
Did the Fund make any significant purchases or sales during the reporting period?
During the reporting period, the Fund initiated a position in GEO Group, which provides government-outsourced services specializing in the management of correctional, detention, and re-entry facilities. The Fund also purchased bonds of Ardagh Group, a global leader in glass and metal packaging solutions. Both positions were purchased as new issues, offered attractive yields and were from companies that generated strong cash flows.
During the reporting period, the Fund sold bonds in pipeline company Energy Transfer Partners and banking company HSBC. Energy Transfer Partners’ merger with another pipeline operator began to unravel, which had a negative impact on the bonds. The HSBC bonds were contingent convertible bonds, a structure the market did not view favorably after payment concerns arose at another bank. As a result, the Fund exited this position.
How did the Fund’s sector weightings change during the reporting period?
The Fund witnessed increased bouts of volatility during the reporting period, and we believed that this would persist into the near future because of changing market technical conditions and reduced liquidity. Even so, there were no significant changes to the Fund’s positioning. The high-yield component of the Fund pared back exposure to companies with weaker credit profiles. This, in turn, slightly reduced the Fund’s overall exposure to high-yield securities by the end of the reporting period. The Fund also moderately increased its exposure to investment-grade bonds. The Fund’s duration remained consistent throughout the reporting period.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2016, the Fund maintained overweight positions relative to the Barclays U.S. Aggregate Index in spread products, specifically in high-yield bonds and, to a more moderate degree, in bank loans. The increased volatility experienced in the third quarter of 2015 created a wider disparity between spreads and defaults, increasing our conviction in our overweight position in high-yield securities. The Fund held underweight positions relative to the Index in sectors that tend to be more interest-rate sensitive, such as U.S. Treasury 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 forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay Unconstrained Bond Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 92.3%† Asset-Backed Securities 0.3% |
| |||||||
Home Equity 0.2% | ||||||||
Carrington Mortgage Loan Trust | $ | 239,639 | $ | 228,239 | ||||
Citigroup Mortgage Loan Trust | 148,013 | 103,737 | ||||||
First NLC Trust | 386,641 | 207,955 | ||||||
GSAA Home Equity Trust | 822,227 | 420,166 | ||||||
Home Equity Loan Trust | 86,628 | 83,948 | ||||||
HSI Asset Securitization Corp. Trust | 3,758 | 2,633 | ||||||
JPMorgan Mortgage Acquisition Trust | 149,322 | 88,720 | ||||||
MASTR Asset Backed Securities Trust | 101,237 | 44,650 | ||||||
Morgan Stanley ABS Capital I, Inc. | 355,366 | 154,455 | ||||||
Series 2006-HE8, Class A2B | 183,491 | 99,813 | ||||||
Series 2007-HE4, Class A2A | 95,993 | 42,751 | ||||||
Series 2007-NC2, Class A2FP | 365,509 | 194,070 | ||||||
Renaissance Home Equity Loan Trust | 895,079 | 432,764 | ||||||
Securitized Asset Backed Receivables LLC Trust | 434,890 | 251,507 | ||||||
Soundview Home Equity Loan Trust | 377,518 | 223,511 | ||||||
Series 2006-EQ2, Class A2 | 236,211 | 164,603 |
Principal Amount | Value | |||||||
Home Equity (continued) | ||||||||
Specialty Underwriting & Residential Finance Trust | $ | 955,821 | $ | 417,041 | ||||
|
| |||||||
3,160,563 | ||||||||
|
| |||||||
Student Loans 0.1% | ||||||||
KeyCorp Student Loan Trust | 1,026,698 | 990,024 | ||||||
|
| |||||||
Total Asset-Backed Securities | 4,150,587 | |||||||
|
| |||||||
Convertible Bond 0.1% | ||||||||
Transportation 0.1% | ||||||||
Hornbeck Offshore Services, Inc. | 1,900,000 | 1,182,750 | ||||||
|
| |||||||
Total Convertible Bond | 1,182,750 | |||||||
|
| |||||||
Corporate Bonds 73.6% | ||||||||
Advertising 0.2% | ||||||||
Lamar Media Corp. | 2,695,000 | 2,843,225 | ||||||
|
| |||||||
Aerospace & Defense 1.5% | ||||||||
KLX, Inc. | 8,935,000 | 8,990,844 | ||||||
Moog, Inc. | 5,505,000 | 5,560,050 | ||||||
Orbital ATK, Inc. | 2,250,000 | 2,356,875 | ||||||
5.50%, due 10/1/23 (b) | 4,045,000 | 4,247,250 | ||||||
TransDigm, Inc. | 2,035,000 | 2,127,592 | ||||||
|
| |||||||
23,282,611 | ||||||||
|
| |||||||
Airlines 1.4% | ||||||||
Continental Airlines, Inc. | 3,004,488 | 3,319,959 | ||||||
Series 2003-ERJ1 | 221,380 | 230,235 | ||||||
Series 2005-ERJ1 | 449,315 | 488,630 | ||||||
Delta Air Lines, Inc. | 909,237 | 966,064 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2016, 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Airlines (continued) | ||||||||
U.S. Airways Group, Inc. | $ | 2,311,195 | $ | 2,582,760 | ||||
Class A Series 2010-1 Pass Through Trust | 6,941,354 | 7,704,903 | ||||||
United Airlines, Inc. | 5,881,604 | 5,837,492 | ||||||
|
| |||||||
21,130,043 | ||||||||
|
| |||||||
Auto Manufacturers 1.3% |
| |||||||
Ford Holdings LLC | 93,000 | 125,049 | ||||||
Ford Motor Co. | 39,000 | 51,758 | ||||||
8.90%, due 1/15/32 | 3,009,000 | 4,012,128 | ||||||
Ford Motor Credit Co. LLC | 22,000 | 22,922 | ||||||
General Motors Financial Co., Inc. | 8,590,000 | 8,621,740 | ||||||
Navistar International Corp. | 9,049,000 | 6,470,035 | ||||||
|
| |||||||
19,303,632 | ||||||||
|
| |||||||
Auto Parts & Equipment 2.7% |
| |||||||
Dana Holding Corp. | 8,575,000 | 8,767,938 | ||||||
Goodyear Tire & Rubber Co. (The) | 6,977,000 | 7,347,653 | ||||||
7.00%, due 5/15/22 | 1,000,000 | 1,080,000 | ||||||
MPG Holdco I, Inc. | 8,575,000 | 8,575,000 | ||||||
Schaeffler Finance B.V. | 6,490,000 | 6,668,475 | ||||||
ZF North America Capital, Inc. | 9,440,000 | 9,664,011 | ||||||
|
| |||||||
42,103,077 | ||||||||
|
| |||||||
Banks 7.5% |
| |||||||
¨Bank of America Corp. | 510,000 | 518,304 | ||||||
4.25%, due 10/22/26 | 7,260,000 | 7,420,221 | ||||||
5.125%, due 12/29/49 (a) | 4,990,000 | 4,671,888 | ||||||
5.625%, due 7/1/20 | 1,720,000 | 1,932,826 | ||||||
6.11%, due 1/29/37 | 2,807,000 | 3,261,566 | ||||||
6.30%, due 12/29/49 (a) | 3,570,000 | 3,739,575 | ||||||
7.625%, due 6/1/19 | 420,000 | 487,030 | ||||||
8.57%, due 11/15/24 | 1,645,000 | 2,112,343 |
Principal Amount | Value | |||||||
Banks (continued) |
| |||||||
Barclays Bank PLC | $ | 8,037,000 | $ | 8,646,317 | ||||
Capital One Financial Corp. | 7,975,000 | 7,959,050 | ||||||
CIT Group, Inc. | 2,000,000 | 2,080,000 | ||||||
6.625%, due 4/1/18 (b) | 5,100,000 | 5,374,125 | ||||||
Citigroup, Inc. | 10,800,000 | 10,584,000 | ||||||
Citizens Financial Group, Inc. | 2,270,000 | 2,351,940 | ||||||
Goldman Sachs Group, Inc. (The) | 7,257,000 | 7,520,611 | ||||||
JPMorgan Chase & Co. | 7,595,000 | 7,795,508 | ||||||
Mellon Capital III | GBP 2,950,000 | 4,299,619 | ||||||
¨Morgan Stanley | $ | 4,287,000 | 4,664,282 | |||||
5.00%, due 11/24/25 | 2,465,000 | 2,683,024 | ||||||
5.45%, due 7/29/49 (a) | 11,425,000 | 10,882,313 | ||||||
Royal Bank of Scotland Group PLC | 8,746,000 | 8,560,733 | ||||||
Wells Fargo & Co. | 5,835,000 | 5,973,581 | ||||||
Wells Fargo Capital X | 1,490,000 | 1,528,740 | ||||||
|
| |||||||
115,047,596 | ||||||||
|
| |||||||
Building Materials 1.2% |
| |||||||
Masco Corp. | 2,250,000 | 2,598,750 | ||||||
Standard Industries, Inc. | 8,400,000 | 8,757,000 | ||||||
USG Corp. | 6,755,000 | 7,109,637 | ||||||
|
| |||||||
18,465,387 | ||||||||
|
| |||||||
Chemicals 1.4% |
| |||||||
Ashland, Inc. | 2,970,000 | 2,987,078 | ||||||
Dow Chemical Co. (The) | 693,000 | 827,558 | ||||||
Hexion, Inc. | 2,385,000 | 1,997,438 | ||||||
8.875%, due 2/1/18 | 2,283,000 | 1,769,325 | ||||||
Huntsman International LLC | EUR 3,275,000 | 3,860,741 | ||||||
5.125%, due 11/15/22 | $ | 3,500,000 | 3,517,500 | |||||
WR Grace & Co. | 6,410,000 | 6,711,270 | ||||||
|
| |||||||
21,670,910 | ||||||||
|
|
12 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Commercial Services 1.3% |
| |||||||
Avis Budget Car Rental LLC / Avis Budget Finance, Inc. | $ | 5,000,000 | $ | 4,746,875 | ||||
5.50%, due 4/1/23 | 2,000 | 1,912 | ||||||
Hertz Corp. (The) | 3,865,000 | 3,892,016 | ||||||
Service Corporation International | 1,835,000 | 1,922,163 | ||||||
United Rentals North America, Inc. | 4,710,000 | 4,692,337 | ||||||
5.75%, due 11/15/24 | 1,750,000 | 1,774,063 | ||||||
6.125%, due 6/15/23 | 3,259,000 | 3,381,212 | ||||||
|
| |||||||
20,410,578 | ||||||||
|
| |||||||
Computers 0.6% | ||||||||
NCR Corp. | 5,215,000 | 5,228,037 | ||||||
6.375%, due 12/15/23 | 3,350,000 | 3,484,000 | ||||||
|
| |||||||
8,712,037 | ||||||||
|
| |||||||
Diversified Financial Services 0.1% | ||||||||
Peachtree Corners Funding Trust | 1,690,000 | 1,708,370 | ||||||
|
| |||||||
Electric 2.5% | ||||||||
Calpine Corp. | 4,760,000 | 4,807,600 | ||||||
¨FirstEnergy Transmission LLC | 10,815,000 | 11,614,175 | ||||||
Great Plains Energy, Inc. | 5,200,000 | 5,665,322 | ||||||
5.292%, due 6/15/22 (c) | 663,000 | 741,058 | ||||||
IPALCO Enterprises, Inc. | 8,560,000 | 8,731,200 | ||||||
WEC Energy Group, Inc. | 7,793,280 | 6,429,456 | ||||||
|
| |||||||
37,988,811 | ||||||||
|
| |||||||
Engineering & Construction 0.4% | ||||||||
SBA Communications Corp. | 6,561,000 | 6,606,140 | ||||||
|
| |||||||
Entertainment 1.2% | ||||||||
Isle of Capri Casinos, Inc. | 485,000 | 505,612 | ||||||
8.875%, due 6/15/20 (d) | 5,815,000 | 6,113,019 | ||||||
Mohegan Tribal Gaming Authority | 5,102,000 | 5,318,835 |
Principal Amount | Value | |||||||
Entertainment (continued) | ||||||||
¨Scientific Games International, Inc. | $ | 1,010,000 | $ | 1,029,569 | ||||
10.00%, due 12/1/22 | 6,635,000 | 5,483,827 | ||||||
|
| |||||||
18,450,862 | ||||||||
|
| |||||||
Finance—Auto Loans 0.4% | ||||||||
Ally Financial, Inc. | 5,610,000 | 6,717,975 | ||||||
|
| |||||||
Finance—Consumer Loans 1.4% | ||||||||
Navient Corp. | 3,210,000 | 3,065,550 | ||||||
8.00%, due 3/25/20 | 1,846,000 | 1,938,300 | ||||||
OneMain Financial Holdings LLC | 8,015,000 | 8,335,600 | ||||||
Springleaf Finance Corp. | 3,100,000 | 2,968,250 | ||||||
7.75%, due 10/1/21 | 4,850,000 | 4,789,375 | ||||||
|
| |||||||
21,097,075 | ||||||||
|
| |||||||
Finance—Credit Card 0.2% | ||||||||
Capital One Bank USA N.A. | 3,000,000 | 3,018,861 | ||||||
|
| |||||||
Finance—Investment Banker/Broker 0.1% |
| |||||||
Jefferies Group LLC | 813,000 | 850,135 | ||||||
6.45%, due 6/8/27 | 1,100,000 | 1,179,321 | ||||||
|
| |||||||
2,029,456 | ||||||||
|
| |||||||
Food 1.5% | ||||||||
Kerry Group Financial Services | 4,595,000 | 4,561,695 | ||||||
Premier Foods Finance PLC | GBP 4,500,000 | 6,562,029 | ||||||
TreeHouse Foods, Inc. | $ | 6,125,000 | 6,331,719 | |||||
Tyson Foods, Inc. | 5,450,000 | 5,884,022 | ||||||
|
| |||||||
23,339,465 | ||||||||
|
| |||||||
Forest Products & Paper 0.3% | ||||||||
Domtar Corp. | 308,000 | 331,941 | ||||||
Georgia-Pacific LLC | 2,945,000 | 3,839,385 | ||||||
International Paper Co. | 693,000 | 905,552 | ||||||
|
| |||||||
5,076,878 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Gas 0.2% | ||||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | $ | 2,717,000 | $ | 2,778,132 | ||||
|
| |||||||
Health Care—Products 0.9% | ||||||||
Hologic, Inc. | 8,195,000 | 8,584,263 | ||||||
Mallinckrodt International Finance S.A. | 4,485,000 | 3,657,114 | ||||||
Zimmer Biomet Holdings, Inc. | 1,895,000 | 1,928,996 | ||||||
|
| |||||||
14,170,373 | ||||||||
|
| |||||||
Health Care—Services 2.7% | ||||||||
CHS / Community Health Systems, Inc. | 8,985,000 | 8,131,425 | ||||||
DaVita HealthCare Partners, Inc. | 1,925,000 | 1,959,111 | ||||||
5.75%, due 8/15/22 (d) | 5,825,000 | 6,101,688 | ||||||
Fresenius Medical Care U.S. Finance II, Inc. | 2,500,000 | 2,746,750 | ||||||
HCA, Inc. | 8,645,000 | 8,947,575 | ||||||
¨MPH Acquisition Holdings LLC | 6,780,000 | 7,079,405 | ||||||
Tenet Healthcare Corp. | 6,250,000 | 6,257,812 | ||||||
|
| |||||||
41,223,766 | ||||||||
|
| |||||||
Holding Company—Diversified 0.4% |
| |||||||
Stena AB | 8,000,000 | 6,800,000 | ||||||
|
| |||||||
Home Builders 5.3% | ||||||||
Beazer Homes USA, Inc. | 3,206,000 | 2,973,565 | ||||||
CalAtlantic Group, Inc. | 2,875,000 | 3,083,438 | ||||||
8.375%, due 1/15/21 | 4,560,000 | 5,369,400 | ||||||
D.R. Horton, Inc. | 2,750,000 | 2,811,875 | ||||||
5.75%, due 8/15/23 | 4,250,000 | 4,653,750 | ||||||
K. Hovnanian Enterprises, Inc. | 3,100,000 | 2,170,000 | ||||||
7.25%, due 10/15/20 (b) | 6,035,000 | 5,389,134 | ||||||
KB Home | 3,300,000 | 3,522,750 | ||||||
8.00%, due 3/15/20 | 2,250,000 | 2,430,000 |
Principal Amount | Value | |||||||
Home Builders (continued) | ||||||||
Lennar Corp. | $ | 5,800,000 | $ | 5,999,375 | ||||
4.50%, due 11/15/19 | 4,740,000 | 4,920,712 | ||||||
MDC Holdings, Inc. | 7,025,000 | 6,814,250 | ||||||
5.625%, due 2/1/20 | 1,608,000 | 1,632,120 | ||||||
Meritage Homes Corp. | 7,800,000 | 8,365,500 | ||||||
Shea Homes, L.P. / Shea Homes Funding Corp. | 8,770,000 | 8,835,775 | ||||||
Toll Brothers Finance Corp. | 5,750,000 | 6,210,000 | ||||||
TRI Pointe Group, Inc. / TRI Pointe Homes. Inc. | 6,950,000 | 6,984,750 | ||||||
|
| |||||||
82,166,394 | ||||||||
|
| |||||||
Household Products & Wares 0.4% | ||||||||
Spectrum Brands, Inc. | 5,085,000 | 5,393,405 | ||||||
|
| |||||||
Insurance 4.7% | ||||||||
Allstate Corp. (The) | 8,525,000 | 9,207,000 | ||||||
Chubb Corp. (The) | 9,873,000 | 8,490,780 | ||||||
Genworth Holdings, Inc. | 4,475,000 | 3,199,625 | ||||||
6.15%, due 11/15/66 (a) | 7,233,000 | 2,025,240 | ||||||
7.20%, due 2/15/21 | 1,145,000 | 956,075 | ||||||
Liberty Mutual Group, Inc. | 870,000 | 1,031,951 | ||||||
7.80%, due 3/7/87 (b) | 7,453,000 | 8,142,402 | ||||||
10.75%, due 6/15/88 (a)(b) | 938,000 | 1,369,480 | ||||||
Lincoln National Corp. | 3,537,000 | 2,369,790 | ||||||
Oil Insurance, Ltd. | 8,452,000 | 7,606,800 | ||||||
Pacific Life Insurance Co. | 1,150,000 | 1,452,578 | ||||||
Progressive Corp. (The) | 612,000 | 577,667 | ||||||
Protective Life Corp. | 3,621,000 | 4,839,561 | ||||||
Provident Cos., Inc. | 5,460,000 | 6,565,754 | ||||||
Swiss Re Capital I, L.P. | 571,000 | 571,000 | ||||||
Validus Holdings, Ltd. | 5,383,000 | 7,099,843 |
14 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Insurance (continued) | ||||||||
Voya Financial, Inc. | $ | 3,350,000 | $ | 3,760,368 | ||||
XLIT, Ltd. | 4,116,000 | 2,881,200 | ||||||
|
| |||||||
72,147,114 | ||||||||
|
| |||||||
Investment Management/Advisory Services 0.6% |
| |||||||
Scottish Widows PLC | GBP 6,500,000 | 9,795,303 | ||||||
|
| |||||||
Iron & Steel 1.7% | ||||||||
AK Steel Corp. | $ | 9,410,000 | 7,763,250 | |||||
ArcelorMittal | 5,425,000 | 5,706,422 | ||||||
Cliffs Natural Resources, Inc. | 1,140,000 | 478,800 | ||||||
5.95%, due 1/15/18 | 2,169,000 | 1,344,780 | ||||||
Steel Dynamics, Inc. | 7,666,000 | 7,780,990 | ||||||
United States Steel Corp. | 4,039,000 | 3,806,757 | ||||||
|
| |||||||
26,880,999 | ||||||||
|
| |||||||
Leisure Time 0.7% |
| |||||||
NCL Corp., Ltd. | 3,400,000 | 3,493,500 | ||||||
Royal Caribbean Cruises, Ltd. | 6,115,000 | 6,604,200 | ||||||
|
| |||||||
10,097,700 | ||||||||
|
| |||||||
Lodging 1.4% |
| |||||||
MGM Resorts International | 7,600,000 | 7,894,500 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 946,000 | 1,032,475 | ||||||
7.15%, due 12/1/19 | 2,341,000 | 2,710,831 | ||||||
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. | 6,130,000 | 6,236,049 | ||||||
5.50%, due 3/1/25 (b) | 3,600,000 | 3,444,750 | ||||||
|
| |||||||
21,318,605 | ||||||||
|
| |||||||
Machinery—Construction & Mining 0.3% |
| |||||||
Terex Corp. | 5,000,000 | 5,002,500 | ||||||
|
|
Principal Amount | Value | |||||||
Machinery—Diversified 0.6% | ||||||||
Zebra Technologies Corp. | $ | 8,520,000 | $ | 9,223,752 | ||||
|
| |||||||
Media 2.2% | ||||||||
Clear Channel Worldwide Holdings, Inc. | 7,405,000 | 7,442,025 | ||||||
Series B | ||||||||
7.625%, due 3/15/20 (d) | 2,500,000 | 2,317,200 | ||||||
Cox Communications, Inc. | 2,241,000 | 2,252,622 | ||||||
DISH DBS Corp. | 3,350,000 | 3,417,000 | ||||||
6.75%, due 6/1/21 | 4,265,000 | 4,393,846 | ||||||
iHeartCommunications, Inc. | 2,100,000 | 1,627,500 | ||||||
9.00%, due 3/1/21 | 8,845,000 | 6,257,837 | ||||||
Time Warner Entertainment Co., L.P. | 1,087,000 | 1,416,388 | ||||||
Virgin Media Secured Finance PLC | 5,000,000 | 5,112,500 | ||||||
|
| |||||||
34,236,918 | ||||||||
|
| |||||||
Mining 0.3% |
| |||||||
Aleris International, Inc. | 4,857,000 | 4,310,587 | ||||||
|
| |||||||
Miscellaneous—Manufacturing 1.3% |
| |||||||
Amsted Industries, Inc. | 7,860,000 | 7,840,350 | ||||||
Gates Global LLC / Gates Global Co. | 4,585,000 | 3,988,950 | ||||||
Textron Financial Corp. | 11,250,000 | 7,875,000 | ||||||
|
| |||||||
19,704,300 | ||||||||
|
| |||||||
Oil & Gas 5.7% |
| |||||||
Anadarko Petroleum Corp. | 19,735,000 | 7,301,950 | ||||||
Berry Petroleum Co., LLC | 1,517,000 | 371,665 | ||||||
CHC Helicopter S.A. | 9,714,600 | 4,322,997 | ||||||
¨CITGO Petroleum Corp. | 9,000,000 | 8,775,000 | ||||||
Concho Resources, Inc. | 1,014,000 | 1,021,605 | ||||||
6.50%, due 1/15/22 | 1,550,000 | 1,612,000 | ||||||
Denbury Resources, Inc. | 3,635,000 | 2,135,563 | ||||||
6.375%, due 8/15/21 | 6,630,000 | 4,309,500 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Oil & Gas (continued) |
| |||||||
Hilcorp Energy I, L.P. / Hilcorp Finance Co. | $ | 9,000,000 | $ | 8,370,000 | ||||
LINN Energy LLC / LINN Energy Finance Corp. | 3,160,000 | 276,500 | ||||||
Murphy Oil USA, Inc. | 8,818,000 | 9,220,277 | ||||||
Precision Drilling Corp. | 1,127,000 | 969,220 | ||||||
6.625%, due 11/15/20 | 2,417,000 | 2,154,151 | ||||||
QEP Resources, Inc. | 3,350,000 | 3,174,125 | ||||||
Sanchez Energy Corp. | 9,620,000 | 7,190,950 | ||||||
SM Energy Co. | 1,970,000 | 1,640,025 | ||||||
6.125%, due 11/15/22 | 5,385,000 | 4,873,425 | ||||||
Sunoco, L.P. / Sunoco Finance Corp. | 4,685,000 | 4,755,275 | ||||||
Tesoro Corp. | 11,050,000 | 11,050,000 | ||||||
Whiting Petroleum Corp. | 2,350,000 | 2,079,750 | ||||||
5.75%, due 3/15/21 | 2,260,000 | 1,881,450 | ||||||
|
| |||||||
87,485,428 | ||||||||
|
| |||||||
Oil & Gas Services 0.5% |
| |||||||
CGG S.A. | 6,150,000 | 2,460,000 | ||||||
PHI, Inc. | 4,800,000 | 4,425,024 | ||||||
|
| |||||||
6,885,024 | ||||||||
|
| |||||||
Packaging & Containers 3.5% |
| |||||||
Albea Beauty Holdings S.A. | 4,720,000 | 4,956,000 | ||||||
Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc. | 4,250,000 | 4,250,000 | ||||||
6.75%, due 1/31/21 (b) | 3,240,000 | 3,248,100 | ||||||
7.00%, due 11/15/20 (b) | 652,941 | 617,029 | ||||||
Crown European Holdings S.A. | EUR 7,700,000 | 9,478,155 | ||||||
Kloeckner Pentaplast of America, Inc. | 3,175,000 | 3,842,761 | ||||||
MeadWestvaco Corp. | $ | 1,800,000 | 2,041,844 | |||||
Novelis, Inc. | 4,653,000 | 4,804,223 |
Principal Amount | Value | |||||||
Packaging & Containers (continued) |
| |||||||
Owens-Brockway Glass Container, Inc. | $ | 5,555,000 | $ | 5,721,650 | ||||
Reynolds Group Issuer, Inc. | 925,000 | 959,688 | ||||||
9.875%, due 8/15/19 | 5,714,000 | 5,906,847 | ||||||
Sealed Air Corp. | 5,070,000 | 5,279,137 | ||||||
5.50%, due 9/15/25 (b) | 3,315,000 | 3,518,044 | ||||||
|
| |||||||
54,623,478 | ||||||||
|
| |||||||
Pharmaceuticals 0.4% |
| |||||||
Endo Ltd. / Endo Finance LLC / Endo Finco, Inc. | 3,865,000 | 3,792,531 | ||||||
6.00%, due 2/1/25 (b) | 2,375,000 | 2,268,125 | ||||||
|
| |||||||
6,060,656 | ||||||||
|
| |||||||
Pipelines 1.5% |
| |||||||
Holly Energy Partners, L.P. / Holly Energy Finance Corp. | 3,875,000 | 3,894,375 | ||||||
Kinder Morgan, Inc. | 2,449,000 | 2,531,252 | ||||||
7.75%, due 1/15/32 | 2,035,000 | 2,192,232 | ||||||
Plains All American Pipeline, L.P. / PAA Finance Corp. | 4,150,000 | 3,343,307 | ||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | 3,725,000 | 3,576,000 | ||||||
Tesoro Logistics, L.P. / Tesoro Logistics Finance Corp. | 3,810,000 | 3,886,200 | ||||||
6.125%, due 10/15/21 | 3,500,000 | 3,578,750 | ||||||
|
| |||||||
23,002,116 | ||||||||
|
| |||||||
Private Equity 0.5% |
| |||||||
Icahn Enterprises, L.P. / Icahn Enterprises Finance Corp. | 6,880,000 | 6,863,488 | ||||||
|
| |||||||
Real Estate Investment Trusts 1.1% |
| |||||||
Crown Castle International Corp. | 2,625,000 | 2,913,750 | ||||||
GEO Group Inc. (The) | 4,690,000 | 4,804,905 | ||||||
Host Hotels & Resorts, L.P. | 472,000 | 467,179 | ||||||
Iron Mountain Europe PLC | GBP 3,475,000 | 5,179,049 | ||||||
Iron Mountain, Inc. | $ | 4,125,000 | 4,238,438 |
16 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Real Estate Investment Trusts (continued) |
| |||||||
Ventas Realty, L.P. / Ventas Capital Corp. | $ | 1,000 | $ | 1,008 | ||||
|
| |||||||
17,604,329 | ||||||||
|
| |||||||
Retail 2.9% |
| |||||||
AmeriGas Finance LLC / AmeriGas Finance Corp. | 5,200,000 | 5,492,500 | ||||||
Brinker International, Inc. | 1,875,000 | 1,884,546 | ||||||
CVS Pass-Through Trust | 64,586 | 71,231 | ||||||
¨Dollar Tree, Inc. | 9,670,000 | 10,325,626 | ||||||
Macy’s Retail Holdings, Inc. | 1,925,000 | 1,972,890 | ||||||
QVC, Inc. | 6,500,000 | 6,573,326 | ||||||
Signet UK Finance PLC | 10,160,000 | 10,010,567 | ||||||
Suburban Propane Partners, L.P. / Suburban Energy Finance Corp. | 8,550,000 | 8,447,400 | ||||||
|
| |||||||
44,778,086 | ||||||||
|
| |||||||
Semiconductors 1.8% |
| |||||||
Freescale Semiconductor, Inc. | 6,300,000 | 6,552,000 | ||||||
6.00%, due 1/15/22 (b) | 3,159,000 | 3,348,540 | ||||||
NXP B.V. / NXP Funding LLC | 9,100,000 | 9,441,250 | ||||||
Sensata Technologies B.V. | 8,700,000 | 8,743,500 | ||||||
|
| |||||||
28,085,290 | ||||||||
|
| |||||||
Software 0.3% |
| |||||||
First Data Corp. | 1,785,000 | 1,845,244 | ||||||
6.75%, due 11/1/20 (b) | 2,275,000 | 2,388,750 | ||||||
7.00%, due 12/1/23 (b) | 755,000 | 775,762 | ||||||
|
| |||||||
5,009,756 | ||||||||
|
| |||||||
Telecommunications 3.7% |
| |||||||
CenturyLink, Inc. | 8,000,000 | 7,900,000 | ||||||
CommScope Holding Co., Inc. | 4,350,000 | 4,491,375 | ||||||
CommScope, Inc. | 4,295,000 | 4,359,425 |
Principal Amount | Value | |||||||
Telecommunications (continued) |
| |||||||
Hughes Satellite Systems Corp. | $ | 2,250,000 | $ | 2,477,813 | ||||
7.625%, due 6/15/21 | 3,350,000 | 3,726,875 | ||||||
Inmarsat Finance PLC | 8,190,000 | 7,780,500 | ||||||
Sprint Capital Corp. | 1,060,000 | 842,700 | ||||||
Sprint Communications, Inc. | 1,800,000 | 1,494,000 | ||||||
Sprint Corp. | 4,000,000 | 3,230,000 | ||||||
7.875%, due 9/15/23 | 1,650,000 | 1,287,000 | ||||||
T-Mobile USA, Inc. | 3,000,000 | 3,150,000 | ||||||
6.125%, due 1/15/22 | 4,525,000 | 4,759,757 | ||||||
Telefonica Emisiones SAU | 1,000 | 1,137 | ||||||
Verizon Communications, Inc. | 3,573,000 | 4,109,282 | ||||||
ViaSat, Inc. | 7,340,000 | 7,578,550 | ||||||
|
| |||||||
57,188,414 | ||||||||
|
| |||||||
Transportation 0.8% |
| |||||||
Hapag-Lloyd A.G. | 992,000 | 1,006,880 | ||||||
Hornbeck Offshore Services, Inc. | 1,755,000 | 1,116,619 | ||||||
5.875%, due 4/1/20 | 1,748,000 | 1,131,830 | ||||||
XPO Logistics, Inc. | 9,725,000 | 9,470,205 | ||||||
|
| |||||||
12,725,534 | ||||||||
|
| |||||||
Total Corporate Bonds | 1,134,564,436 | |||||||
|
| |||||||
Foreign Bonds 0.6% | ||||||||
Belgium 0.2% | ||||||||
Belfius Financing Co. | GBP 2,000,000 | 2,893,079 | ||||||
|
| |||||||
Ireland 0.3% | ||||||||
UT2 Funding PLC | EUR 3,945,000 | 4,534,407 | ||||||
|
| |||||||
United Kingdom 0.1% | ||||||||
Barclays Bank PLC | GBP 449,000 | 816,345 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Foreign Bonds (continued) | ||||||||
United Kingdom (continued) | ||||||||
Rexam PLC | EUR 978,000 | $ | 1,129,266 | |||||
|
| |||||||
1,945,611 | ||||||||
|
| |||||||
Total Foreign Bonds | 9,373,097 | |||||||
|
| |||||||
Loan Assignments 17.7% (g) | ||||||||
Advertising 1.6% | ||||||||
Outdoor Media Capital LLC | $ | 8,714,375 | 8,667,169 | |||||
¨USAGM HoldCo LLC | 8,728,125 | 8,542,653 | ||||||
2015 2nd Lien Term Loan | 8,750,000 | 7,875,000 | ||||||
|
| |||||||
25,084,822 | ||||||||
|
| |||||||
Aerospace & Defense 0.2% | ||||||||
TransDigm, Inc. | 1,738,185 | 1,734,926 | ||||||
Term Loan D | 1,110,000 | 1,103,293 | ||||||
|
| |||||||
2,838,219 | ||||||||
|
| |||||||
Auto Manufacturers 0.3% | ||||||||
Navistar International Corp. | 4,481,250 | 4,227,311 | ||||||
|
| |||||||
Auto Parts & Equipment 1.3% | ||||||||
Allison Transmission, Inc. | 7,321,475 | 7,327,574 | ||||||
MPG Holdco I, Inc. | 1,058,029 | 1,050,093 | ||||||
TI Group Automotive Systems LLC | 11,019,625 | 10,987,481 | ||||||
|
| |||||||
19,365,148 | ||||||||
|
| |||||||
Building Materials 0.8% | ||||||||
¨Quikrete Holdings, Inc. | 11,686,979 | 11,662,635 | ||||||
2nd Lien Term Loan | 1,193,684 | 1,193,684 | ||||||
|
| |||||||
12,856,319 | ||||||||
|
|
Principal Amount | Value | |||||||
Chemicals 1.2% | ||||||||
Axalta Coating Systems U.S. Holdings, Inc. | $ | 4,252,855 | $ | 4,242,223 | ||||
ECO Services Operations LLC | 2,616,875 | 2,544,911 | ||||||
PQ Corp. | 11,248,718 | 11,222,936 | ||||||
|
| |||||||
18,010,070 | ||||||||
|
| |||||||
Commercial Services 1.5% | ||||||||
Allied Security Holdings LLC | 5,808,219 | 5,633,973 | ||||||
KAR Auction Services, Inc. | 8,799,621 | 8,805,120 | ||||||
Neff Rental LLC | 8,810,928 | 8,194,163 | ||||||
|
| |||||||
22,633,256 | ||||||||
|
| |||||||
Containers, Packaging & Glass 0.4% | ||||||||
Milacron LLC | 6,602,740 | 6,602,740 | ||||||
|
| |||||||
Electric 0.1% | ||||||||
Calpine Corp. | 1,985,000 | 1,966,391 | ||||||
|
| |||||||
Entertainment 0.8% | ||||||||
Mohegan Tribal Gaming Authority | 2,849,729 | 2,810,546 | ||||||
¨Scientific Games International, Inc. | 9,041,875 | 8,893,064 | ||||||
|
| |||||||
11,703,610 | ||||||||
|
| |||||||
Environmental Controls 0.0%‡ | ||||||||
Filtration Group Corp. | 505,319 | 494,897 | ||||||
|
| |||||||
Food Services 0.3% | ||||||||
Aramark Services, Inc. | 4,907,368 | 4,911,972 | ||||||
|
|
18 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Loan Assignments (continued) | ||||||||
Health Care—Products 0.8% | ||||||||
¨Ortho-Clinical Diagnostics, Inc. | $ | 12,398,477 | $ | 11,750,136 | ||||
Sterigenics-Nordion Holdings LLC | 995,000 | 992,512 | ||||||
|
| |||||||
12,742,648 | ||||||||
|
| |||||||
Health Care—Services 1.0% | ||||||||
AmSurg Corp. | 6,915,655 | 6,925,261 | ||||||
Community Health Systems, Inc. | 123,112 | 121,078 | ||||||
DaVita HealthCare Partners, Inc. | 2,456,250 | 2,462,391 | ||||||
¨MPH Acquisition Holdings LLC | 6,233,961 | 6,198,115 | ||||||
|
| |||||||
15,706,845 | ||||||||
|
| |||||||
Household Products & Wares 1.1% | ||||||||
KIK Custom Products, Inc. | 7,711,250 | 7,460,635 | ||||||
Prestige Brands, Inc. | 10,237,488 | 10,256,683 | ||||||
|
| |||||||
17,717,318 | ||||||||
|
| |||||||
Iron & Steel 0.6% | ||||||||
Signode Industrial Group U.S., Inc. | 9,356,137 | 9,262,575 | ||||||
|
| |||||||
Lodging 0.8% | ||||||||
Boyd Gaming Corp. | 1,008,681 | 1,009,221 | ||||||
Hilton Worldwide Finance LLC | 10,940,282 | 10,966,265 | ||||||
|
| |||||||
11,975,486 | ||||||||
|
| |||||||
Machinery—Construction & Mining 0.2% |
| |||||||
Terex Corp. | 2,561,000 | 2,561,000 | ||||||
|
|
Principal Amount | Value | |||||||
Machinery—Diversified 0.6% | ||||||||
Husky Injection Molding Systems, Ltd. | $ | 8,876,627 | $ | 8,802,658 | ||||
|
| |||||||
Media 0.9% | ||||||||
Charter Communications Operating LLC | 8,833,867 | 8,804,883 | ||||||
iHeartCommunications, Inc. | 1,928,771 | 1,436,333 | ||||||
Virgin Media Investment Holdings, Ltd. | 4,161,125 | 4,150,722 | ||||||
|
| |||||||
14,391,938 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 0.4% |
| |||||||
Gates Global, Inc. | 5,635,685 | 5,389,124 | ||||||
|
| |||||||
Oil & Gas 0.3% | ||||||||
¨CITGO Petroleum Corp. | 4,303,031 | 4,249,243 | ||||||
|
| |||||||
Pharmaceuticals 0.1% | ||||||||
Valeant Pharmaceuticals International, Inc. | 1,771,755 | 1,721,556 | ||||||
|
| |||||||
Real Estate 0.5% | ||||||||
Realogy Corp. | 7,751,598 | 7,746,753 | ||||||
Extended Letter of Credit | 45,643 | 45,186 | ||||||
|
| |||||||
7,791,939 | ||||||||
|
| |||||||
Retail 0.3% | ||||||||
¨Dollar Tree, Inc. | 2,192,514 | 2,196,820 | ||||||
Pilot Travel Centers LLC | 2,793,000 | 2,805,219 | ||||||
|
| |||||||
5,002,039 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Loan Assignments (continued) | ||||||||
Software 0.3% | ||||||||
First Data Corp. | $ | 4,440,058 | $ | 4,447,828 | ||||
|
| |||||||
Telecommunications 1.3% | ||||||||
Intelsat Jackson Holdings S.A. | 2,500,000 | 2,340,000 | ||||||
Level 3 Financing, Inc. | 9,000,000 | 9,009,378 | ||||||
SBA Senior Finance II LLC | 8,879,200 | 8,859,222 | ||||||
|
| |||||||
20,208,600 | ||||||||
|
| |||||||
Total Loan Assignments | 272,665,552 | |||||||
|
| |||||||
Mortgage-Backed Securities 0.0%‡ | ||||||||
Commercial Mortgage Loans |
| |||||||
Banc of America Commercial Mortgage Trust | 229,066 | 202,359 | ||||||
Bayview Commercial Asset Trust | 36,834 | 32,362 | ||||||
Wells Fargo Mortgage Backed Securities Trust | 148,335 | 142,166 | ||||||
|
| |||||||
376,887 | ||||||||
|
| |||||||
Residential Mortgages |
| |||||||
Deutsche Alt-A Securities, Inc. Alternate Loan Trust | 86,212 | 81,708 | ||||||
WaMu Mortgage Pass-Through Certificates | 145,986 | 126,085 | ||||||
|
| |||||||
207,793 | ||||||||
|
| |||||||
Total Mortgage-Backed Securities | 584,680 | |||||||
|
|
Principal Amount | Value | |||||||
U.S. Government 0.0%‡ | ||||||||
United States Treasury Note 0.0%‡ | ||||||||
2.125%, due 8/15/21 | $ | 70,000 | $ | 72,748 | ||||
|
| |||||||
Total U.S. Government | 72,748 | |||||||
|
| |||||||
Total Long-Term Bonds | 1,422,593,850 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 0.0%‡ | ||||||||
Auto Manufacturers 0.0%‡ | ||||||||
General Motors Co. | 15,078 | 479,481 | ||||||
Motors Liquidation Co. GUC Trust | 11,598 | 137,436 | ||||||
|
| |||||||
616,917 | ||||||||
|
| |||||||
Media 0.0%‡ | ||||||||
ION Media Networks, Inc. (e)(i)(j)(k) | 22 | 11,778 | ||||||
|
| |||||||
Total Common Stocks | 628,695 | |||||||
|
| |||||||
Number of Warrants | ||||||||
Warrants 0.0%‡ | ||||||||
Auto Manufacturers 0.0%‡ | ||||||||
General Motors Co. | 20,476 | 284,207 | ||||||
|
| |||||||
Total Warrants | 284,207 | |||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 7.6% | ||||||||
Repurchase Agreement 7.6% | ||||||||
Fixed Income Clearing Corp. | $ | 117,552,714 | 117,552,714 | |||||
|
| |||||||
Total Short-Term Investment | 117,552,714 | |||||||
|
| |||||||
Total Investments, Before Investments Sold Short | 99.9 | % | 1,541,059,466 | |||||
|
|
20 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Long-Term Bonds Sold Short (1.8%) Corporate Bonds Sold Short (1.8%) |
| |||||||
Household Products & Wares (0.3%) | ||||||||
ACCO Brands Corp. | $ | (3,850,000 | ) | $ | (4,081,000 | ) | ||
|
| |||||||
Oil & Gas (1.5%) | ||||||||
Noble Energy, Inc. | (12,115,000 | ) | (12,045,302 | ) | ||||
4.15%, due 12/15/21 | (3,000,000 | ) | (3,061,479 | ) | ||||
Southwestern Energy Co. | (9,770,000 | ) | (8,499,900 | ) | ||||
|
| |||||||
(23,606,681 | ) | |||||||
|
| |||||||
Total Investments Sold Short | (1.8 | )% | (27,687,681 | ) | ||||
|
| |||||||
Total Investments, Net of Investments Sold Short | 98.1 | 1,513,371,785 | ||||||
Other Assets, Less Liabilities | 1.9 | 28,997,418 | ||||||
Net Assets | 100.0 | % | $ | 1,542,369,203 |
‡ | Less than one-tenth of a percent. |
(a) | Floating rate—Rate shown was the rate in effect as of April 30, 2016. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Step coupon—Rate shown was the rate in effect as of April 30, 2016. |
(d) | Security, or a portion thereof, was maintained in a segregated account at the Fund’s custodian as collateral for securities Sold Short (See Note 2(O)). |
(e) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2016, the total market value of these securities was $2,725,717, which represented 0.2% of the Fund’s net assets. |
(f) | PIK (“Payment-in-Kind”)—issuer may pay interest or dividends with additional securities and/or in cash. |
(g) | 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 weighted average interest rate of all contracts within the floating rate loan facility as of April 30, 2016. |
(h) | Collateral strip rate—A bond whose interest was based on the weighted net interest rate of the collateral. The coupon rate adjusts periodically based on a predetermined schedule. Rate shown was the rate in effect as of April 30, 2016. |
(i) | Restricted security. |
(j) | Illiquid security—As of April 30, 2016, the total market value of this security deemed illiquid under procedures approved by the Board of Trustees was $11,778, which represented less than one-tenth of a percent of the Fund’s net assets. |
(k) | Non-income producing security. |
(l) | Issue in default. |
(m) | As of April 30, 2016, cost was $1,604,790,593 for federal income tax purposes and net unrealized depreciation was as follows: |
Gross unrealized appreciation | $ | 18,860,375 | ||
Gross unrealized depreciation | (82,591,502 | ) | ||
|
| |||
Net unrealized depreciation | $ | (63,731,127 | ) | |
|
|
As of April 30, 2016, the Fund held the following foreign currency forward contracts:
Foreign Currency Buy Contracts | Expiration Date | Counterparty | Contract Amount Purchased | Contract Amount Sold | Unrealized Appreciation (Depreciation) | |||||||||||||||||
Euro vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | EUR | 22,662,000 | $ | 25,618,824 | $ | 335,520 | ||||||||||||||
Pound Sterling vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | GBP | 22,899,000 | 33,336,364 | 123,120 | ||||||||||||||||
Foreign Currency Sales Contracts | Contract Amount Sold | Contract Amount Purchased | ||||||||||||||||||||
Euro vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | EUR | 22,662,000 | 25,784,484 | (169,861 | ) | |||||||||||||||
Euro vs. U.S. Dollar | 7/28/16 | JPMorgan Chase Bank | 20,459,000 | 23,236,309 | (252,448 | ) | ||||||||||||||||
Pound Sterling vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | GBP | 22,899,000 | 33,060,366 | (399,118 | ) | |||||||||||||||
Pound Sterling vs. U.S. Dollar | 7/28/16 | JPMorgan Chase Bank | 22,939,000 | 33,401,547 | (124,679 | ) | ||||||||||||||||
Net unrealized appreciation (depreciation) on foreign currency forward contracts |
| $ | (487,466 | ) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
As of April 30, 2016, the Fund held the following futures contracts1:
Type | Number of Contracts (Short) | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)2 | ||||||||||||
2-Year United States Treasury Note | (500 | ) | June 2016 | $ | (109,312,500 | ) | $ | (170,377 | ) | |||||||
Euro-Bund | (373 | ) | June 2016 | (69,139,563 | ) | 763,922 | ||||||||||
|
|
|
| |||||||||||||
$ | (178,452,063 | ) | $ | 593,545 | ||||||||||||
|
|
|
|
1. | As of April 30, 2016, cash in the amount of $1,363,698 was on deposit with a broker for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of April 30, 2016. |
As of April 30, 2016, the Fund held the following centrally cleared interest rate swap agreements1:
Notional Amount | Currency | Expiration Date | Payments Made by Fund | Payments Fund | Upfront Premiums Received/(Paid) | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
$350,000,000 | USD | 4/16/2017 | Fixed 0.768 | % | 3-Month USD-LIBOR | $ | — | $ | 14,878 | $ | 14,878 | |||||||||||||||
$500,000,000 | USD | 4/17/2017 | Fixed 0.766 | % | 3-Month USD-LIBOR | — | 30,885 | 30,885 | ||||||||||||||||||
$500,000,000 | USD | 4/21/2017 | Fixed 0.769 | % | 3-Month USD-LIBOR | — | 26,350 | 26,350 | ||||||||||||||||||
$125,000,000 | USD | 4/29/2017 | Fixed 0.786 | % | 3-Month USD-LIBOR | — | (12,536 | ) | (12,536 | ) | ||||||||||||||||
$350,000,000 | USD | 5/6/2017 | Fixed 0.860 | % | 3-Month USD-LIBOR | — | (284,575 | ) | (284,575 | ) | ||||||||||||||||
$273,000,000 | USD | 7/8/2017 | Fixed 0.877 | % | 3-Month USD-LIBOR | — | (235,533 | ) | (235,533 | ) | ||||||||||||||||
$250,000,000 | USD | 10/8/2017 | Fixed 0.730 | % | 3-Month USD-LIBOR | — | 392,600 | 392,600 | ||||||||||||||||||
$250,000,000 | USD | 10/16/2017 | Fixed 0.695 | % | 3-Month USD-LIBOR | — | 533,390 | 533,390 | ||||||||||||||||||
$400,000,000 | USD | 2/16/2018 | Fixed 0.670 | % | 3-Month USD-LIBOR | 45,089 | 1,551,940 | 1,506,851 | ||||||||||||||||||
$ | 45,089 | $ | 2,017,399 | $ | 1,972,310 |
As of April 30, 2016, the Fund held the following centrally cleared credit default swap contract1:
Reference Entity | Termination Date | Buy/Sell Protection2 | Notional | (Pay)/ Receive | Upfront Received/ (Paid) | Value | Unrealized Appreciation/ (Depreciation)5 | |||||||||||||||||||||||||
Markit iTraxx Europe Crossover Series 24 | 12/20/2020 | Buy | EUR | 19,000 | (5.00 | )% | $ | (1,100,026 | ) | $ | (1,491,675 | ) | $ | (391,649 | ) |
As of April 30, 2016, the Fund held the following OTC credit default swap contract:
Reference Entity | Counterparty | Termination Date | Buy/Sell Protection2 | Notional Amount (000)3 | (Pay)/ Receive | Upfront (Paid) | Value | Unrealized Appreciation/ (Depreciation)5 | ||||||||||||||||||||||||
Staples, Inc. | Credit Suisse First Boston | 6/20/2019 | Buy | $ | 7,000 | (1.00 | )% | $ | (306,418 | ) | $ | 24,943 | $ | (281,475 | ) |
1. | As of April 30, 2016, cash in the amount of $7,565,408 was on deposit with a broker for centrally cleared swap agreements. |
2. | Buy—Fund pays premium and buys credit protection. If a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
Sell—Fund receives premium and sells credit protection. If a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
3. | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap contract. |
4. | The annual fixed rate represents the interest received by the Fund (as a seller of protection) or paid by the Fund (as a buyer of protection) annually on the notional amount of the credit default swap contract. |
5. | Represents the difference between the value of the credit default swap contracts at the time they were opened and the value at April 30, 2016. |
22 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following abbreviations are used in the preceding pages:
EUR—Euro
GBP—British Pound Sterling
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 4,150,587 | $ | — | $ | 4,150,587 | ||||||||
Convertible Bond | — | 1,182,750 | — | 1,182,750 | ||||||||||||
Corporate Bonds | — | 1,134,564,436 | — | 1,134,564,436 | ||||||||||||
Foreign Bonds | — | 9,373,097 | — | 9,373,097 | ||||||||||||
Loan Assignments (b) | — | 246,327,299 | 26,338,253 | 272,665,552 | ||||||||||||
Mortgage-Backed Securities (c) | — | 502,972 | 81,708 | 584,680 | ||||||||||||
U.S. Government | — | 72,748 | — | 72,748 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 1,396,173,889 | 26,419,961 | 1,422,593,850 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (d) | 616,917 | — | 11,778 | 628,695 | ||||||||||||
Warrants | 284,207 | — | — | 284,207 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 117,552,714 | — | 117,552,714 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 901,124 | 1,513,726,603 | 26,431,739 | 1,541,059,466 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contract (e) | — | 458,640 | — | 458,640 | ||||||||||||
Futures Contracts Short (e) | 763,922 | — | — | 763,922 | ||||||||||||
Interest Rate Swap Contracts (e) | — | 2,504,954 | — | 2,504,954 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | 763,922 | 2,963,594 | — | 3,727,516 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 1,665,046 | $ | 1,516,690,197 | $ | 26,431,739 | $ | 1,544,786,982 | ||||||||
|
|
|
|
|
|
|
|
Liability Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities Sold Short (a) | ||||||||||||||||
Long-Term Bonds Sold Short | ||||||||||||||||
Corporate Bonds Sold Short | $ | — | $ | (27,687,681 | ) | $ | — | $ | (27,687,681 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities Sold Short | — | (27,687,681 | ) | — | (27,687,681 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Credit Default Swap Contracts (e) | — | (673,124 | ) | — | (673,124 | ) | ||||||||||
Foreign Currency Forward Contract (e) | — | (946,106 | ) | — | (946,106 | ) | ||||||||||
Futures Contracts Short (e) | (170,377 | ) | — | — | (170,377 | ) | ||||||||||
Interest Rate Swap Contracts (e) | — | (532,644 | ) | — | (532,644 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | (170,377 | ) | (2,151,874 | ) | — | (2,322,251 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities Sold Short and Other Financial Instruments | $ | (170,377 | ) | $ | (29,839,555 | ) | $ | — | $ | (30,009,932 | ) | |||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
(b) | Includes $1,193,684, $2,544,911, $8,194,163, $6,602,740, $992,512, $2,561,000 and $4,249,243 of Level 3 securities held in Building Materials, Chemicals, Commercial Services, Containers, Packaging & Glass, Health Care—Products, Machinery—Construction & Mining and Oil & Gas, respectively, within the Loan Assignments section of the Portfolio of Investments. |
(c) | The Level 3 security valued at $81,708 is held in Residential Mortgages (Collateralized Mortgage Obligations) within the Mortgage-Backed Securities section of the Portfolio of Investments. |
(d) | The Level 3 security valued at $11,778 is held in Media within the Common Stocks 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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, securities with a market value of $24,202,610 transferred from Level 2 to Level 3. The transfer occurred as a result of utilizing significant unobservable inputs. As of October 31, 2015, the fair value obtained for these securities, from an independent pricing service, utilized significant observable inputs. (See Note 2)
As of April 30, 2016, securities with a market value of $2,855,916 transferred from Level 3 to Level 2. The transfer occurred as a result of utilizing significant observable inputs. As of October 31, 2015, the fair value obtained for these Loan Assignments, from an independent pricing service, utilized significant unobservable inputs. (See Note 2)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2015 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales (a) | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of April 30, 2016 | Change in April 30, 2016 (b) | ||||||||||||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Building Materials | $ | — | $ | (1,334 | ) | $ | — | $ | 1,334 | $ | — | $ | — | $ | 1,193,684 | $ | — | $ | 1,193,684 | $ | 1,334 | |||||||||||||||||||||||||||||
Chemicals | — | 937 | 55 | (43,367 | ) | — | (13,250 | ) | 2,600,536 | — | 2,544,911 | (43,367 | ) | |||||||||||||||||||||||||||||||||||||
Commercial Services | 7,985,661 | 5,089 | 232 | 265,209 | — | (62,028 | ) | — | — | 8,194,163 | 259,237 | |||||||||||||||||||||||||||||||||||||||
Containers, Packaging & Glass | — | — | — | (8,253 | ) | — | — | 6,610,993 | — | 6,602,740 | (8,253 | ) | ||||||||||||||||||||||||||||||||||||||
Health Care—Products | 990,000 | 178 | 11 | 7,323 | — | (5,000 | ) | — | — | 992,512 | 7,285 | |||||||||||||||||||||||||||||||||||||||
Machinery—Construction & Mining | — | 458 | 26 | 6,594 | — | (13,000 | ) | 2,566,922 | — | 2,561,000 | 6,594 | |||||||||||||||||||||||||||||||||||||||
Mining | 897,500 | 184 | (155,702 | ) | 96,018 | — | (838,000 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
Oil & Gas | — | 5,246 | (169,035 | ) | 83,364 | — | (6,806,969 | ) | 11,136,637 | — | 4,249,243 | 83,364 | ||||||||||||||||||||||||||||||||||||||
Real Estate | 45,416 | — | — | — | — | — | — | (45,416 | ) | — | — | |||||||||||||||||||||||||||||||||||||||
Retail | 2,810,500 | — | — | — | — | — | — | (2,810,500 | ) | — | — | |||||||||||||||||||||||||||||||||||||||
Mortgage-Backed Securities |
| |||||||||||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | — | 74 | (1,633 | ) | (1,263 | ) | — | (9,308 | ) | 93,838 | — | 81,708 | (1,263 | ) | ||||||||||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||||||||||||
Media | 9,560 | — | — | 2,218 | — | — | — | — | 11,778 | 2,218 | ||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | $ | 12,738,637 | $ | 10,832 | $ | (326,046 | ) | $ | 409,177 | $ | — | $ | (7,747,555 | ) | $ | 24,202,610 | $ | (2,855,916 | ) | $ | 26,431,739 | $ | 307,149 | |||||||||||||||||||||||||||
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|
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|
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|
|
|
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|
|
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|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in “change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
24 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 1,541,059,466 | ||
Cash collateral on deposit at broker | 8,929,106 | |||
Cash denominated in foreign currencies | 3,444,831 | |||
Receivables: | ||||
Dividends and interest | 19,370,900 | |||
Investment securities sold | 6,615,555 | |||
Fund shares sold | 4,555,108 | |||
Variation margin on futures contracts | 135,440 | |||
Premiums paid for OTC swap contracts | 306,418 | |||
Other assets | 108,228 | |||
Unrealized appreciation on foreign currency forward contracts | 458,640 | |||
Variation margin on centrally cleared swaps | 47,836 | |||
|
| |||
Total assets | 1,585,031,528 | |||
|
| |||
Liabilities | ||||
Investments sold short (proceeds $26,255,532) | 27,687,681 | |||
Payables: | ||||
Investment securities purchased | 5,447,000 | |||
Fund shares redeemed | 5,138,677 | |||
Manager (See Note 3) | 712,968 | |||
Transfer agent (See Note 3) | 553,189 | |||
Interest on investments sold short | 527,212 | |||
NYLIFE Distributors (See Note 3) | 320,702 | |||
Broker fees and charges on short sales | 179,295 | |||
Shareholder communication | 84,103 | |||
Professional fees | 51,983 | |||
Custodian | 24,669 | |||
Trustees | 4,715 | |||
Accrued expenses | 12,904 | |||
Interest expense and fees payable | 4,248 | |||
Dividend payable | 685,398 | |||
Unrealized depreciation on foreign currency forward contracts | 946,106 | |||
Unrealized depreciation on OTC swap contracts | 281,475 | |||
|
| |||
Total liabilities | 42,662,325 | |||
|
| |||
Net assets | $ | 1,542,369,203 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 1,797,761 | ||
Additional paid-in capital | 1,754,924,617 | |||
|
| |||
1,756,722,378 | ||||
Undistributed net investment income | 4,859,074 | |||
Accumulated net realized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | (155,454,204 | ) | ||
Net unrealized appreciation (depreciation) on investments, swap contracts and futures contracts | (61,800,372 | ) | ||
Net unrealized appreciation (depreciation) on investments sold short | (1,432,149 | ) | ||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | (525,524 | ) | ||
|
| |||
Net assets | $ | 1,542,369,203 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 447,938,325 | ||
|
| |||
Shares of beneficial interest outstanding | 52,196,190 | |||
|
| |||
Net asset value per share outstanding | $ | 8.58 | ||
Maximum sales charge (4.50% of offering price) | 0.40 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.98 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 31,730,423 | ||
|
| |||
Shares of beneficial interest outstanding | 3,669,723 | |||
|
| |||
Net asset value per share outstanding | $ | 8.65 | ||
Maximum sales charge (4.50% of offering price) | 0.41 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.06 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 18,377,359 | ||
|
| |||
Shares of beneficial interest outstanding | 2,151,519 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.54 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 250,666,047 | ||
|
| |||
Shares of beneficial interest outstanding | 29,368,372 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.54 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 793,583,105 | ||
|
| |||
Shares of beneficial interest outstanding | 92,381,723 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.59 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 47,586 | ||
|
| |||
Shares of beneficial interest outstanding | 5,545 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.58 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 26,358 | ||
|
| |||
Shares of beneficial interest outstanding | 3,070 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.59 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 47,957,218 | ||
Dividends | 11,158 | |||
|
| |||
Total income | 47,968,376 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 4,923,091 | |||
Distribution/Service—Class A (See Note 3) | 618,813 | |||
Distribution/Service—Investor Class (See Note 3) | 38,836 | |||
Distribution/Service—Class B (See Note 3) | 92,632 | |||
Distribution/Service—Class C (See Note 3) | 1,368,901 | |||
Distribution/Service—Class R2 (See Note 3) | 123 | |||
Distribution/Service—Class R3 (See Note 3) | 22 | |||
Transfer agent (See Note 3) | 1,485,496 | |||
Interest on investments sold short | 983,839 | |||
Broker fees and charges on short sales | 473,123 | |||
Shareholder communication | 99,399 | |||
Registration | 81,283 | |||
Professional fees | 73,787 | |||
Custodian | 35,578 | |||
Trustees | 23,952 | |||
Interest expense | 4,317 | |||
Shareholder service (See Note 3) | 54 | |||
Miscellaneous | 33,874 | |||
|
| |||
Total expenses | 10,337,120 | |||
|
| |||
Net investment income (loss) | 37,631,256 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (85,390,510 | ) | ||
Investments sold short | 3,193,102 | |||
Futures transactions | (4,298,666 | ) | ||
Swap transactions | (6,478,579 | ) | ||
Foreign currency transactions | 1,594,094 | |||
|
| |||
Net realized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | (91,380,559 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 37,236,186 | |||
Investments sold short | (2,569,544 | ) | ||
Futures contracts | 1,735,895 | |||
Swap contracts | 5,478,801 | |||
Translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | (1,091,286 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | 40,790,052 | |||
|
| |||
Net realized and unrealized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | (50,590,507 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (12,959,251 | ) | |
|
|
26 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 37,631,256 | $ | 99,541,667 | ||||
Net realized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | (91,380,559 | ) | (78,763,295 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | 40,790,052 | (92,514,436 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (12,959,251 | ) | (71,736,064 | ) | ||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (9,901,354 | ) | (22,199,099 | ) | ||||
Investor Class | (625,976 | ) | (1,079,074 | ) | ||||
Class B | (306,231 | ) | (561,584 | ) | ||||
Class C | (4,480,530 | ) | (9,024,905 | ) | ||||
Class I | (20,078,837 | ) | (50,654,929 | ) | ||||
Class R2 | (1,945 | ) | (7,479 | ) | ||||
Class R3 | (142 | ) | — | |||||
|
| |||||||
Total dividends to shareholders | (35,395,015 | ) | (83,527,070 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 170,162,977 | 986,207,670 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 30,355,306 | 70,622,476 | ||||||
Cost of shares redeemed | (825,299,413 | ) | (1,243,315,257 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (624,781,130 | ) | (186,485,111 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (673,135,396 | ) | (341,748,245 | ) | ||||
Net Assets | ||||||||
Beginning of period | 2,215,504,599 | 2,557,252,844 | ||||||
|
| |||||||
End of period | $ | 1,542,369,203 | $ | 2,215,504,599 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 4,859,074 | $ | 2,622,833 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.72 | $ | 9.27 | $ | 9.28 | $ | 9.22 | $ | 8.73 | $ | 9.06 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.18 | 0.36 | 0.36 | 0.40 | 0.45 | 0.45 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.63 | ) | (0.05 | ) | 0.06 | 0.49 | (0.31 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | 0.02 | 0.01 | (0.01 | ) | 0.01 | (0.00 | )‡ | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.03 | (0.25 | ) | 0.32 | 0.45 | 0.95 | 0.14 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.30 | ) | (0.33 | ) | (0.39 | ) | (0.46 | ) | (0.47 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 8.58 | $ | 8.72 | $ | 9.27 | $ | 9.28 | $ | 9.22 | $ | 8.73 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 0.41 | %(c) | (2.70 | %) | 3.48 | % | 4.96 | % | 11.26 | % | 1.54 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 4.22 | %†† | 4.01 | % | 3.81 | % | 4.25 | % | 5.08 | % | 5.04 | % | ||||||||||||
Net expenses (excluding short sale expenses) | 1.00 | %†† | 0.96 | % | 0.98 | % | 1.00 | % | 1.00 | % | 1.03 | % | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 1.17 | %†† | 1.01 | % | 1.04 | % | 1.12 | % | 1.33 | % | 1.22 | % | ||||||||||||
Short sale expenses | 0.17 | %†† | 0.05 | % | 0.06 | % | 0.12 | % | 0.33 | % | 0.19 | % | ||||||||||||
Portfolio turnover rate | 1 | % | 22 | % | 19 | % | 23 | % | 25 | % | 26 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 447,938 | $ | 584,184 | $ | 675,552 | $ | 317,917 | $ | 192,009 | $ | 169,649 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.78 | $ | 9.33 | $ | 9.34 | $ | 9.28 | $ | 8.78 | $ | 9.12 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.18 | 0.36 | 0.36 | 0.39 | 0.44 | 0.43 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.63 | ) | (0.05 | ) | 0.06 | 0.50 | (0.32 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | 0.02 | 0.01 | (0.01 | ) | 0.01 | (0.00 | )‡ | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.04 | (0.25 | ) | 0.32 | 0.44 | 0.95 | 0.11 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.30 | ) | (0.33 | ) | (0.38 | ) | (0.45 | ) | (0.45 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 8.65 | $ | 8.78 | $ | 9.33 | $ | 9.34 | $ | 9.28 | $ | 8.78 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 0.52 | %(c) | (2.70 | %) | 3.42 | % | 4.76 | % | 10.98 | % | 1.33 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 4.21 | %†† | 3.99 | % | 3.78 | % | 4.12 | % | 4.89 | % | 4.85 | % | ||||||||||||
Net expenses (excluding short sale expenses) | 1.02 | %†† | 0.98 | % | 1.00 | % | 1.15 | % | 1.19 | % | 1.24 | % | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 1.19 | %†† | 1.03 | % | 1.06 | % | 1.27 | % | 1.52 | % | 1.42 | % | ||||||||||||
Short sale expenses | 0.17 | %†† | 0.05 | % | 0.06 | % | 0.12 | % | 0.33 | % | 0.18 | % | ||||||||||||
Portfolio turnover rate | 1 | % | 22 | % | 19 | % | 23 | % | 25 | % | 26 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 31,730 | $ | 32,498 | $ | 31,690 | $ | 28,341 | $ | 24,551 | $ | 20,415 |
* | Unaudited. |
†† | 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. |
28 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.68 | $ | 9.23 | $ | 9.24 | $ | 9.18 | $ | 8.70 | $ | 9.03 | ||||||||||||
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Net investment income (loss) (a) | 0.14 | 0.29 | 0.28 | 0.31 | 0.37 | 0.36 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.62 | ) | (0.04 | ) | 0.07 | 0.48 | (0.31 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | 0.02 | 0.01 | (0.01 | ) | 0.01 | (0.00 | )‡ | |||||||||||||||
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Total from investment operations | — | (0.31 | ) | 0.25 | 0.37 | 0.86 | 0.05 | |||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.24 | ) | (0.26 | ) | (0.31 | ) | (0.38 | ) | (0.38 | ) | ||||||||||||
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Net asset value at end of period | $ | 8.54 | $ | 8.68 | $ | 9.23 | $ | 9.24 | $ | 9.18 | $ | 8.70 | ||||||||||||
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Total investment return (b) | 0.03 | %(c) | (3.45 | %) | 2.71 | % | 4.05 | % | 10.15 | % | 0.59 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.46 | %†† | 3.24 | % | 3.03 | % | 3.38 | % | 4.14 | % | 4.10 | % | ||||||||||||
Net expenses (excluding short sales expenses) | 1.77 | %†† | 1.73 | % | 1.75 | % | 1.90 | % | 1.94 | % | 1.99 | % | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 1.94 | %†† | 1.78 | % | 1.81 | % | 2.02 | % | 2.27 | % | 2.16 | % | ||||||||||||
Short sale expenses | 0.17 | %†† | 0.05 | % | 0.06 | % | 0.12 | % | 0.33 | % | 0.17 | % | ||||||||||||
Portfolio turnover rate | 1 | % | 22 | % | 19 | % | 23 | % | 25 | % | 26 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 18,377 | $ | 19,833 | $ | 22,460 | $ | 19,254 | $ | 17,591 | $ | 16,754 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.67 | $ | 9.22 | $ | 9.23 | $ | 9.18 | $ | 8.69 | $ | 9.03 | ||||||||||||
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Net investment income (loss) (a) | 0.14 | 0.29 | 0.28 | 0.31 | 0.37 | 0.36 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.13 | ) | (0.62 | ) | (0.04 | ) | 0.06 | 0.49 | (0.32 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | 0.02 | 0.01 | (0.01 | ) | 0.01 | (0.00 | )‡ | |||||||||||||||
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Total from investment operations | 0.01 | (0.31 | ) | 0.25 | 0.36 | 0.87 | 0.04 | |||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.24 | ) | (0.26 | ) | (0.31 | ) | (0.38 | ) | (0.38 | ) | ||||||||||||
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Net asset value at end of period | $ | 8.54 | $ | 8.67 | $ | 9.22 | $ | 9.23 | $ | 9.18 | $ | 8.69 | ||||||||||||
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Total investment return (b) | 0.03 | %(c) | (3.46 | %) | 2.71 | % | 4.05 | % | 10.16 | % | 0.48 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.46 | %†† | 3.24 | % | 3.05 | % | 3.34 | % | 4.14 | % | 4.09 | % | ||||||||||||
Net expenses (excluding short sale expenses) | 1.77 | %†† | 1.73 | % | 1.75 | % | 1.90 | % | 1.94 | % | 1.99 | % | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 1.94 | %†† | 1.78 | % | 1.81 | % | 2.02 | % | 2.27 | % | 2.19 | % | ||||||||||||
Short sale expenses | 0.17 | %†† | 0.05 | % | 0.06 | % | 0.12 | % | 0.33 | % | 0.20 | % | ||||||||||||
Portfolio turnover rate | 1 | % | 22 | % | 19 | % | 23 | % | 25 | % | 26 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 250,666 | $ | 315,183 | $ | 345,900 | $ | 113,183 | $ | 59,159 | $ | 50,280 |
* | Unaudited. |
†† | 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. | 29 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 8.72 | $ | 9.28 | $ | 9.29 | $ | 9.23 | $ | 8.73 | $ | 9.07 | ||||||||||||
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Net investment income (loss) (a) | 0.19 | 0.38 | 0.38 | 0.41 | 0.47 | 0.46 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.63 | ) | (0.05 | ) | 0.07 | 0.51 | (0.31 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | 0.02 | 0.01 | (0.01 | ) | 0.01 | (0.00 | )‡ | |||||||||||||||
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Total from investment operations | 0.05 | (0.23 | ) | 0.34 | 0.47 | 0.99 | 0.15 | |||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.33 | ) | (0.35 | ) | (0.41 | ) | (0.49 | ) | (0.49 | ) | ||||||||||||
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Net asset value at end of period | $ | 8.59 | $ | 8.72 | $ | 9.28 | $ | 9.29 | $ | 9.23 | $ | 8.73 | ||||||||||||
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Total investment return (b) | 0.65 | %(c) | (2.56 | %) | 3.73 | % | 5.32 | % | 11.41 | % | 1.79 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 4.47 | %†† | 4.25 | % | 4.08 | % | 4.45 | % | 5.32 | % | 5.20 | % | ||||||||||||
Net expenses (excluding short sale expenses) | 0.75 | %†† | 0.71 | % | 0.73 | % | 0.75 | % | 0.76 | % | 0.78 | % | ||||||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 0.92 | %†† | 0.76 | % | 0.79 | % | 0.87 | % | 1.08 | % | 1.02 | % | ||||||||||||
Short sale expenses | 0.17 | %†† | 0.05 | % | 0.06 | % | 0.12 | % | 0.32 | % | 0.24 | % | ||||||||||||
Portfolio turnover rate | 1 | % | 22 | % | 19 | % | 23 | % | 25 | % | 26 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 793,583 | $ | 1,263,695 | $ | 1,481,314 | $ | 294,560 | $ | 111,435 | $ | 163,356 |
* | Unaudited. |
†† | 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. Class I shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
Class R2 | Six months ended April 30, 2016* | Year ended 2015 | February 28, 2014** through October 31, 2014 | |||||||||||
Net asset value at beginning of period | $ | 8.72 | $ | 9.27 | $ | 9.39 | ||||||||
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Net investment income (loss) (a) | 0.17 | 0.35 | 0.23 | |||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.63 | ) | (0.16 | ) | ||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | 0.02 | 0.02 | ||||||||||
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Total from investment operations | 0.03 | (0.26 | ) | 0.09 | ||||||||||
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Less dividends: | ||||||||||||||
From net investment income | (0.17 | ) | (0.29 | ) | (0.21 | ) | ||||||||
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Net asset value at end of period | $ | 8.58 | $ | 8.72 | $ | 9.27 | ||||||||
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Total investment return (b) | 0.36 | %(c) | (2.81 | %) | 0.99 | %(c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||
Net investment income (loss) | 4.14 | %†† | 3.87 | % | 3.78 | %†† | ||||||||
Net expenses | 1.10 | %†† | 1.06 | % | 1.08 | %†† | ||||||||
Expenses (including short sales expenses, before waiver/reimbursement) | 1.27 | %†† | 1.11 | % | 1.14 | %†† | ||||||||
Short sale expenses | 0.17 | %†† | 0.05 | % | 0.06 | %†† | ||||||||
Portfolio turnover rate | 1 | % | 22 | % | 19 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 48 | $ | 112 | $ | 336 |
* | Unaudited. |
** | Inception date. |
†† | 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. Class R2 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
30 | MainStay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Class R3 | February 29, 2016* | |||
Net asset value at beginning of period | $ | 8.20 | ||
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Net investment income (loss) (a) | 0.05 | |||
Net realized and unrealized gain (loss) on investments | 0.39 | |||
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Total from investment operations | 0.44 | |||
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Less dividends: | ||||
From net investment income | (0.05 | ) | ||
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Net asset value at end of period | $ | 8.59 | ||
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Total investment return (b)(c) | 5.33 | % | ||
Ratios (to average net assets)/Supplemental Data: | ||||
Net investment income (loss) | 3.63 | %†† | ||
Net expenses | 1.35 | %†† | ||
Expenses (before reimbursement/waiver) | 1.52 | %†† | ||
Short sale expenses | 0.17 | % | ||
Portfolio turnover rate | 1 | % | ||
Net assets at end of period (in 000’s) | $ | 26 |
* | Unaudited. |
** | Inception date. |
†† | 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. | 31 |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Unconstrained Bond Fund, (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers seven classes of shares. Class A and Class B shares commenced operations on February 28, 1997. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Class R2 shares commenced operations on February 28, 2014. Class R3 shares commenced operations on February 29, 2016.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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, Class R2 and Class R3 shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A shares. The seven 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 Class A, Investor Class, Class R2 and Class R3 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. 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 Fund’s investment objective is to seek total return by investing primarily in domestic and foreign debt securities.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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
32 | MainStay Unconstrained Bond Fund |
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 based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Equity and credit default swap curves | • Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the
amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Equity securities and shares of Exchange-Traded Funds (“ETFs”) are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally 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 primarily traded. Investments in mutual funds, including money market funds, are valued at their respective 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 (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. Those values reflect broker/dealer supplied prices and electronic data processing techniques, if the evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized
33 |
Notes to Financial Statements (Unaudited) (continued)
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. These securities are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured 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.
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 utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, the Fund held Level 3 securities with a value of $26,338,253 that were valued by utilizing significant unobservable inputs.
Swaps are marked to market daily based upon quotations from pricing agents, brokers, or market makers. These securities are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A Fund security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security 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 the 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 measuring 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 measures 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 by methods deemed reasonable in good faith in such a manner as the Board deems appropriate to reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was measured as of April 30, 2016 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2016, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least 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. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method and includes realized gains and losses from repayments of principal on mortgage-backed securities. 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. The straight-line method approximates the effective interest method for short-term investments. Income from payment-in-kind securities is recorded daily based on the effective interest method of accrual.
34 | MainStay Unconstrained Bond Fund |
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.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(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/or 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 or Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(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 market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. Government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period
the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation 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 or futures commission merchant 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. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures, and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. 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 futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. 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) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) 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 may invest 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. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. In the event that the
35 |
Notes to Financial Statements (Unaudited) (continued)
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. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of April 30, 2016, the Fund did not hold any unfunded commitments.
(K) Swap Contracts. The Fund may enter into credit default, interest rate, equity, index and currency exchange rate contracts (“swaps”). In a typical swap transaction, two parties agree to exchange the future returns (or differentials in rates of future returns) earned or realized at periodic intervals on a particular investment or instrument based on a notional principal amount. Generally, the Fund will enter into a swap on a net basis, which means that the two payment streams under the swap are netted, with the Fund receiving or paying (as the case may be) only the net amount of the two payment streams. Therefore, the Fund’s current obligation under a swap generally will be equal to the net amount to be paid or received under the swap, based on the relative value of notional positions attributable to each counterparty to the swap. The payments may be adjusted for transaction costs, interest payments, the amount of interest paid on the investment or instrument or other factors. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the custodian bank or broker in accordance with the terms of the swap. Swap agreements are privately negotiated in the over the counter market (“OTC swaps”) and may be executed in a multilateral or other trade facilities platform, such as a registered commodities exchange (“centrally cleared swaps”).
Certain standardized swaps, including certain credit default and interest rate swaps, are subject to mandatory clearing, and more types of standardized swaps are expected to be subject to mandatory clearing in the future. The counterparty risk for cleared derivatives is expected to be generally lower than for uncleared derivatives, but cleared contracts are not risk-free. In a cleared derivative transaction, the Fund typically enters into the transaction with a financial institution counterparty, and performance of the transaction is effectively guaranteed by a central clearinghouse, thereby reducing or eliminating the Fund’s exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse may be greater than the margin the Fund would be required to post in an uncleared transaction. As of April 30, 2016, all swap positions outstanding are shown in the Portfolio of Investments.
Swaps are marked to market daily based upon quotations from pricing agents, brokers, or market makers and the change in value, if any, is recorded as unrealized appreciation or depreciation. Any payments made or received upon entering into a swap would be amortized or accreted over the life of the swap and recorded as a realized gain or loss. Early termination of a swap is recorded as a realized gain or loss. Daily changes in valuation of centrally cleared swaps, if any, are recorded as a receivable or payable for the change in value as appropriate (“variation margin”) on the Statements of Assets and Liabilities.
The Fund bears the risk of loss of the amount expected to be received under a swap in the event of the default or bankruptcy of the swap counterparty. The Fund may be able to eliminate its exposure under a swap either by assignment or other disposition, or by entering into an offsetting swap with the same party or a similar creditworthy party. Swaps are not actively traded on financial markets. Entering into swaps involves elements of credit, market, and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibilities that there will be no liquid market for these swaps, that the counterparty to the swaps may default on its obligation to perform or disagree as to the meaning of the contractual terms in the swaps and that there may be unfavorable changes in interest rates, the price of the index or the security underlying these transactions.
Interest Rate Swaps: An interest rate swap is an agreement between two parties where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often LIBOR). A Portfolio will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain amarginally lower interest rate than it would have been able to get without the swap.
Credit Default Swaps: The Fund may enter into credit default swaps to simulate long and short bond positions or to take an active long or short position with respect to the likelihood of a default or credit event by the issuer of the underlying reference obligation. The types of reference obligations underlying the swaps that may be entered into by the Fund include debt obligations of a single issuer of corporate or sovereign debt, a basket of obligations of different issuers or a credit index. A credit index is an equally-weighted credit default swap index that is designed to track a representative segment of the credit default swap market (e.g., investment grade, high volatility, below investment grade or emerging markets) and provides an investor with exposure to specific “baskets” of issuers of certain debt instruments. Index credit default swaps have standardized terms including a fixed spread and standard maturity dates. The composition of the obligations within a particular index changes periodically. Credit default swaps involve one party, the protection buyer, making a stream of payments to another party, the protection seller, in exchange for the right to receive a contingent payment if there is a credit event related to the underlying reference obligation. In the event that the reference obligation matures prior to the termination date of the contract, a similar security will be substituted for the duration of the contract term. Credit events are defined under individual swap agreements and generally include bankruptcy, failure to pay, restructuring, repudiation/moratorium, obligation acceleration and obligation default. Selling protection effectively adds leverage to a portfolio up to the notional amount of the swap agreement. Potential liabilities under these contracts may be reduced by: the auction rates of the underlying reference obligations; upfront payments received at the inception of a swap; and net amounts received from credit default swaps purchased with the identical reference obligation.
(L) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies 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
36 | MainStay Unconstrained Bond Fund |
contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation 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 may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk, and illiquidity risk. Counterparty risk is heightened for these investments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also 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 also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations.
(M) Foreign Currency Transactions. The Fund’s books and records are maintained 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 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.
(N) Rights and Warrants. Rights are certificates that permit the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. 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 such warrants are not exercised by the date of its expiration. The Fund is exposed to risk until the sale or exercise of each right or warrant is completed. As of April 30, 2016, the Fund did not hold any rights.
(O) Securities Sold Short. The Fund engages in sales of securities it does not own (“short sales”) as part of its investment strategy. When the Fund enters into a short sale, it must segregate or maintain with a broker 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. During the period a short position is open, depending on the nature and type of security, a short position is reflected as a liability and is marked to market in accordance with the valuation methodologies previously detailed (See Note 2(A)). Liabilities for securities sold short are closed out by purchasing the applicable securities for delivery to the counterparty broker. A gain, limited to the price at which the Fund 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. Interest on short positions held is accrued daily, while dividends declared on short positions existing on the record date are recorded on the ex-dividend date as a dividend expense in the Statement of Operations. Broker fees and other expenses related to securities sold short are disclosed in the Statement of Operations. Short sales involve risk of loss in excess of the related amounts reflected in the Statement of Assets and Liabilities.
(P) 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
37 |
Notes to Financial Statements (Unaudited) (continued)
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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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.During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(Q) Restricted Securities. Restricted securities, as disclosed in Note 5, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
(R) Concentration of Risk. The Fund’s principal investments include high-yield debt securities (sometimes called “junk bonds”), which are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility.
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 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. 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.
(S) Counterparty Credit Risk. In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains collateral posting terms and netting provisions. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit
a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels or if the Fund fails to meet the terms of its ISDA Master Agreements. The result would cause the Fund to accelerate payment of any net liability owed to the counterparty. For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.
(T) 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.
(U) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to 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. The Fund entered into 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 entered into interest rate and credit default swap contracts in order to obtain a desired return at a lower cost to the Fund, rather than directly investing in an instrument yielding that desired return or to hedge against credit and interest rate risk. The Fund also entered into foreign currency forward contracts to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
38 | MainStay Unconstrained Bond Fund |
Fair value of derivative instruments as of April 30, 2016:
Asset Derivatives
Statement of Assets and Liabilities Location | Credit Contracts Risk | Foreign Exchange Contracts Risk | Interest Rate | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation (depreciation) on investments and futures contracts (a) | $ | — | $ | — | $ | 763,922 | $ | 763,922 | |||||||||
Swap Contracts | Net Assets—Net unrealized appreciation (depreciation) on investments and futures contracts (b) | — | — | 2,504,954 | 2,504,954 | |||||||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | — | 458,640 | — | 458,640 | |||||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | — | $ | 458,640 | $ | 3,268,876 | $ | 3,727,516 | ||||||||||
|
|
Liability Derivatives
Statement of Assets and Liabilities Location | Credit Contracts Risk | Foreign Exchange Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation (depreciation) on investments and futures contracts (a) | $ | — | $ | — | $ | (170,377 | ) | $ | (170,377 | ) | |||||||
Swap Contracts | Net Assets—Net unrealized appreciation (depreciation) on investments and futures contracts (b) | (673,124 | ) | — | (532,644 | ) | (1,205,768 | ) | ||||||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | — | (946,106 | ) | — | (946,106 | ) | |||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | (673,124 | ) | $ | (946,106 | ) | $ | (703,021 | ) | $ | (2,322,251 | ) | ||||||
|
|
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
(b) | Includes cumulative appreciation (depreciation) of centrally cleared swap agreements as reported in the Portfolio of Investments. Only current day’s variation margin of centrally cleared swaps is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2016:
Realized Gain (Loss)
Statement of Operations Location | Credit Contracts Risk | Foreign Exchange Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | — | $ | (4,298,666 | ) | $ | (4,298,666 | ) | |||||||
Swap Contracts | Net realized gain (loss) on swap transactions | (3,411,970 | ) | — | (3,066,609 | ) | (6,478,579 | ) | ||||||||||
Forward Contracts | Net realized gain (loss) on foreign currency transactions | — | 2,007,241 | — | 2,007,241 | |||||||||||||
|
| |||||||||||||||||
Total Realized Gain (Loss) | $ | (3,411,970 | ) | $ | 2,007,241 | $ | (7,365,275 | ) | $ | (8,770,004 | ) | |||||||
|
|
39 |
Notes to Financial Statements (Unaudited) (continued)
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Credit Contracts Risk | Foreign Exchange Contracts Risk | Interest Rate | Total | ||||||||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | — | $ | — | $ | 1,735,895 | $ | 1,735,895 | |||||||||
Swap Contracts | Net change in unrealized appreciation (depreciation) on swap contracts | 389,160 | — | 5,089,641 | 5,478,801 | |||||||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | — | (1,206,000 | ) | — | (1,206,000 | ) | |||||||||||
|
| |||||||||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 389,160 | $ | (1,206,000 | ) | $ | 6,825,536 | $ | 6,008,696 | |||||||||
|
|
Average Notional Amount
Credit Contracts Risk | Foreign Exchange Contracts Risk | Interest Rate Contracts Risk | Total | |||||||||||||
Futures Contracts Short | $ | — | $ | — | $ | (276,219,824 | ) | $ | (276,219,824 | ) | ||||||
Swap Contracts | $ | 27,891,768 | $ | — | $ | 3,173,000,000 | $ | 3,200,891,768 | ||||||||
Forward Contracts Long (a) | $ | — | $ | 24,922,918 | $ | — | $ | 24,922,918 | ||||||||
Forward Contracts Short (b) | $ | — | $ | (81,313,904 | ) | $ | — | $ | (81,313,904 | ) | ||||||
|
|
(a) | Positions were open four months during the reporting period. |
(b) | Positions were open five months during the reporting period. |
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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer 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 the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, 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; 0.55% from $500 million to $1 billion; 0.50% from $1 billion to $5 billion; and 0.475% in excess of $5 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an
annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the six-month period ended April 30, 2016, the effective management fee rate was 0.55%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $4,923,091.
State Street 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 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, Service and Shareholder 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 Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class R2 shares for
40 | MainStay Unconstrained Bond Fund |
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 shares are not subject to a distribution and/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.
In accordance with the Shareholder Services Plan for the 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 R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third party service providers are 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 R2 and Class R3 shares. This is in addition to any fees paid under a distribution plan, where applicable.
During the six-month period ended April 30, 2016, shareholder service fees incurred by the Fund were as follows:
Class R2 | $ | 50 | ||
Class R3 | 4 |
(C) Sales Charges. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $ 21,738 and $7,267, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $4,092, $3, $12,176 and $22,354, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 406,415 | ||
Investor Class | 28,066 | |||
Class B | 16,726 | |||
Class C | 246,719 | |||
Class I | 787,481 | |||
Class R2 | 82 | |||
Class R3 | 7 |
(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. As of April 30, 2016, New York Life and its affiliates beneficially held shares of the Fund with values and percentages of net assets as follows:
Class A | $ | 12,764,647 | 2.8 | % | ||||
Class R3 | 26,358 | 100.0 |
Note 4–Federal Income Tax
Under the Regulated Investment Company Modernization Act of 2010, the Fund is 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.
As of October 31, 2015, for federal income tax purposes, capital loss carryforwards of $64,494,468 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 Available Through | Short-Term Capital Loss | Long-Term Capital Loss Amounts (000’s) | ||||||
2017 Unlimited | $ | 473 21,290 | | $ | — 42,731 | | ||
Total | $ | 21,763 | $ | 42,731 |
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 83,527,070 |
41 |
Notes to Financial Statements (Unaudited) (continued)
Note 5–Restricted Securities
As of April 30, 2016, the Fund held the following restricted security:
Security | Date of Acquisition | Number of Shares | Cost | 4/30/16 Value | Percent of Net Assets | |||||||||||||||
ION Media Networks, Inc. | 3/11/14 | 22 | $ | 34 | $ | 11,778 | 0.0%‡ |
‡ | Less than one-tenth of a percent. |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $21,959 and $602,036, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 5,351,349 | $ | 45,051,557 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,034,024 | 8,684,622 | ||||||
Shares redeemed | (21,248,766 | ) | (178,666,459 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (14,863,393 | ) | (124,930,280 | ) | ||||
Shares converted into Class A (See Note 1) | 107,965 | 905,410 | ||||||
Shares converted from Class A (See Note 1) | (73,808 | ) | (623,675 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (14,829,236 | ) | $ | (124,648,545 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 28,450,020 | $ | 258,407,016 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,174,176 | 19,530,531 | ||||||
Shares redeemed | (36,415,497 | ) | (326,787,137 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (5,791,301 | ) | (48,849,590 | ) | ||||
Shares converted into Class A (See Note 1) | 193,550 | 1,750,177 | ||||||
Shares converted from Class A (See Note 1) | (273,131 | ) | (2,423,227 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (5,870,882 | ) | $ | (49,522,640 | ) | |||
|
|
|
| |||||
42 | MainStay Unconstrained Bond Fund |
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 224,107 | $ | 1,905,247 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 71,576 | 605,623 | ||||||
Shares redeemed | (344,319 | ) | (2,918,084 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (48,636 | ) | (407,214 | ) | ||||
Shares converted into Investor Class (See Note 1) | 114,527 | 974,860 | ||||||
Shares converted from Investor Class (See Note 1) | (97,269 | ) | (827,098 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (31,378 | ) | $ | (259,452 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 670,786 | $ | 6,136,874 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 115,763 | 1,046,718 | ||||||
Shares redeemed | (658,661 | ) | (5,981,986 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 127,888 | 1,201,606 | ||||||
Shares converted into Investor Class (See Note 1) | 351,284 | 3,153,845 | ||||||
Shares converted from Investor Class (See Note 1) | (173,263 | ) | (1,578,782 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 305,909 | $ | 2,776,669 | |||||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 114,498 | $ | 968,351 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 31,289 | 261,357 | ||||||
Shares redeemed | (229,157 | ) | (1,921,845 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (83,370 | ) | (692,137 | ) | ||||
Shares converted from Class B (See Note 1) | (51,183 | ) | (429,497 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (134,553 | ) | $ | (1,121,634 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 353,620 | $ | 3,182,670 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 53,569 | 479,142 | ||||||
Shares redeemed | (455,330 | ) | (4,088,289 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (48,141 | ) | (426,477 | ) | ||||
Shares converted from Class B (See Note 1) | (100,199 | ) | (902,013 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (148,340 | ) | $ | (1,328,490 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 2,362,889 | $ | 19,914,083 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 425,432 | 3,551,960 | ||||||
Shares redeemed | (9,775,425 | ) | (81,834,523 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (6,987,104 | ) | $ | (58,368,480 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 10,867,149 | $ | 98,101,445 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 789,891 | 7,057,406 | ||||||
Shares redeemed | (12,819,125 | ) | (114,653,445 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,162,085 | ) | $ | (9,494,594 | ) | |||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 12,099,479 | $ | 102,270,911 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,050,355 | 17,249,657 | ||||||
Shares redeemed | (66,612,303 | ) | (559,867,639 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (52,462,469 | ) | $ | (440,347,071 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 68,304,110 | $ | 620,273,431 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,727,262 | 42,501,199 | ||||||
Shares redeemed | (87,873,504 | ) | (791,484,328 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (14,842,132 | ) | $ | (128,709,698 | ) | |||
|
|
|
| |||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 3,303 | $ | 27,789 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 232 | 1,945 | ||||||
Shares redeemed | (10,826 | ) | (90,863 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (7,291 | ) | $ | (61,129 | ) | |||
|
|
|
| |||||
Period ended October 31, 2015: | ||||||||
Shares sold | 11,624 | $ | 106,234 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 828 | 7,480 | ||||||
Shares redeemed | (35,876 | ) | (320,072 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (23,424 | ) | $ | (206,358 | ) | |||
|
|
|
| |||||
Class R3 | Shares | Amount | ||||||
Period ended April 30, 2016 (a): | ||||||||
Shares sold | 3,053 | $ | 25,039 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 17 | 142 | ||||||
|
|
|
| |||||
Net increase (decrease) | 3,070 | $ | 25,181 | |||||
|
|
|
|
(a) | Inception date was February 29, 2016. |
43 |
Notes to Financial Statements (Unaudited) (continued)
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
44 | MainStay Unconstrained Bond Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Unconstrained Bond Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and MacKay Shields in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, and responses from New York Life Investments and MacKay Shields to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Funds’ distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and MacKay Shields; (ii) the investment performance of the Fund, New York Life Investments and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay Shields from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and MacKay Shields. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and MacKay Shields
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
45 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that MacKay Shields provides to the Fund. The Board evaluated MacKay Shields’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined MacKay Shields’ track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay Shields, and MacKay Shields’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay Shields. The Board also reviewed MacKay Shields’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis, and with the Board’s Alternative and Closed-End Funds Oversight Committee that occur regularly with respect to the Fund. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions. The Board considered the Fund’s recent underperformance relative to peers but also observed that the Fund’s performance for all other periods compared favorably to peers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments and MacKay Shields under the Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and MacKay Shields must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate
46 | MainStay Unconstrained Bond Fund |
certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay
Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to MacKay Shields are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board also noted that the Fund’s total expenses and net management fee were lower than many of its peers.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are
47 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
48 | MainStay Unconstrained Bond 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; 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 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).
49 |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1696972 MS164-16 | MSUB10-06/16 (NYLIM) NL016 |
MainStay Government Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –3.14 1.43 | %
|
| –3.32 1.23 | %
|
| 1.34 2.28 | %
|
| 3.40 3.88 | %
|
| 1.00 1.00 | %
| |||||||
Investor Class Shares3 | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | –3.26 1.30 | | | –3.58 0.96 | | | 1.11 2.05 | | | 3.25 3.72 | | | 1.28 1.28 | | |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First | With sales charges Excluding sales charges | | –4.07 0.93 | | | –4.73 0.22 | | | 0.92 1.29 | | | 2.95 2.95 | | | 2.03 2.03 | | |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 0.05 1.05 | | | –0.65 0.34 | | | 1.32 1.32 | | | 2.97 2.97 | | | 2.03 2.03 | | |||||||
Class I Shares | No Sales Charge | 1.54 | 1.47 | 2.51 | 4.24 | 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, changes 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 may 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 (if any), 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 would likely have been different. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Barclays U.S. Government Bond Index4 | 2.43 | % | 2.77 | % | 3.18 | % | 4.54 | % | ||||||||
Morningstar Intermediate Government Category Average5 | 1.62 | 1.53 | 2.46 | 4.09 |
4. | The Barclays U.S. Government Bond Index consists of publicly issued debt of the U.S. Treasury and government agencies. The Barclays U.S. Government Bond Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume the reinvestment of all income and capital gains. An investment cannot be made directly in an Index. |
5. | The Morningstar Intermediate Government Category Average is representative of funds that have at least 90% of their bond holdings in |
bonds backed by U.S. government or by U.S. government-linked agencies. These funds have durations between 3.5 and 6 years and/or average effective maturities between 4 and 10 years. Results are based on total returns with all dividends 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 Government Fund |
Cost in Dollars of a $1,000 Investment in MainStay Government Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,014.30 | $ | 4.96 | $ | 1,019.90 | $ | 4.97 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,013.00 | $ | 6.21 | $ | 1,018.70 | $ | 6.22 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,009.30 | $ | 9.94 | $ | 1,015.00 | $ | 9.97 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,010.50 | $ | 9.95 | $ | 1,015.00 | $ | 9.97 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,015.40 | $ | 3.71 | $ | 1,021.20 | $ | 3.72 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.99% for Class A, 1.24% for Investor Class, 1.99% for Class B and Class C and 0.74% for Class I) multiplied by the average account value over the period, divided by 366 and multiplied by 182 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7 |
Portfolio Composition as of April 30, 2016 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | Tennessee Valley Authority, 4.65%, due 6/15/35 |
2. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 4.00%, due 3/1/41 |
3. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 4.00%, due 2/1/41 |
4. | United States Treasury Note, 1.875%, due 11/30/21 |
5. | Government National Mortgage Association (Mortgage Pass-Through Securities), 4.00%, due 10/15/41 |
6. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 3.50%, due 11/1/41 |
7. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 4.50%, due 1/1/41 |
8. | Overseas Private Investment Corporation, 5.142%, due 12/15/23 |
9. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 3.00%, due 6/1/45 |
10. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 3.50%, due 8/1/43 |
8 | MainStay Government Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Louis N. Cohen, CFA, and Steven H. Rich, PhD, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay Government Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay Government Fund returned 1.43% for Class A shares, 1.30% for Investor Class shares, 0.93% for Class B shares and 1.05% for Class C shares for the six months ended April 30, 2016. Over the same period, the Fund’s Class I shares returned 1.54%. For the six months ended April 30, 2016, all share classes underperformed the 2.43% return of the Barclays U.S. Government Bond Index,1 which is the Fund’s broad-based securities-market index. Over the same period, all share classes underperformed the 1.62% return of the Morningstar Intermediate Government Category Average.2 See page 5 for Fund returns with applicable sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s performance relative to the Barclays U.S. Government Bond Index was affected primarily by four factors during the reporting period: duration3 positioning, yield-curve4 posture, sector weightings and issue selection.
The Fund’s duration was shorter than that of the Barclays U.S. Government Bond Index during the reporting period. With a shorter duration, the Fund was less sensitive than the benchmark and longer-duration peers to changes in U.S. Treasury yields. The short duration posture detracted from the Fund’s relative performance as yields fell, on average, across the yield curve. During the reporting period, the spread5 between the 2- and 30-year U.S. Treasury benchmark yields narrowed, which benefited the Fund’s peers who were more concentrated in longer-duration securities.
Agency mortgage pass-through securities6 were the largest class of securities in the Fund. The Fund’s commitment to agency mortgage pass-throughs imparted a yield advantage over lower-yielding U.S. Treasury securities and agency debentures. This benefit, however, was offset by the underperformance of agency mortgage-backed securities relative to comparable-duration U.S. Treasury securities, as mortgage rates followed U.S. Treasury yields lower and refinancing opportunities expanded. With the Fund’s commitment to mortgage-backed securities, the Fund’s performance was slowed relative
to the Barclays U.S. Government Bond Index, which held no mortgage-backed securities, and relative to peers with less exposure to mortgage-backed securities.
The Fund’s mortgage allocation favored mortgage-backed securities issued by Fannie Mae and Freddie Mac. Relative to its peers the Fund was underweight Ginnie Mae issues. Given the outperformance of Fannie Mae and Freddie Mac issues during the reporting period, the Fund benefited relative to peers with larger Ginnie Mae commitments. Ginnie Mae securities exhibited faster prepayment speeds than equivalent Fannie Mae and Freddie Mac issues, as a result of policies that accelerated refinancing rates for Ginnie Mae–eligible borrowers. Faster prepayment rates possibly hampered returns of mortgage-backed securities because the majority of the mortgage market was priced above par and prepayments returned principal to investors at par as of the end of the reporting period.
Low portfolio turnover benefited the Fund relative to peers with higher turnover by limiting transaction costs. In seeking to preserve yield, the Fund remained nearly fully invested, which avoided large cash balances that can detract from performance.
What was the Fund’s duration strategy during the reporting period?
The Fund’s 3.4 year-duration at the end of the reporting period was shorter than the duration of the Barclays U.S. Government Bond Index. Under the market conditions during the reporting period, the Fund’s duration favored the shorter side because doing so often helps the Fund relative to its benchmark and relative to peer funds with longer durations in periods of rising U.S. Treasury yields. As the reporting period unfolded, however, the Fund’s duration extended by 0.75 years to seek to narrow the distance between the Fund’s duration and that of the Barclays U.S. Government Bond Index and in turn, to moderate the impact of U.S. Treasury yield volatility on relative performance. Because the Fund had a shorter duration than the benchmark, it was less sensitive to changes in U.S. Treasury yields. Accordingly, the short-duration posture detracted from the Fund’s performance relative to the Barclays U.S. Government Bond Index and longer-duration peers as U.S. Treasury yields fell, on average, during the reporting period.
1. | See footnote on page 6 for more information on the Barclays U.S. Government Bond Index. |
2. | See footnote on page 6 for more information on the Morningstar Intermediate Government Category Average. |
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. |
5. | 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 term may also refer to the difference in yield between two specific securities or types of securities at a given time. |
6. | Mortgage pass-through securities 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 an investment bank to investors. |
9 |
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
Most of the Fund’s residential mortgage exposure was attributable to mortgage pass-through securities rather than collateralized mortgage obligations. In our opinion, the compensation demanded by the market for the better predictability of cash flows among collateralized mortgage obligations was excessive.
The reporting period reflected a transition in which the principal driver of the housing market migrated from purchase activity to refinancing, as mortgage rates declined and the peak summer housing season had ended. To mute the impact of these changes, the Fund emphasized mortgage pass-through securities whose underlying loan pools were less sensitive to mortgage-rate changes. We believe that these “call-protected” pass-throughs can be a source of better value because the loan pools tend to be less responsive to mortgage-rate volatility, thereby stabilizing prepayment speeds and enabling the investor to preserve more of the security’s yield. A loan pool comprised of smaller-balance loans (e.g., a loan pool where no mortgage is larger than $110,000) is one instance, in our opinion, of a mortgage-backed security with superior call protection. Shallow—rather than rapid—macroeconomic improvement prompted the extension of the Fund’s duration. This was accomplished with two types of trades: unwinding the Fund’s U.S. Treasury-futures position and reinvesting principal runoff from the Fund’s mortgage position into intermediate-duration U.S. Treasury securities.
During the reporting period, which aspects of the Fund’s positioning were the strongest positive contributors to the Fund’s performance and which aspects detracted the most?
Duration was the principal detractor from the Fund’s performance. As discussed, the Fund was positioned to be less sensitive to changes in U.S. Treasury yields and saw less of an advantage from falling yields during the reporting period. The secondary performance headwind was the Fund’s commitment to mortgage-backed securities, which underperformed comparable-duration U.S. Treasury securities as mortgage rates followed U.S. Treasury yields lower. The Fund offset some of this drag by favoring mortgage securities with stable cash flows, which better positioned the Fund to withstand lower mortgage rates.
The flattening of the U.S. Treasury yield-curve between the 2-year and 30-year maturities likely detracted from the Fund’s performance relative to the Barclays U.S. Government Bond Index and relative to peers with larger concentrations in longer-duration securities.
The yield advantage of mortgage-backed securities relative to comparable-duration U.S. Treasury securities contributed to the Fund’s absolute and relative performance. Issue selection, specifically the Fund’s underweight positions in Ginnie Mae issues in favor of Fannie Mae and Freddie Mac pass-through securities enhanced the Fund’s relative performance. In addition, the Fund favored 30-year loan terms over shorter (15- and 20-year) loan terms, which also helped performance relative to the Barclays U.S. Government Bond Index. The flattening of the U.S. Treasury yield curve enhanced the inherent value of the wider-window cash flows of mortgage pass-through securities backed by 30-year loan terms.
How did the Fund’s sector weightings change during the reporting period?
The market-equivalent weight of the Fund’s U.S. Treasury securities rose by 13% of assets, and the Fund’s allocation to mortgage-backed securities fell by 7% of assets. These changes reflected several investment decisions during the reporting period. The Fund diversified its asset base by reinvesting mortgage prepayments in U.S. Treasury securities and closed its U.S. Treasury futures position to extend the Fund’s duration. The Fund also sought to extend its duration by investing cash contributions in intermediate-duration U.S. Treasury securities.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2016, the Fund held underweight positions relative to the Barclays U.S. Government Bond Index in U.S. Treasury securities and agency debentures and an overweight position in agency mortgage pass-through securities. As of the same date, the Fund held modestly overweight positions relative to the Index in asset-backed securities and commercial mortgage-backed securities. As of April 30, 2016, the Fund’s collective non-government exposure was about 3% of net assets and the Fund held about 4% of net assets in cash or cash equivalents.
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 will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay Government Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 98.0%† Asset-Backed Securities 1.5% | ||||||||
Other ABS 0.2% | ||||||||
Small Business Administration | $ | 322,724 | $ | 331,089 | ||||
|
| |||||||
Utilities 1.3% | ||||||||
Atlantic City Electric Transition Funding LLC | 1,980,880 | 2,186,736 | ||||||
|
| |||||||
Total Asset-Backed Securities | 2,517,825 | |||||||
|
| |||||||
Mortgage-Backed Securities 1.1% | ||||||||
Commercial Mortgage Loans (Collateralized Mortgage Obligation) 0.4% |
| |||||||
Four Times Square Trust | 620,000 | 698,959 | ||||||
|
| |||||||
Residential Mortgages (Collateralized Mortgage Obligations) 0.7% |
| |||||||
Citigroup Mortgage Loan Trust, Inc. | 235,935 | 215,095 | ||||||
Mortgage Equity Conversion Asset Trust | 1,158,965 | 984,325 | ||||||
|
| |||||||
1,199,420 | ||||||||
|
| |||||||
Total Mortgage-Backed Securities | 1,898,379 | |||||||
|
| |||||||
U.S. Government & Federal Agencies 95.4% | ||||||||
Fannie Mae Strip (Collateralized Mortgage Obligations) 0.0%‡ |
| |||||||
Series 360, Class 2, IO 5.00%, due 8/25/35 (f) | 230,287 | 48,186 | ||||||
Series 361, Class 2, IO 6.00%, due 10/25/35 (f) | 46,882 | 7,542 | ||||||
|
| |||||||
55,728 | ||||||||
|
| |||||||
Federal Home Loan Mortgage Corporation |
| |||||||
2.50%, due 6/1/35 (c) | 177,452 | 186,917 | ||||||
2.645%, due 2/1/37 (c) | 78,080 | 82,413 | ||||||
2.696%, due 3/1/35 (c) | 34,395 | 36,019 | ||||||
3.00%, due 4/1/45 | 2,800,859 | 2,872,253 | ||||||
¨3.00%, due 6/1/45 | 3,405,512 | 3,492,320 | ||||||
3.00%, due 7/1/45 | 1,514,026 | 1,552,619 |
Principal Amount | Value | |||||||
Federal Home Loan Mortgage Corporation |
| |||||||
3.50%, due 10/1/25 | $ | 394,241 | $ | 420,309 | ||||
3.50%, due 11/1/25 | 2,479,432 | 2,644,184 | ||||||
3.50%, due 4/1/42 | 1,003,363 | 1,059,061 | ||||||
3.50%, due 5/1/42 | 808,994 | 849,077 | ||||||
3.50%, due 7/1/42 | 401,803 | 421,715 | ||||||
3.50%, due 6/1/43 | 1,042,118 | 1,092,630 | ||||||
¨3.50%, due 8/1/43 | 3,274,654 | 3,442,656 | ||||||
3.50%, due 1/1/44 | 1,107,928 | 1,162,260 | ||||||
3.50%, due 5/1/44 | 341,685 | 360,975 | ||||||
3.50%, due 3/1/45 | 1,484,471 | 1,556,294 | ||||||
3.50%, due 12/1/45 | 589,661 | 618,190 | ||||||
4.00%, due 3/1/25 | 1,059,043 | 1,128,139 | ||||||
4.00%, due 7/1/25 | 369,075 | 393,496 | ||||||
4.00%, due 8/1/31 | 146,973 | 158,443 | ||||||
4.00%, due 8/1/39 | 285,845 | 311,261 | ||||||
4.00%, due 12/1/40 | 2,960,937 | 3,212,742 | ||||||
¨4.00%, due 2/1/41 | 4,800,361 | 5,195,353 | ||||||
¨4.00%, due 3/1/41 | 5,346,235 | 5,803,642 | ||||||
4.00%, due 4/1/41 | 507,474 | 545,754 | ||||||
4.00%, due 1/1/42 | 2,657,816 | 2,885,756 | ||||||
4.00%, due 12/1/42 | 795,918 | 859,309 | ||||||
4.00%, due 11/1/43 | 293,241 | 313,272 | ||||||
4.00%, due 2/1/46 | 1,428,196 | 1,526,746 | ||||||
4.50%, due 3/1/41 | 782,256 | 861,251 | ||||||
4.50%, due 8/1/41 | 1,046,912 | 1,155,568 | ||||||
5.00%, due 1/1/20 | 73,535 | 76,896 | ||||||
5.00%, due 6/1/33 | 472,050 | 525,918 | ||||||
5.00%, due 8/1/33 | 387,509 | 431,713 | ||||||
5.00%, due 5/1/36 | 366,514 | 405,062 | ||||||
5.00%, due 10/1/39 | 932,003 | 1,044,830 | ||||||
5.50%, due 1/1/21 | 240,571 | 257,969 | ||||||
5.50%, due 11/1/35 | 420,960 | 478,695 | ||||||
5.50%, due 11/1/36 | 99,307 | 114,018 | ||||||
6.50%, due 4/1/37 | 82,297 | 98,854 | ||||||
|
| |||||||
49,634,579 | ||||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
2.142%, due 11/1/34 (c) | 156,916 | 162,593 | ||||||
2.232%, due 4/1/34 (c) | 299,828 | 319,327 | ||||||
2.50%, due 2/1/43 | 896,615 | 892,223 | ||||||
3.00%, due 10/1/32 | 959,252 | 999,201 | ||||||
3.00%, due 4/1/43 | 3,167,577 | 3,254,456 | ||||||
3.50%, due 11/1/25 | 1,149,961 | 1,221,845 | ||||||
3.50%, due 11/1/32 | 723,750 | 765,792 | ||||||
3.50%, due 2/1/41 | 2,123,824 | 2,229,434 | ||||||
¨3.50%, due 11/1/41 | 3,412,718 | 3,603,017 | ||||||
3.50%, due 12/1/41 | 324,783 | 342,183 | ||||||
3.50%, due 1/1/42 | 1,759,276 | 1,864,891 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings, as of April 30, 2016, 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
Federal National Mortgage Association |
| |||||||
3.50%, due 3/1/42 | $ | 2,342,289 | $ | 2,457,635 | ||||
3.50%, due 8/1/42 | 1,433,291 | 1,508,148 | ||||||
3.50%, due 12/1/42 | 804,470 | 849,898 | ||||||
3.50%, due 2/1/43 | 1,172,114 | 1,238,283 | ||||||
3.50%, due 5/1/43 | 725,910 | 763,547 | ||||||
3.50%, due 6/1/43 | 856,062 | 900,862 | ||||||
3.50%, due 9/1/43 TBA (g) | 3,280,000 | 3,437,338 | ||||||
4.00%, due 9/1/31 | 1,432,053 | 1,543,120 | ||||||
4.00%, due 2/1/41 | 1,536,841 | 1,659,597 | ||||||
4.00%, due 3/1/41 | 2,246,438 | 2,445,139 | ||||||
4.00%, due 10/1/41 | 503,572 | 548,114 | ||||||
4.00%, due 3/1/42 | 1,540,105 | 1,652,551 | ||||||
4.00%, due 4/1/42 | 669,448 | 718,397 | ||||||
4.00%, due 6/1/42 | 1,876,190 | 2,024,749 | ||||||
4.00%, due 7/1/42 | 1,716,868 | 1,852,968 | ||||||
4.50%, due 11/1/18 | 447,531 | 460,868 | ||||||
4.50%, due 6/1/23 | 365,281 | 383,205 | ||||||
4.50%, due 5/1/39 | 659,452 | 728,573 | ||||||
4.50%, due 6/1/39 | 2,100,816 | 2,312,115 | ||||||
4.50%, due 7/1/39 | 2,046,468 | 2,263,450 | ||||||
4.50%, due 8/1/39 | 1,763,098 | 1,948,014 | ||||||
4.50%, due 9/1/40 | 1,371,270 | 1,516,714 | ||||||
4.50%, due 12/1/40 | 2,120,704 | 2,318,995 | ||||||
¨4.50%, due 1/1/41 | 3,255,603 | 3,596,774 | ||||||
4.50%, due 2/1/41 | 1,107,315 | 1,219,570 | ||||||
4.50%, due 8/1/41 | 798,910 | 880,777 | ||||||
4.50%, due 12/1/43 | 539,534 | 587,634 | ||||||
5.00%, due 9/1/17 | 138,165 | 142,242 | ||||||
5.00%, due 9/1/20 | 25,533 | 26,491 | ||||||
5.00%, due 11/1/33 | 476,231 | 529,709 | ||||||
5.00%, due 6/1/35 | 431,194 | 479,374 | ||||||
5.00%, due 10/1/35 | 183,296 | 203,312 | ||||||
5.00%, due 1/1/36 | 95,697 | 106,157 | ||||||
5.00%, due 2/1/36 | 686,545 | 761,625 | ||||||
5.00%, due 5/1/36 | 470,782 | 522,256 | ||||||
5.00%, due 6/1/36 | 81,687 | 90,398 | ||||||
5.00%, due 9/1/36 | 125,895 | 139,619 | ||||||
5.00%, due 3/1/40 | 1,192,995 | 1,338,704 | ||||||
5.00%, due 2/1/41 | 2,195,124 | 2,479,374 | ||||||
5.50%, due 1/1/17 | 4,104 | 4,145 | ||||||
5.50%, due 2/1/17 | 105,221 | 106,270 | ||||||
5.50%, due 6/1/19 | 273,748 | 285,688 | ||||||
5.50%, due 11/1/19 | 315,496 | 330,233 | ||||||
5.50%, due 4/1/21 | 487,168 | 519,903 | ||||||
5.50%, due 6/1/33 | 1,339,856 | 1,514,601 | ||||||
5.50%, due 11/1/33 | 777,654 | 879,352 | ||||||
5.50%, due 12/1/33 | 926,227 | 1,049,505 | ||||||
5.50%, due 6/1/34 | 230,887 | 260,926 | ||||||
5.50%, due 12/1/34 | 69,038 | 77,627 |
Principal Amount | Value | |||||||
Federal National Mortgage Association |
| |||||||
5.50%, due 3/1/35 | $ | 365,850 | $ | 412,538 | ||||
5.50%, due 12/1/35 | 92,877 | 104,914 | ||||||
5.50%, due 4/1/36 | 287,724 | 324,236 | ||||||
5.50%, due 9/1/36 | 100,932 | 114,178 | ||||||
5.50%, due 7/1/37 | 224,742 | 258,743 | ||||||
6.00%, due 12/1/16 | 13,403 | 13,490 | ||||||
6.00%, due 11/1/32 | 241,855 | 279,516 | ||||||
6.00%, due 1/1/33 | 178,296 | 205,554 | ||||||
6.00%, due 3/1/33 | 202,053 | 232,854 | ||||||
6.00%, due 9/1/34 | 83,766 | 96,162 | ||||||
6.00%, due 9/1/35 | 571,375 | 663,355 | ||||||
6.00%, due 10/1/35 | 265,635 | 307,487 | ||||||
6.00%, due 6/1/36 | 224,115 | 255,550 | ||||||
6.00%, due 11/1/36 | 417,098 | 475,891 | ||||||
6.00%, due 4/1/37 | 61,351 | 68,004 | ||||||
6.50%, due 10/1/31 | 146,064 | 174,382 | ||||||
6.50%, due 2/1/37 | 64,623 | 78,304 | ||||||
|
| |||||||
73,384,666 | ||||||||
|
| |||||||
Government National Mortgage Association |
| |||||||
4.00%, due 7/15/39 | 442,204 | 473,852 | ||||||
4.00%, due 9/20/40 | 1,846,762 | 2,005,919 | ||||||
4.00%, due 11/20/40 | 312,678 | 339,674 | ||||||
4.00%, due 1/15/41 | 1,788,834 | 1,923,062 | ||||||
¨4.00%, due 10/15/41 | 3,442,085 | 3,750,827 | ||||||
4.50%, due 5/20/40 | 1,942,808 | 2,113,449 | ||||||
5.00%, due 2/20/41 | 455,585 | 506,004 | ||||||
6.00%, due 8/15/32 | 341,446 | 395,104 | ||||||
6.00%, due 12/15/32 | 222,447 | 257,123 | ||||||
6.50%, due 8/15/28 | 107,433 | 123,331 | ||||||
6.50%, due 4/15/31 | 340,621 | 405,070 | ||||||
|
| |||||||
12,293,415 | ||||||||
|
| |||||||
¨Overseas Private Investment Corporation 2.1% |
| |||||||
5.142%, due 12/15/23 | 3,201,119 | 3,505,417 | ||||||
|
| |||||||
¨Tennessee Valley Authority 4.0% |
| |||||||
4.65%, due 6/15/35 | 5,605,000 | 6,621,915 | ||||||
|
| |||||||
United States Treasury Notes 8.2% | ||||||||
1.75%, due 3/31/22 | 2,500,000 | 2,539,745 | ||||||
1.75%, due 9/30/22 | 750,000 | 759,492 | ||||||
¨1.875%, due 11/30/21 | 4,000,000 | 4,101,564 | ||||||
2.00%, due 11/30/20 | 3,000,000 | 3,099,141 | ||||||
2.375%, due 8/15/24 | 3,000,000 | 3,150,936 | ||||||
|
| |||||||
13,650,878 | ||||||||
|
| |||||||
Total U.S. Government & Federal Agencies | 159,146,598 | |||||||
|
| |||||||
Total Long-Term Bonds | 163,562,802 | |||||||
|
|
12 | MainStay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Short-Term Investment 3.9% | ||||||||
Repurchase Agreement 3.9% | ||||||||
Fixed Income Clearing Corp. | $ | 6,437,033 | $ | 6,437,033 | ||||
|
| |||||||
Total Short-Term Investment | 6,437,033 | |||||||
|
| |||||||
Total Investments | 101.9 | % | 169,999,835 | |||||
Other Assets, Less Liabilities | (1.9 | ) | (3,153,724 | ) | ||||
Net Assets | 100.0 | % | $ | 166,846,111 |
‡ | 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(a)(2) of the Securities Act of 1933, as amended. |
(b) | Collateral strip rate—A bond whose interest was based on the weighted net interest rate of the collateral. The coupon rate adjusts periodically based on a predetermined schedule. Rate shown was the rate in effect as of April 30, 2016. |
(c) | Floating rate—Rate shown was the rate in effect as of April 30, 2016. |
(d) | Illiquid security—As of April 30, 2016, the total market value of this security deemed illiquid under procedures approved by the Board of Trustees was $984,325, which represented 0.6% of the Fund’s net assets. |
(e) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2016, the total market value of this security was $984,325, which represented 0.6% of the Fund’s net assets. |
(f) | Collateralized Mortgage Obligation Interest Only Strip—Pays a fixed or variable rate of interest based on mortgage loans or mortgage pass-through securities. The principal amount of the underlying pool represents the notional amount on which the current interest was calculated. The value of these stripped securities may be particularly sensitive to changes in prevailing interest rates and are typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities. |
(g) | 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. As of April 30, 2016, the total net market value of these securities was $3,437,338, which represented 2.1% of the Fund’s net assets. All or a portion of these securities are a part of a mortgage dollar roll agreement. |
(h) | As of April 30, 2016, cost was $162,787,422 for federal income tax purposes and net unrealized appreciation was as follows: |
Gross unrealized appreciation | $ | 7,542,465 | ||
Gross unrealized depreciation | (330,052 | ) | ||
|
| |||
Net unrealized appreciation | $ | 7,212,413 | ||
|
|
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 2,517,825 | $ | — | $ | 2,517,825 | ||||||||
Mortgage-Backed Securities (b) | — | 914,054 | 984,325 | 1,898,379 | ||||||||||||
U.S. Government & Federal Agencies | — | 159,146,598 | — | 159,146,598 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 162,578,477 | 984,325 | 163,562,802 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 6,437,033 | — | 6,437,033 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | — | $ | 169,015,510 | $ | 984,325 | $ | 169,999,835 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $984,325 is held in Residential Mortgages (Collateralized Mortgage Obligations) within the Mortgage-Backed Securities section of the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
The Fund recognizes transfers between the levels as of the beginning of the period.
For the period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2015 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of April 30, 2016 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at April 30, 2016 (a) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | $ | 950,544 | $ | 459 | $ | — | $ | 33,322 | $ | — | $ | — | $ | — | $ | — | $ | 984,325 | $ | 33,322 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 950,544 | $ | 459 | $ | — | $ | 33,322 | $ | — | $ | — | $ | — | $ | — | $ | 984,325 | $ | 33,322 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
14 | MainStay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 169,999,835 | ||
Receivables: | ||||
Interest | 628,945 | |||
Fund shares sold | 204,495 | |||
Investment securities sold | 4,451 | |||
Other assets | 45,664 | |||
|
| |||
Total assets | 170,883,390 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 3,438,363 | |||
Fund shares redeemed | 340,117 | |||
Manager (See Note 3) | 68,011 | |||
Transfer agent (See Note 3) | 60,188 | |||
NYLIFE Distributors (See Note 3) | 51,445 | |||
Professional fees | 34,424 | |||
Shareholder communication | 15,342 | |||
Custodian | 7,430 | |||
Trustees | 87 | |||
Accrued expenses | 2,092 | |||
Dividend payable | 19,780 | |||
|
| |||
Total liabilities | 4,037,279 | |||
|
| |||
Net assets | $ | 166,846,111 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 195,145 | ||
Additional paid-in capital | 160,025,904 | |||
|
| |||
160,221,049 | ||||
Distributions in excess of net investment income | (2,935 | ) | ||
Accumulated net realized gain (loss) on investments and futures transactions | (584,416 | ) | ||
Net unrealized appreciation (depreciation) on investments | 7,212,413 | |||
|
| |||
Net assets | $ | 166,846,111 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 91,017,251 | ||
|
| |||
Shares of beneficial interest outstanding | 10,658,859 | |||
|
| |||
Net asset value per share outstanding | $ | 8.54 | ||
Maximum sales charge (4.50% of offering price) | 0.40 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.94 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 41,954,309 | ||
|
| |||
Shares of beneficial interest outstanding | 4,892,753 | |||
|
| |||
Net asset value per share outstanding | $ | 8.57 | ||
Maximum sales charge (4.50% of offering price) | 0.40 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.97 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 8,122,838 | ||
|
| |||
Shares of beneficial interest outstanding | 951,302 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.54 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 21,163,067 | ||
|
| |||
Shares of beneficial interest outstanding | 2,479,515 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.54 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 4,588,646 | ||
|
| |||
Shares of beneficial interest outstanding | 532,113 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.62 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 2,565,986 | ||
|
| |||
Expenses | ||||
Manager (See Note 3) | 409,484 | |||
Distribution/Service—Class A (See Note 3) | 112,183 | |||
Distribution/Service—Investor Class (See Note 3) | 52,183 | |||
Distribution/Service—Class B (See Note 3) | 39,472 | |||
Distribution/Service—Class C (See Note 3) | 100,205 | |||
Transfer agent (See Note 3) | 170,580 | |||
Registration | 38,231 | |||
Professional fees | 34,825 | |||
Shareholder communication | 18,723 | |||
Custodian | 10,849 | |||
Trustees | 1,865 | |||
Miscellaneous | 6,027 | |||
|
| |||
Total expenses | 994,627 | |||
|
| |||
Net investment income (loss) | 1,571,359 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 48,640 | |||
Futures transactions | (29,661 | ) | ||
|
| |||
Net realized gain (loss) on investments and futures transactions | 18,979 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 622,434 | |||
Futures contracts | (30,615 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | 591,819 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and futures transactions | 610,798 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 2,182,157 | ||
|
|
16 | MainStay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,571,359 | $ | 3,589,282 | ||||
Net realized gain (loss) on investments and futures transactions | 18,979 | (792,858 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | 591,819 | (1,149,339 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 2,182,157 | 1,647,085 | ||||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (964,000 | ) | (2,214,956 | ) | ||||
Investor Class | (394,392 | ) | (913,904 | ) | ||||
Class B | (45,616 | ) | (126,342 | ) | ||||
Class C | (115,907 | ) | (167,451 | ) | ||||
Class I | (51,989 | ) | (143,227 | ) | ||||
|
| |||||||
(1,571,904 | ) | (3,565,880 | ) | |||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | — | (174,799 | ) | |||||
Investor Class | — | (82,736 | ) | |||||
Class B | — | (18,280 | ) | |||||
Class C | — | (21,724 | ) | |||||
Class I | — | (17,272 | ) | |||||
|
| |||||||
— | (314,811 | ) | ||||||
|
| |||||||
Total dividends and distributions to shareholders | (1,571,904 | ) | (3,880,691 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 19,393,101 | 29,631,569 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 1,443,800 | 3,576,891 | ||||||
Cost of shares redeemed | (17,092,298 | ) | (46,438,657 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 3,744,603 | (13,230,197 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 4,354,856 | (15,463,803 | ) | |||||
Net Assets | ||||||||
Beginning of period | 162,491,255 | 177,955,058 | ||||||
|
| |||||||
End of period | $ | 166,846,111 | $ | 162,491,255 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (2,935 | ) | $ | (2,390 | ) | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 8.51 | $ | 8.63 | $ | 8.57 | $ | 9.02 | $ | 8.86 | $ | 9.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.20 | 0.21 | 0.19 | 0.22 | 0.24 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | (0.10 | ) | 0.08 | (0.41 | ) | 0.19 | (0.01 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.12 | 0.10 | 0.29 | (0.22 | ) | 0.41 | 0.23 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.09 | ) | (0.20 | ) | (0.21 | ) | (0.20 | ) | (0.23 | ) | (0.28 | ) | ||||||||||||||
From net realized gain on investments | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.02 | ) | (0.09 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.22 | ) | (0.23 | ) | (0.23 | ) | (0.25 | ) | (0.37 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 8.54 | $ | 8.51 | $ | 8.63 | $ | 8.57 | $ | 9.02 | $ | 8.86 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 1.43 | %(c) | 1.17 | % | 3.46 | % | (2.50 | %) | 4.70 | % | 2.76 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 2.15 | %†† | 2.38 | % | 2.47 | % | 2.17 | % | 2.46 | % | 2.74 | % | ||||||||||||||
Net expenses | 0.99 | %†† | 1.00 | % | 0.98 | % | 1.03 | % | 1.03 | % | 1.03 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 0.99 | %†† | 1.00 | % | 0.98 | % | 1.09 | % | 1.14 | % | 1.17 | % | ||||||||||||||
Portfolio turnover rate (d) | 13 | % | 13 | % | 14 | % | 28 | % | 37 | % | 62 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 91,017 | $ | 90,119 | $ | 100,212 | $ | 143,234 | $ | 174,621 | $ | 176,253 |
* | Unaudited. |
†† | 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 7%, 16% and 43% for the years ended October 31, 2013, 2012, and 2011, respectively. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 8.54 | $ | 8.66 | $ | 8.60 | $ | 9.05 | $ | 8.90 | $ | 9.03 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.08 | 0.18 | 0.19 | 0.18 | 0.21 | 0.23 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | (0.10 | ) | 0.08 | (0.42 | ) | 0.17 | (0.00 | )‡ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.11 | 0.08 | 0.27 | (0.24 | ) | 0.38 | 0.23 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.08 | ) | (0.18 | ) | (0.19 | ) | (0.18 | ) | (0.21 | ) | (0.27 | ) | ||||||||||||||
From net realized gain on investments | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.02 | ) | (0.09 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.08 | ) | (0.20 | ) | (0.21 | ) | (0.21 | ) | (0.23 | ) | (0.36 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 8.57 | $ | 8.54 | $ | 8.66 | $ | 8.60 | $ | 9.05 | $ | 8.90 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 1.30 | %(c) | 0.88 | % | 3.15 | % | (2.66 | %) | 4.42 | % | 2.73 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.89 | %†† | 2.11 | % | 2.19 | % | 2.01 | % | 2.32 | % | 2.61 | % | ||||||||||||||
Net expenses | 1.24 | %†† | 1.28 | % | 1.26 | % | 1.19 | % | 1.17 | % | 1.17 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.24 | %†† | 1.28 | % | 1.26 | % | 1.25 | % | 1.28 | % | 1.31 | % | ||||||||||||||
Portfolio turnover rate (d) | 13 | % | 13 | % | 14 | % | 28 | % | 37 | % | 62 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 41,954 | $ | 42,444 | $ | 45,947 | $ | 50,200 | $ | 57,666 | $ | 59,533 |
* | Unaudited. |
†† | 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) | The portfolio turnover rates not including mortgage dollar rolls were 7%, 16% and 43% for the years ended October 31, 2013, 2012, and 2011, respectively. |
18 | MainStay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 8.51 | $ | 8.63 | $ | 8.57 | $ | 9.02 | $ | 8.86 | $ | 9.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.05 | 0.12 | 0.12 | 0.11 | 0.14 | 0.16 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | (0.10 | ) | 0.08 | (0.42 | ) | 0.19 | (0.00 | )‡ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.08 | 0.02 | 0.20 | (0.31 | ) | 0.33 | 0.16 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.05 | ) | (0.12 | ) | (0.12 | ) | (0.11 | ) | (0.15 | ) | (0.21 | ) | ||||||||||||||
From net realized gain on investments | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.02 | ) | (0.09 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.05 | ) | (0.14 | ) | (0.14 | ) | (0.14 | ) | (0.17 | ) | (0.30 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 8.54 | $ | 8.51 | $ | 8.63 | $ | 8.57 | $ | 9.02 | $ | 8.86 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 0.93 | %(c) | 0.14 | % | 2.38 | % | (3.40 | %) | 3.77 | % | 1.85 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.14 | %†† | 1.35 | % | 1.44 | % | 1.26 | % | 1.57 | % | 1.85 | % | ||||||||||||||
Net expenses | 1.99 | %†† | 2.03 | % | 2.01 | % | 1.94 | % | 1.92 | % | 1.92 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.99 | %†† | 2.03 | % | 2.01 | % | 2.00 | % | 2.03 | % | 2.06 | % | ||||||||||||||
Portfolio turnover rate (d) | 13 | % | 13 | % | 14 | % | 28 | % | 37 | % | 62 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 8,123 | $ | 8,363 | $ | 10,550 | $ | 14,783 | $ | 21,826 | $ | 25,644 |
* | Unaudited. |
†† | 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) | The portfolio turnover rates not including mortgage dollar rolls were 7%, 16% and 43% for the years ended October 31, 2013, 2012, and 2011, respectively. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 8.50 | $ | 8.62 | $ | 8.56 | $ | 9.01 | $ | 8.86 | $ | 9.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.05 | 0.12 | 0.12 | 0.11 | 0.14 | 0.16 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.04 | (0.10 | ) | 0.08 | (0.42 | ) | 0.18 | (0.00 | )‡ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.09 | 0.02 | 0.20 | (0.31 | ) | 0.32 | 0.16 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.05 | ) | (0.12 | ) | (0.12 | ) | (0.11 | ) | (0.15 | ) | (0.21 | ) | ||||||||||||||
From net realized gain on investments | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.02 | ) | (0.09 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.05 | ) | (0.14 | ) | (0.14 | ) | (0.14 | ) | (0.17 | ) | (0.30 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 8.54 | $ | 8.50 | $ | 8.62 | $ | 8.56 | $ | 9.01 | $ | 8.86 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 1.05 | %(c) | 0.14 | % | 2.39 | % | (3.41 | %) | 3.66 | % | 1.85 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.15 | %†† | 1.34 | % | 1.44 | % | 1.24 | % | 1.57 | % | 1.86 | % | ||||||||||||||
Net expenses | 1.99 | %†† | 2.03 | % | 2.01 | % | 1.94 | % | 1.92 | % | 1.92 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 1.99 | %†† | 2.03 | % | 2.01 | % | 2.00 | % | 2.03 | % | 2.06 | % | ||||||||||||||
Portfolio turnover rate (d) | 13 | % | 13 | % | 14 | % | 28 | % | 37 | % | 62 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 21,163 | $ | 17,073 | $ | 11,226 | $ | 12,593 | $ | 27,610 | $ | 29,441 |
* | Unaudited. |
†† | 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) | The portfolio turnover rates not including mortgage dollar rolls were 7%, 16% and 43% for the years ended October 31, 2013, 2012, and 2011, respectively. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 8.59 | $ | 8.71 | $ | 8.65 | $ | 9.10 | $ | 8.94 | $ | 9.08 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.10 | 0.22 | 0.23 | 0.21 | 0.24 | 0.26 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | (0.09 | ) | 0.09 | (0.41 | ) | 0.19 | (0.00 | )‡ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.13 | 0.13 | 0.32 | (0.20 | ) | 0.43 | 0.26 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.10 | ) | (0.23 | ) | (0.24 | ) | (0.22 | ) | (0.25 | ) | (0.31 | ) | ||||||||||||||
From net realized gain on investments | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.02 | ) | (0.09 | ) | |||||||||||||||
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Total dividends and distributions | (0.10 | ) | (0.25 | ) | (0.26 | ) | (0.25 | ) | (0.27 | ) | (0.40 | ) | ||||||||||||||
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Net asset value at end of period | $ | 8.62 | $ | 8.59 | $ | 8.71 | $ | 8.65 | $ | 9.10 | $ | 8.94 | ||||||||||||||
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Total investment return (b) | 1.54 | %(c) | 1.41 | % | 3.69 | % | (2.24 | %) | 4.92 | % | 2.99 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 2.39 | %†† | 2.57 | % | 2.70 | % | 2.42 | % | 2.69 | % | 2.99 | % | ||||||||||||||
Net expenses | 0.74 | %†† | 0.75 | % | 0.73 | % | 0.78 | % | 0.78 | % | 0.78 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 0.74 | %†† | 0.75 | % | 0.73 | % | 0.84 | % | 0.89 | % | 0.92 | % | ||||||||||||||
Portfolio turnover rate (d) | 13 | % | 13 | % | 14 | % | 28 | % | 37 | % | 62 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 4,589 | $ | 4,492 | $ | 10,020 | $ | 3,561 | $ | 5,753 | $ | 3,998 |
* | Unaudited. |
†† | 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. Class I shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | The portfolio turnover rates not including mortgage dollar rolls were 7%, 16% and 43% for the years ended October 31, 2013, 2012, and 2011, respectively. |
20 | MainStay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Government Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers five classes of shares. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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 Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A 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 Class A and Investor Class 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 current income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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 based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with inves-
21 |
Notes to Financial Statements (Unaudited) (continued)
ting in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Equity and credit default swap curves | • Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, a security that was fair valued in such a manner is shown in the Portfolio of Investments.
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in mutual funds, including money market funds, are valued at their respective 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 (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. Those values reflect broker/dealer supplied prices and electronic data processing techniques, if the evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. 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. These securities are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
22 | MainStay Government Fund |
A Fund security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security 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 the 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 measuring 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 measures 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 by methods deemed reasonable in good faith in such a manner as the Board deems appropriate to reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was measured as of April 30, 2016 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2016, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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 from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least 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 and includes realized gains and losses from repayments of principal on mortgage-backed securities. 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. The straight-line method approximates the effective interest method for short-term investments. 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.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(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/or 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 Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on the obligation to repurchase, the Fund has the right to liqui-
23 |
Notes to Financial Statements (Unaudited) (continued)
date the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty 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 market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. Government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation 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 or futures commission merchant 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. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures, and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. 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 futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. 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) Dollar Rolls. The Fund may enter into dollar roll 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 Fund generally transfers MBS where the MBS are “to be announced,” therefore, the Fund accounts for these transactions as purchases and sales. The securities sold in connection with the dollar rolls 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. Dollar rolls 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. Dollar roll transactions involve certain risks, including the risk that the security returned to the Fund at the end of the roll period, while substantially similar, could be inferior to what was initially sold to the counterparty.
The Fund accounts for a dollar roll transaction as a purchase and sale whereby the difference in the sales price and purchase price of the security sold is recorded as a realized gain (loss).
(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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(K) 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.
(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 assurance that material
24 | MainStay Government Fund |
liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(M) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to 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. The Fund entered into 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. These derivatives are not accounted for as hedging instruments.
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2016:
Realized Gain (Loss)
Statement of Operations Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | (29,661 | ) | $ | (29,661 | ) | |||
|
| |||||||||
Total Realized Gain (Loss) | $ | (29,661 | ) | $ | (29,661 | ) | ||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | (30,615 | ) | $ | (30,615 | ) | |||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | (30,615 | ) | $ | (30,615 | ) | ||||
|
|
Average Notional Amount
Interest Rate Contracts Risk | Total | |||||||
Futures Contracts Short (a) | $ | (8,391,169 | ) | $ | (8,391,169 | ) | ||
|
|
(a) | Positions were open five months during the reporting period. |
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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer 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 the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of its average daily net assets as follows: 0.50% up to $500 million; 0.475% from $500 million to $1 billion; and 0.45% in excess of $1 billion.
During the six-month period ended April 30, 2016, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.50%.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for the Fund’s Class A shares do not exceed 1.00% 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 will remain in effect until March 1, 2017, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval by 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.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $409,484.
State Street 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 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 Class A and Investor Class Plans, the Distributor receives a monthly distribution fee from the Class A and Investor Class shares at an annual rate of 0.25% of the average daily net assets of the Class A and Investor Class shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and
25 |
Notes to Financial Statements (Unaudited) (continued)
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 and/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. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $6,664 and $3,871, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $58, $4,612 and $796, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 45,270 | ||
Investor Class | 73,751 | |||
Class B | 13,931 | |||
Class C | 35,425 | |||
Class I | 2,203 |
(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.
Note 4–Federal Income Tax
As of October 31, 2015, for federal income tax purposes, capital loss carryforwards of $572,780 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 realized 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 Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
Unlimited | $ | 314 | $ | 259 |
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 3,566,075 | ||
Long-Term Capital Gain | 314,616 | |||
Total | $ | 3,880,691 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of U.S. government securities were $24,666 and $21,103, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $0 and $311, respectively.
26 | MainStay Government Fund |
Note 8–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 961,717 | $ | 8,208,954 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 103,138 | 877,425 | ||||||
Shares redeemed | (1,054,450 | ) | (8,977,745 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 10,405 | 108,634 | ||||||
Shares converted into Class A (See Note 1) | 103,524 | 866,037 | ||||||
Shares converted from Class A (See Note 1) | (47,341 | ) | (403,823 | ) | ||||
|
| |||||||
Net increase (decrease) | 66,588 | $ | 570,848 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 1,378,750 | $ | 11,850,690 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 252,146 | 2,165,235 | ||||||
Shares redeemed | (2,748,908 | ) | (23,655,170 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,118,012 | ) | (9,639,245 | ) | ||||
Shares converted into Class A (See Note 1) | 180,941 | 1,558,245 | ||||||
Shares converted from Class A (See Note 1) | (83,343 | ) | (716,000 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,020,414 | ) | $ | (8,797,000 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 174,104 | $ | 1,489,560 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 44,275 | 378,099 | ||||||
Shares redeemed | (316,418 | ) | (2,702,981 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (98,039 | ) | (835,322 | ) | ||||
Shares converted into Investor Class (See Note 1) | 106,196 | 907,361 | ||||||
Shares converted from Investor Class (See Note 1) | (83,494 | ) | (711,528 | ) | ||||
|
| |||||||
Net increase (decrease) | (75,337 | ) | $ | (639,489 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 246,000 | $ | 2,120,044 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 110,476 | 952,264 | ||||||
Shares redeemed | (744,101 | ) | (6,422,185 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (387,625 | ) | (3,349,877 | ) | ||||
Shares converted into Investor Class (See Note 1) | 192,597 | 1,660,405 | ||||||
Shares converted from Investor Class (See Note 1) | (139,902 | ) | (1,210,648 | ) | ||||
|
| |||||||
Net increase (decrease) | (334,930 | ) | $ | (2,900,120 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 131,869 | $ | 1,124,375 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,973 | 42,294 | ||||||
Shares redeemed | (90,991 | ) | (773,329 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 45,851 | 393,340 | ||||||
Shares converted from Class B (See Note 1) | (77,481 | ) | (658,047 | ) | ||||
|
| |||||||
Net increase (decrease) | (31,630 | ) | $ | (264,707 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 238,206 | $ | 2,045,118 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 15,391 | 132,174 | ||||||
Shares redeemed | (342,745 | ) | (2,941,976 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (89,148 | ) | (764,684 | ) | ||||
Shares converted from Class B (See Note 1) | (150,508 | ) | (1,292,002 | ) | ||||
|
| |||||||
Net increase (decrease) | (239,656 | ) | $ | (2,056,686 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 884,613 | $ | 7,510,317 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 11,541 | 98,106 | ||||||
Shares redeemed | (424,283 | ) | (3,609,874 | ) | ||||
|
| |||||||
Net increase (decrease) | 471,871 | $ | 3,998,549 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 1,401,812 | $ | 12,001,243 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 20,421 | 175,131 | ||||||
Shares redeemed | (716,200 | ) | (6,157,680 | ) | ||||
|
| |||||||
Net increase (decrease) | 706,033 | $ | 6,018,694 | |||||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 123,155 | $ | 1,059,895 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,572 | 47,876 | ||||||
Shares redeemed | (119,405 | ) | (1,028,369 | ) | ||||
|
| |||||||
Net increase (decrease) | 9,322 | $ | 79,402 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 186,316 | $ | 1,614,474 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 17,516 | 152,087 | ||||||
Shares redeemed | (830,984 | ) | (7,261,646 | ) | ||||
|
| |||||||
Net increase (decrease) | (627,152 | ) | $ | (5,495,085 | ) | |||
|
|
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
27 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Government Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and MacKay Shields in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, and responses from New York Life Investments and MacKay Shields to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Funds’ distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and MacKay Shields; (ii) the investment performance of the Fund, New York Life Investments and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay Shields from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and MacKay Shields. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and MacKay Shields
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
28 | MainStay Government Fund |
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that MacKay Shields provides to the Fund. The Board evaluated MacKay Shields’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined MacKay Shields’ track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay Shields, and MacKay Shields’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay Shields. The Board also reviewed MacKay Shields’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments and MacKay Shields under the Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and MacKay Shields must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed
information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to MacKay Shields are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other
30 | MainStay Government Fund |
mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
31 |
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 or proxy voting record 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 Government Fund |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1694706 MS164-16 | MSG10-06/16 (NYLIM) NL007 |
MainStay High Yield Corporate Bond Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
Table of Contents
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –2.67 1.91 | %
|
| –4.21 0.30 | %
|
| 4.15 5.11 | %
|
| 5.57 6.06 | %
|
| 0.96 0.96 | %
| |||||||
Investor Class Shares3 | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –2.67 1.92 |
|
| –4.18 0.34 |
|
| 4.11 5.07 |
|
| 5.53 6.02 |
|
| 1.02 1.02 |
| |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges |
| –3.64 1.28 |
|
| –5.27 –0.58 |
|
| 3.94 4.25 |
|
| 5.20 5.20 |
|
| 1.77 1.77 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges |
| 0.48 1.46 |
|
| –1.34 –0.39 |
|
| 4.29 4.29 |
|
| 5.22 5.22 |
|
| 1.77 1.77 |
| |||||||
Class I Shares | No Sales Charge | 2.05 | 0.74 | 5.37 | 6.32 | 0.71 | ||||||||||||||||||
Class R1 Shares4 | No Sales Charge | 1.99 | 0.63 | 5.23 | 6.17 | 0.81 | ||||||||||||||||||
Class R2 Shares5 | No Sales Charge | 1.85 | 0.19 | 4.98 | 5.94 | 1.06 | ||||||||||||||||||
Class R3 Shares6 | No Sales Charge | 1.66 | 0.01 | 4.71 | 5.64 | 1.31 | ||||||||||||||||||
Class R6 Shares7 | No Sales Charge | 1.96 | 0.73 | 5.44 | 6.36 | 0.58 |
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, changes 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 may 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 (if any), 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 would likely have been different. |
4. | Performance figures for Class R1 shares, first offered on June 29, 2012, include the historical performance of Class B shares through June 28, 2012, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for Class R1 shares would likely have been different. |
5. | Class R2 shares were first offered on December 14, 2007, although this class of shares did not commence investment operations until May 1, 2008. Performance figures for Class R2 shares include the historical performance of Class B shares through April 30, 2008, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for Class R2 shares would likely have been different. |
6. | Performance figures for Class R3 shares, first offered on February 29, 2016, include the historical performance of Class B shares through February 28, 2016. Performance for Class R3 shares would likely have been different because of differences in expenses attributable to each share class. |
7. | Performance figures for Class R6 shares, first offered on June 17, 2013, include the historical performance of Class I shares through June 16, 2013. Performance for Class R6 shares would likely have been different because of differences in expenses attributable to each share class. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
�� | 5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Credit Suisse High Yield Index8 | 1.73 | % | –2.04 | % | 5.10 | % | 6.88 | % | ||||||||
Average Lipper High Yield Fund9 | 0.83 | –2.38 | 4.14 | 5.80 |
8. | The Credit Suisse High Yield Index is a market-weighted index that includes publicly traded bonds rated below BBB by Standard & Poor’s and below Baa by Moody’s. The Credit Suisse High Yield Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
9. | The Average Lipper High Yield Fund is representative of funds that, by portfolio practice, aim at high (relative) current yield from fixed income |
securities, have no quality or maturity restrictions, and tend to invest in lower-grade debt issues. 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 Corporate Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay High Yield Corporate Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,019.10 | $ | 4.82 | $ | 1,020.10 | $ | 4.82 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,019.20 | $ | 5.27 | $ | 1,019.60 | $ | 5.27 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,012.80 | $ | 9.01 | $ | 1,015.90 | $ | 9.02 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,014.60 | $ | 9.02 | $ | 1,015.90 | $ | 9.02 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,020.50 | $ | 3.57 | $ | 1,021.30 | $ | 3.57 | ||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,019.90 | $ | 4.07 | $ | 1,020.80 | $ | 4.07 | ||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,018.50 | $ | 5.32 | $ | 1,019.60 | $ | 5.32 | ||||||||||
Class R3 Shares2,3 | $ | 1,000.00 | $ | 1,073.00 | $ | 2.26 | $ | 1,006.20 | $ | 2.19 | ||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,019.60 | $ | 2.91 | $ | 1,022.00 | $ | 2.92 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.96% for Class A, 1.05% for Investor Class, 1.80% for Class B and Class C, 0.71% for Class I, 0.81% for Class R1, 1.06% for Class R2, 1.31% for Class R3 and 0.58% for Class R6) multiplied by the average account value over the period, divided by 366 and multiplied by 182 days for Class A, Investor Class, Class B, Class C, Class I, Class R1, Class R2 and Class R6 (to reflect the six-month period) and 61 days for Class R3 (to reflect the since-inception period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses paid during the period reflect ongoing costs for the period from inception through April 30, 2016. Had these shares been offered for the full six-month period ended April 30, 2016, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $6.57 for Class R3 and the ending account value would have been $1,018.30 for Class R3. |
3. | The inception date for Class R3 shares was February 29, 2016. |
7 |
Portfolio Composition as of April 30, 2016 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings or Issuers Held as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | T-Mobile USA, Inc., 6.00%–6.731%, due 11/15/20–1/15/26 |
2. | Schaeffler Holding Finance B.V., 6.25%–6.875%, due 8/15/18–11/15/22 |
3. | HCA, Inc., 4.25%–8.36%, due 10/1/18–2/15/26 |
4. | CCO Holdings LLC / CCO Holdings Capital Corp., 5.125%–7.00%, due 1/15/19–5/1/27 |
5. | Crown Castle International Corp., 4.875%–5.25%, due 4/15/22–1/15/23 |
6. | Exide Technologies, Inc. |
7. | Virgin Media Secured Finance PLC, 5.25%–5.50%, due 1/15/21–8/15/26 |
8. | Freeport-McMoran Oil & Gas LLC / FCX Oil & Gas, Inc., 6.50%–6.875%, due 11/15/20–2/15/23 |
9. | Calumet Specialty Products Partners, L.P. / Calumet Finance Corp., 6.50%–11.50%, due 1/15/21–4/15/23 |
10. | Valeant Pharmaceuticals International, Inc., 6.375%–7.50%, due 8/15/18–7/15/22 |
8 | MainStay High Yield Corporate Bond Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio manager Andrew Susser of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay High Yield Corporate Bond Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay High Yield Corporate Bond Fund returned 1.91% for Class A shares, 1.92% for Investor Class share, 1.28% for Class B shares and 1.46% for Class C shares for the six months ended April 30, 2016. Over the same period, Class I shares returned 2.05%, Class R1 shares returned 1.99%, Class R2 shares returned 1.85%, Class R3 shares1 returned 1.66% and Class R6 shares returned 1.96%. For the six months ended April 30, 2016, Class B, Class C and Class R3 shares underperformed—and all other share classes outperformed—the 1.73% return of the Credit Suisse High Yield Index,2 which is the Fund’s broad-based securities-market index. For the same period, all share classes outperformed the 0.83% return of the Average Lipper3 High Yield Fund. See page 5 for Fund returns with applicable sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund is managed in a bottom-up investment style, which focuses on individual credit selection. Security selection in the media/telecom sector was the largest contributor to the Fund’s performance relative to the Credit Suisse High Yield Index during the reporting period. (Contributions take weightings and total returns into account.) Within this sector, the Fund did not own certain stressed diversified media companies that fell in price. Wireless communications holdings also benefited the Fund’s relative performance, as the Fund’s top positions materially outperformed the Index. An overweight position in other metals/minerals and credit selection in the sector also contributed positively to the Fund’s relative performance. The sector outperformed during the reporting period because of rising commodity prices, and the Fund’s positions in gold-related issuers and fallen angels (securities that had been downgraded to below investment grade) performed well. The Fund’s avoidance of transportation—shipping companies was a positive contributor to the Fund’s relative performance, as many issuers had negative performance for the reporting period. The Fund’s overweight position in the higher-quality segment of the high-yield market contributed positively to performance relative
to the Credit Suisse High Yield Index, as securities rated BB outperformed securities rated CCC.4
The Fund’s relative performance in the energy sector varied during the reporting period. An underweight position in energy—service & equipment benefited relative performance. This was offset, however, by an overweight position in energy—exploration & production companies and credit selection in that sector, as the drop in oil prices in early 2016 stressed the prices of bonds.
What was the Fund’s duration5 strategy during the reporting period?
The Fund is not managed to a duration strategy, and the Fund’s duration positioning resulted from our bottom-up investment process. During the reporting period, the Fund’s duration was shorter than that of the Credit Suisse High Yield Index and slightly detracted from relative performance. As of April 30, 2016, the Fund’s modified duration to worst6 was approximately 3.23 years, which was shorter than the 3.97-year duration of the Credit Suisse High Yield Index on the same date.
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
Commodity prices and commodity high-yield bond prices continued to fall leading into 2016, exacerbated by the possibility of heavy defaults and the widespread fear that fallen angels would have a significantly negative market impact. The extreme investor pessimism reflected in energy and commodity prices created an opportunity to invest in the bonds of companies that have financial flexibility and optionality. The Fund invested in select energy—exploration & production, energy—midstream and metals/minerals credits at attractive risk-adjusted yields. The Fund also invested in select investment-grade and fallen-angel issuers in these sectors at levels that we believed to be attractive.
1. | See footnote on page 5 for more information on Class R3 shares. |
2. | See footnote on page 6 for more information on the Credit Suisse High Yield Index. |
3. | See footnote on page 6 for more information on Lipper Inc. |
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, the obligor 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. An obligation rated ‘CCC’ by 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. |
5. | 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. |
6. | Modified duration is inversely related to the approximate percentage change in price for a given change in yield. Duration to worst is the duration of a bond computed using the bond’s nearest call date or maturity, whichever comes first. This measure ignores future cash flow fluctuations due to embedded optionality. |
9 |
Which sectors were the strongest contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, credit selection in the media/telecom sector contributed positively to performance relative to the Credit Suisse High Yield Index. An overweight position and credit selection in the metals/minerals industry also added to the Fund’s performance relative to the Index. Positive credit selection also contributed to the Fund’s relative performance in the health care sector.
An underweight position in the energy sector helped relative performance; but this was more than offset by credit selection, and the sector detracted from performance relative to the Credit Suisse High Yield Index. The Fund also held an underweight position in the gaming/leisure sector, which detracted slightly from relative performance.
Did the Fund make any significant purchases or sales during the reporting period?
The Fund purchased bonds of mining company Freeport-McMoRan during the reporting period. The sell-off in the company’s bonds had a strong technical factor, exceeding the increased risk resulting from the sell-off in commodity prices during the fourth quarter of 2015. We believed that the market was focused on short-term commodity prices and misunderstood the long-term asset value of Freeport-McMoRan. We also believed that the company’s short-term financial flexibility supported our purchase of the company’s bonds at very attractive spreads.7 Another position that we added to the Fund was MGM Growth Properties when the bond was issued in April 2016. The company is a real estate investment trust (REIT) that was spun off from MGM Resorts International, a gaming company headquartered in Las Vegas. MGM Resorts International owns the majority of the equity of MGM Growth Properties and guarantees the bonds at MGM Growth Properties. We liked the bonds because we believed that they were well covered by the assets of the company. In particular, MGM Growth Properties owns seven properties on the Las Vegas strip as well as three other regional properties. The leases that were put in place with the operator, MGM Resorts International, are well structured and provide cash flow coverage relative to the rent stream. At the time of the new issue, we believed that the valuation was exceptionally compelling relative to comparable bonds. The bonds also contain covenants (limits on debt and liens) that could protect the Fund as the company grows.
During the reporting period, the Fund sold its position in data storage company Seagate Technology. The hard disk drive industry has suffered substantial declines based on weakness in the personal computer segment, but also driven by the transition in personal computers and servers to the use of solid state drives, which Seagate Technology does not manufacture. Western Digital, Seagate Technology’s main competitor in hard disk drives, recently purchased SanDisk to offset this industry transition. We sold the bonds of Seagate Technology because of fundamental business pressures and technical factors resulting from the potential for rating downgrades that could weigh on the price of the company’s bonds. We also felt that distributions to equity could lead to further credit challenges.
The Fund exited its position in Kratos Defense & Security Solutions during the reporting period. The company is a defense and specialized security technology business focused on electronic attack & warfare, radar, satellite, intelligence, reconnaissance, and missile system platforms. The environment for defense contractors has become increasingly competitive, resulting in lower margins, frequent award protests and delays. The company also reported persistently weak operating results, negative free cash flow and continued credit-profile deterioration. With leverage at elevated levels, limited operational visibility in 2016, and concerns over Kratos Defense & Security Solutions’ ability to win future contracts in an uncertain defense budgetary environment, we believed that the downside risks far outweighed the positive business elements that had prompted our original investment decision.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, there were no material changes to the sector weightings in the Fund. There were small increases in the Fund’s weightings in aerospace and service because of attractive valuations and yields. During the reporting period, the Fund reduced its weightings in the metals/mining and health care industries.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2016, the Fund held overweight positions relative to the Credit Suisse High Yield Index in cable/wireless and metals/mining. As of the same date, the Fund held underweight positions relative to the Index in the energy, media and chemical sectors.
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. |
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 forecasts 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 Corporate Bond Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 93.7%† Convertible Bonds 1.4% | ||||||||
Auto Parts & Equipment 0.6% | ||||||||
¨Exide Technologies, Inc. | $ | 72,055,092 | $ | 50,438,564 | ||||
|
| |||||||
Electric 0.0%‡ | ||||||||
Upstate New York Power Producers, Inc. | 3,211,628 | 3,211,628 | ||||||
|
| |||||||
Mining 0.7% | ||||||||
Detour Gold Corp. | 55,220,000 | 57,256,237 | ||||||
|
| |||||||
Oil & Gas 0.1% | ||||||||
Stone Energy Corp. | 29,845,000 | 10,091,341 | ||||||
|
| |||||||
Total Convertible Bonds | 120,997,770 | |||||||
|
| |||||||
Corporate Bonds 91.3% | ||||||||
Advertising 0.4% | ||||||||
Lamar Media Corp. | ||||||||
5.00%, due 5/1/23 | 2,500,000 | 2,600,000 | ||||||
5.875%, due 2/1/22 | 20,500,000 | 21,473,750 | ||||||
Outfront Media Capital LLC / Outfront Media Capital Corp. | ||||||||
5.25%, due 2/15/22 | 10,350,000 | 10,686,375 | ||||||
5.625%, due 2/15/24 | 5,000,000 | 5,200,000 | ||||||
|
| |||||||
39,960,125 | ||||||||
|
| |||||||
Aerospace & Defense 1.5% | ||||||||
Aerojet Rocketdyne Holdings, Inc. | 45,704,000 | 48,217,720 | ||||||
KLX, Inc. | 27,265,000 | 27,435,406 | ||||||
Orbital ATK, Inc. | ||||||||
5.25%, due 10/1/21 | 3,190,000 | 3,341,525 | ||||||
5.50%, due 10/1/23 (d) | 4,495,000 | 4,719,750 | ||||||
Spirit AeroSystems, Inc. | 18,585,000 | 19,583,944 | ||||||
TransDigm, Inc. | ||||||||
5.50%, due 10/15/20 | 3,000,000 | 3,045,000 | ||||||
6.00%, due 7/15/22 | 4,000,000 | 4,048,800 | ||||||
6.50%, due 7/15/24 | 14,996,000 | 15,108,470 | ||||||
6.50%, due 5/15/25 | 10,000,000 | 10,050,000 | ||||||
|
| |||||||
135,550,615 | ||||||||
|
|
Principal Amount | Value | |||||||
Apparel 0.4% | ||||||||
William Carter Co. (The) | $ | 17,520,000 | $ | 18,255,840 | ||||
Wolverine World Wide, Inc. | 14,943,000 | 15,522,041 | ||||||
|
| |||||||
33,777,881 | ||||||||
|
| |||||||
Auto Manufacturers 1.0% | ||||||||
Allied Specialty Vehicles, Inc. | 33,560,000 | 34,231,200 | ||||||
Ford Holdings LLC | ||||||||
9.30%, due 3/1/30 | 18,155,000 | 24,411,540 | ||||||
9.375%, due 3/1/20 | 1,695,000 | 2,066,471 | ||||||
General Motors Financial Co., Inc. | ||||||||
4.75%, due 8/15/17 | 5,000,000 | 5,193,495 | ||||||
6.75%, due 6/1/18 | 18,000,000 | 19,657,674 | ||||||
|
| |||||||
85,560,380 | ||||||||
|
| |||||||
Auto Parts & Equipment 3.8% | ||||||||
¨Exide Technologies, Inc. | 66,411,002 | 56,449,352 | ||||||
¨Exide Technologies, Inc. (Escrow Claim Shares) | 64,863,000 | 64,863 | ||||||
Goodyear Tire & Rubber Co. (The) | 7,000,000 | 7,227,500 | ||||||
International Automotive Components Group S.A. | 13,960,000 | 12,529,100 | ||||||
Meritor, Inc. | 11,900,000 | 11,245,500 | ||||||
Nexteer Automotive Group, Ltd. | 21,000,000 | 21,577,500 | ||||||
Schaeffler Finance B.V. | ||||||||
4.25%, due 5/15/21 (d) | 21,610,000 | 22,204,275 | ||||||
4.75%, due 5/15/21 (d) | 23,944,000 | 24,602,460 | ||||||
4.75%, due 5/15/23 (d) | 17,195,000 | 17,667,862 | ||||||
¨Schaeffler Holding Finance B.V. | ||||||||
6.25% (6.25% Cash or 7.00% PIK), | 29,681,000 | 30,942,442 | ||||||
6.75% (6.75% Cash or 7.50% PIK), | 44,360,000 | 48,269,225 | ||||||
6.875% (6.875% Cash or 7.625% PIK), due 8/15/18 (a)(d) | 61,402,000 | 63,244,060 | ||||||
Tenneco, Inc. | 11,225,000 | 11,659,969 | ||||||
Titan International, Inc. | 4,442,000 | 3,842,330 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2016, 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Auto Parts & Equipment (continued) | ||||||||
ZF North America Capital, Inc. | ||||||||
4.50%, due 4/29/22 (d) | $ | 2,000,000 | $ | 2,047,460 | ||||
4.75%, due 4/29/25 (d) | 10,025,000 | 10,162,844 | ||||||
|
| |||||||
343,736,742 | ||||||||
|
| |||||||
Banks 0.1% | ||||||||
Provident Funding Associates, L.P. / PFG Finance Corp. | 8,950,000 | 8,480,125 | ||||||
|
| |||||||
Biotechnology 0.2% | ||||||||
AMAG Pharmaceuticals, Inc. | 16,720,000 | 15,006,200 | ||||||
|
| |||||||
Building Materials 1.9% | ||||||||
Boise Cascade Co. | 28,065,000 | 28,029,919 | ||||||
GCP Applied Technologies, Inc. | 18,125,000 | 19,846,875 | ||||||
Gibraltar Industries, Inc. | 11,580,000 | 11,753,700 | ||||||
Headwaters, Inc. | 21,700,000 | 22,351,000 | ||||||
James Hardie International Finance, Ltd. | 18,835,000 | 19,164,612 | ||||||
Standard Industries, Inc. | 7,630,000 | 7,935,200 | ||||||
Summit Materials LLC / Summit Materials Finance Corp. | ||||||||
6.125%, due 7/15/23 | 29,090,000 | 29,308,175 | ||||||
8.50%, due 4/15/22 (d) | 14,000,000 | 14,840,000 | ||||||
USG Corp. | 12,236,000 | 12,756,030 | ||||||
|
| |||||||
165,985,511 | ||||||||
|
| |||||||
Chemicals 1.2% | ||||||||
Blue Cube Spinco, Inc. | ||||||||
9.75%, due 10/15/23 (d) | 31,550,000 | 36,006,437 | ||||||
10.00%, due 10/15/25 (d) | 20,250,000 | 23,338,125 | ||||||
Eagle Spinco, Inc. | 3,650,000 | 3,631,750 | ||||||
Olin Corp. | 15,084,000 | 15,084,000 | ||||||
PolyOne Corp. | 7,880,000 | 7,899,700 | ||||||
Trinseo Materials Operating SCA / Trinseo Materials Finance, Inc. | 18,635,000 | 19,287,225 | ||||||
|
| |||||||
105,247,237 | ||||||||
|
|
Principal Amount | Value | |||||||
Coal 0.6% | ||||||||
Arch Coal, Inc. | $ | 21,960,000 | $ | 274,500 | ||||
CONSOL Energy, Inc. | ||||||||
5.875%, due 4/15/22 | 42,000,000 | 34,965,000 | ||||||
8.00%, due 4/1/23 | 20,530,000 | 17,501,825 | ||||||
|
| |||||||
52,741,325 | ||||||||
|
| |||||||
Commercial Services 2.9% | ||||||||
Ashtead Capital, Inc. | ||||||||
5.625%, due 10/1/24 (d) | 2,000,000 | 2,080,000 | ||||||
6.50%, due 7/15/22 (d) | 24,862,000 | 26,229,410 | ||||||
Avis Budget Car Rental LLC / Avis Budget Finance, Inc. | ||||||||
5.50%, due 4/1/23 | 35,196,000 | 33,640,337 | ||||||
6.375%, due 4/1/24 (d) | 4,500,000 | 4,466,250 | ||||||
Cimpress N.V. | 37,800,000 | 38,178,000 | ||||||
ExamWorks Group, Inc. | 19,580,000 | 20,999,550 | ||||||
Flexi-Van Leasing, Inc. | 14,975,000 | 15,087,313 | ||||||
Great Lakes Dredge & Dock Corp. | 46,601,000 | 44,387,452 | ||||||
Modular Space Corp. | 4,270,000 | 2,199,050 | ||||||
Nielsen Co. Luxembourg S.A.R.L. (The) | 4,500,000 | 4,691,250 | ||||||
Prime Security Services Borrower LLC / Prime Finance, Inc. | 5,000,000 | 5,187,500 | ||||||
Team Health, Inc. | 18,080,000 | 19,198,700 | ||||||
United Rentals North America, Inc. | ||||||||
4.625%, due 7/15/23 | 6,700,000 | 6,674,875 | ||||||
5.875%, due 9/15/26 | 9,250,000 | 9,250,000 | ||||||
7.625%, due 4/15/22 | 10,472,000 | 11,178,860 | ||||||
8.25%, due 2/1/21 | 500,000 | 521,250 | ||||||
WEX, Inc. | 18,718,000 | 17,080,175 | ||||||
|
| |||||||
261,049,972 | ||||||||
|
| |||||||
Computers 1.3% | ||||||||
IHS, Inc. | 54,655,000 | 57,114,475 | ||||||
NCR Corp. | ||||||||
4.625%, due 2/15/21 | 3,180,000 | 3,148,200 | ||||||
5.00%, due 7/15/22 | 12,035,000 | 12,065,087 | ||||||
6.375%, due 12/15/23 | 31,290,000 | 32,541,600 | ||||||
Western Digital Corp. | 8,490,000 | 8,256,525 | ||||||
|
| |||||||
113,125,887 | ||||||||
|
|
12 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Cosmetics & Personal Care 0.6% | ||||||||
Edgewell Personal Care Co. | ||||||||
4.70%, due 5/19/21 | $ | 40,105,000 | $ | 41,881,210 | ||||
4.70%, due 5/24/22 | 10,093,000 | 10,547,185 | ||||||
First Quality Finance Co., Inc. | 3,000,000 | 2,857,500 | ||||||
|
| |||||||
55,285,895 | ||||||||
|
| |||||||
Distribution & Wholesale 0.4% | ||||||||
American Tire Distributors, Inc. | 23,255,000 | 20,871,363 | ||||||
H&E Equipment Services, Inc. | 14,500,000 | 14,645,000 | ||||||
HD Supply, Inc. | 4,500,000 | 4,719,375 | ||||||
|
| |||||||
40,235,738 | ||||||||
|
| |||||||
Electric 1.9% | ||||||||
Calpine Corp. | ||||||||
5.875%, due 1/15/24 (d) | 17,041,000 | 18,084,761 | ||||||
6.00%, due 1/15/22 (d) | 34,773,000 | 36,728,981 | ||||||
GenOn Energy, Inc. | ||||||||
7.875%, due 6/15/17 | 64,917,000 | 56,153,205 | ||||||
9.50%, due 10/15/18 | 39,960,000 | 30,969,000 | ||||||
NRG REMA LLC | ||||||||
Series B | 6,604,053 | 6,471,973 | ||||||
Series C | 20,225,000 | 19,416,000 | ||||||
Public Service Co. of New Mexico | 2,927,000 | 3,262,390 | ||||||
|
| |||||||
171,086,310 | ||||||||
|
| |||||||
Electrical Components & Equipment 1.3% |
| |||||||
Anixter, Inc. | ||||||||
5.50%, due 3/1/23 (d) | 1,000,000 | 1,022,500 | ||||||
5.625%, due 5/1/19 | 7,715,000 | 8,177,900 | ||||||
Belden, Inc. | 45,757,000 | 46,214,570 | ||||||
General Cable Corp. | 44,660,000 | 40,082,350 | ||||||
WESCO Distribution, Inc. | 20,519,000 | 20,826,785 | ||||||
|
| |||||||
116,324,105 | ||||||||
|
| |||||||
Electronics 0.6% | ||||||||
Allegion PLC | 8,500,000 | 9,010,000 | ||||||
Allegion U.S. Holding Co., Inc. | 19,800,000 | 20,691,000 | ||||||
Kemet Corp. | 27,014,000 | 21,070,920 | ||||||
|
| |||||||
50,771,920 | ||||||||
|
|
Principal Amount | Value | |||||||
Engineering & Construction 1.3% | ||||||||
Broadspectrum, Ltd. | $ | 27,490,000 | $ | 29,826,650 | ||||
New Enterprise Stone & Lime Co., Inc. | ||||||||
11.00%, due 9/1/18 | 29,975,000 | 26,977,500 | ||||||
12.00%, due 3/15/18 | 31,317,949 | 32,374,930 | ||||||
Weekley Homes LLC / Weekley Finance Corp. | 25,099,000 | 23,342,070 | ||||||
|
| |||||||
112,521,150 | ||||||||
|
| |||||||
Entertainment 1.7% | ||||||||
Affinity Gaming / Affinity Gaming Finance Corp. | 49,520,000 | 50,510,400 | ||||||
Churchill Downs, Inc. | ||||||||
5.375%, due 12/15/21 (d) | 5,010,000 | 5,147,775 | ||||||
5.375%, due 12/15/21 | 17,605,000 | 18,089,137 | ||||||
GLP Capital, L.P. / GLP Financing II, Inc. | ||||||||
4.875%, due 11/1/20 | 2,000,000 | 2,110,000 | ||||||
5.375%, due 4/15/26 | 5,500,000 | 5,733,750 | ||||||
NAI Entertainment Holdings / NAI Entertainment Holdings Finance Corp. | 17,990,000 | 18,259,850 | ||||||
Rivers Pittsburgh Borrower, L.P. / Rivers Pittsburgh Finance Corp. | 12,872,000 | 13,258,160 | ||||||
Sterling Entertainment Enterprises LLC | 35,000,000 | 36,312,500 | ||||||
|
| |||||||
149,421,572 | ||||||||
|
| |||||||
Finance—Auto Loans 0.1% | ||||||||
Credit Acceptance Corp. | 14,025,000 | 13,288,688 | ||||||
|
| |||||||
Finance—Consumer Loans 0.6% | ||||||||
CFG Holdings, Ltd. / CFG Finance LLC | 25,895,000 | 25,895,000 | ||||||
OneMain Financial Holdings LLC | ||||||||
6.75%, due 12/15/19 (d) | 6,645,000 | 6,794,512 | ||||||
7.25%, due 12/15/21 (d) | 3,245,000 | 3,374,800 | ||||||
Speedy Cash Intermediate Holdings Corp. | 12,414,000 | 8,441,520 | ||||||
Springleaf Finance Corp. | 5,075,000 | 5,233,594 | ||||||
|
| |||||||
49,739,426 | ||||||||
|
| |||||||
Finance—Credit Card 0.1% | ||||||||
Alliance Data Systems Corp. | 10,000,000 | 10,275,000 | ||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Finance—Investment Banker/Broker 0.7% |
| |||||||
E*TRADE Financial Corp. | ||||||||
4.625%, due 9/15/23 | $ | 17,500,000 | $ | 17,713,500 | ||||
5.375%, due 11/15/22 | 20,880,000 | 22,164,329 | ||||||
KCG Holdings, Inc. | 23,535,000 | 21,534,525 | ||||||
|
| |||||||
61,412,354 | ||||||||
|
| |||||||
Finance—Leasing Companies 0.5% | ||||||||
AerCap Ireland Capital, Ltd. / AerCap Global Aviation Trust | ||||||||
4.625%, due 10/30/20 | 9,240,000 | 9,609,600 | ||||||
5.00%, due 10/1/21 | 16,320,000 | 17,217,600 | ||||||
Aircastle, Ltd. | 2,000,000 | 2,127,500 | ||||||
Lincoln Finance, Ltd. | 14,055,000 | 14,951,006 | ||||||
|
| |||||||
43,905,706 | ||||||||
|
| |||||||
Finance—Mortgage Loan/Banker 0.4% |
| |||||||
Ladder Capital Finance Holdings LLLP / Ladder Capital Finance Corp. | ||||||||
5.875%, due 8/1/21 (d) | 24,865,000 | 21,881,200 | ||||||
7.375%, due 10/1/17 | 18,385,000 | 18,430,963 | ||||||
|
| |||||||
40,312,163 | ||||||||
|
| |||||||
Finance—Other Services 0.5% | ||||||||
Cantor Commercial Real Estate Co., L.P. / CCRE Finance Corp. | 25,340,000 | 24,833,200 | ||||||
Nationstar Mortgage LLC / Nationstar Capital Corp. | ||||||||
6.50%, due 8/1/18 | 12,000,000 | 11,700,000 | ||||||
6.50%, due 7/1/21 | 1,500,000 | 1,316,250 | ||||||
7.875%, due 10/1/20 | 6,000,000 | 5,760,000 | ||||||
|
| |||||||
43,609,450 | ||||||||
|
| |||||||
Food 2.0% | ||||||||
B&G Foods, Inc. | 16,649,000 | 16,919,546 | ||||||
BI-LO LLC / BI-LO Finance Corp. | 5,250,000 | 5,079,375 | ||||||
C&S Group Enterprises LLC | 50,865,000 | 48,830,400 | ||||||
Fresh Market, Inc. (The) | 16,365,000 | 16,119,525 | ||||||
Ingles Markets, Inc. | 12,100,000 | 12,584,000 | ||||||
KeHE Distributors LLC / KeHE Finance Corp. | 18,815,000 | 18,438,700 | ||||||
Land O’ Lakes, Inc. | 29,810,000 | 31,598,600 |
Principal Amount | Value | |||||||
Food (continued) | ||||||||
TreeHouse Foods, Inc. | $ | 9,715,000 | $ | 10,334,331 | ||||
Wells Enterprises, Inc. | 21,607,000 | 22,255,210 | ||||||
|
| |||||||
182,159,687 | ||||||||
|
| |||||||
Forest Products & Paper 0.7% | ||||||||
Smurfit Kappa Treasury Funding, Ltd. | 51,820,000 | 61,406,700 | ||||||
|
| |||||||
Gas 0.1% | ||||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | 13,025,000 | 13,318,063 | ||||||
|
| |||||||
Health Care—Products 1.4% | ||||||||
Alere, Inc. | 9,970,000 | 10,169,400 | ||||||
ConvaTec Healthcare E S.A. | 24,859,000 | 25,480,475 | ||||||
Halyard Health, Inc. | 11,331,000 | 11,500,965 | ||||||
Hanger, Inc. | 25,535,000 | 24,258,250 | ||||||
Hill-Rom Holdings, Inc. | 12,025,000 | 12,460,906 | ||||||
Hologic, Inc. | 12,715,000 | 13,318,963 | ||||||
Sterigenics-Nordion Holdings LLC | 8,350,000 | 8,475,250 | ||||||
Universal Hospital Services, Inc. | 21,710,000 | 20,272,798 | ||||||
|
| |||||||
125,937,007 | ||||||||
|
| |||||||
Health Care—Services 3.9% | ||||||||
Acadia Healthcare Co., Inc. | ||||||||
5.625%, due 2/15/23 | 7,105,000 | 7,264,863 | ||||||
6.50%, due 3/1/24 (d) | 5,965,000 | 6,293,075 | ||||||
Centene Corp. | ||||||||
5.625%, due 2/15/21 (d) | 13,405,000 | 14,108,762 | ||||||
5.75%, due 6/1/17 | 14,370,000 | 14,801,100 | ||||||
6.125%, due 2/15/24 (d) | 19,320,000 | 20,382,600 | ||||||
Fresenius Medical Care U.S. Finance, Inc. | 130,000 | 136,825 | ||||||
Fresenius Medical Care U.S. Finance II, Inc. | ||||||||
5.625%, due 7/31/19 (d) | 11,680,000 | 12,716,600 | ||||||
5.875%, due 1/31/22 (d) | 7,000,000 | 7,700,000 | ||||||
6.50%, due 9/15/18 (d) | 4,730,000 | 5,196,851 |
14 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Health Care—Services (continued) | ||||||||
¨HCA, Inc. | ||||||||
4.25%, due 10/15/19 | $ | 6,000,000 | $ | 6,240,000 | ||||
5.00%, due 3/15/24 | 14,944,000 | 15,467,040 | ||||||
5.25%, due 4/15/25 | 14,000,000 | 14,490,000 | ||||||
5.375%, due 2/1/25 | 20,495,000 | 20,956,137 | ||||||
5.875%, due 3/15/22 | 12,010,000 | 13,120,925 | ||||||
5.875%, due 5/1/23 | 2,828,000 | 2,974,703 | ||||||
5.875%, due 2/15/26 | 19,470,000 | 20,200,125 | ||||||
6.50%, due 2/15/20 | 3,294,000 | 3,648,105 | ||||||
7.50%, due 2/15/22 | 9,407,000 | 10,653,428 | ||||||
7.58%, due 9/15/25 | 3,000,000 | 3,225,000 | ||||||
7.69%, due 6/15/25 | 705,000 | 754,350 | ||||||
8.00%, due 10/1/18 | 4,984,000 | 5,638,150 | ||||||
8.36%, due 4/15/24 | 2,494,000 | 2,818,220 | ||||||
HealthSouth Corp. | 13,345,000 | 13,778,712 | ||||||
Molina Healthcare, Inc. | 22,000,000 | 22,715,000 | ||||||
MPH Acquisition Holdings LLC | 59,148,000 | 61,759,976 | ||||||
Quorum Health Corp. | 10,000,000 | 9,800,000 | ||||||
Tenet Healthcare Corp. | ||||||||
6.00%, due 10/1/20 | 10,000,000 | 10,600,000 | ||||||
6.75%, due 6/15/23 | 20,000,000 | 19,750,000 | ||||||
|
| |||||||
347,190,547 | ||||||||
|
| |||||||
Holding Company—Diversified 0.7% | ||||||||
Carlson Travel Holdings, Inc. | 67,601,000 | 65,403,967 | ||||||
|
| |||||||
Home Builders 2.3% | ||||||||
Ashton Woods USA LLC / Ashton Woods Finance Co. | 35,515,000 | 30,454,112 | ||||||
AV Homes, Inc. | 24,860,000 | 24,673,550 | ||||||
Brookfield Residential Properties, Inc. | ||||||||
6.375%, due 5/15/25 (d) | 5,665,000 | 5,098,500 | ||||||
6.50%, due 12/15/20 (d) | 13,235,000 | 12,970,300 | ||||||
Brookfield Residential Properties, Inc. / Brookfield Residential U.S. Corp. | 29,141,000 | 26,985,149 | ||||||
Century Communities, Inc. | 25,336,000 | 24,639,260 | ||||||
D.R. Horton, Inc. | ||||||||
4.75%, due 2/15/23 | 2,000,000 | 2,070,000 | ||||||
5.75%, due 8/15/23 | 3,605,000 | 3,947,475 |
Principal Amount | Value | |||||||
Home Builders (continued) | ||||||||
Mattamy Group Corp. | $ | 36,862,000 | $ | 35,710,062 | ||||
Meritage Homes Corp. | 1,500,000 | 1,608,750 | ||||||
PulteGroup, Inc. | 4,000,000 | 4,130,000 | ||||||
WCI Communities, Inc. | 12,355,000 | 12,385,888 | ||||||
Woodside Homes Co. LLC / Woodside Homes Finance, Inc. | 26,501,000 | 24,380,920 | ||||||
|
| |||||||
209,053,966 | ||||||||
|
| |||||||
Household Products & Wares 0.4% | ||||||||
Century Intermediate Holding Co. 2 | 10,120,000 | 10,246,500 | ||||||
Prestige Brands, Inc. | ||||||||
5.375%, due 12/15/21 (d) | 4,000,000 | 4,090,000 | ||||||
6.375%, due 3/1/24 (d) | 3,000,000 | 3,150,000 | ||||||
Spectrum Brands, Inc. | ||||||||
5.75%, due 7/15/25 | 7,000,000 | 7,424,550 | ||||||
6.375%, due 11/15/20 | 6,435,000 | 6,790,662 | ||||||
6.625%, due 11/15/22 | 7,535,000 | 8,137,800 | ||||||
|
| |||||||
39,839,512 | ||||||||
|
| |||||||
Housewares 0.3% | ||||||||
American Greetings Corp. | 10,500,000 | 10,815,000 | ||||||
RSI Home Products, Inc. | 12,500,000 | 13,031,250 | ||||||
|
| |||||||
23,846,250 | ||||||||
|
| |||||||
Insurance 1.3% | ||||||||
American Equity Investment Life Holding Co. | 27,660,000 | 28,283,733 | ||||||
Fairfax Financial Holdings, Ltd. | ||||||||
7.375%, due 4/15/18 | 9,092,000 | 9,750,334 | ||||||
8.30%, due 4/15/26 | 5,395,000 | 6,385,786 | ||||||
Fidelity & Guaranty Life Holdings, Inc. | 29,148,000 | 29,148,000 | ||||||
Ironshore Holdings (U.S.), Inc. | 12,890,000 | 14,703,726 | ||||||
USI, Inc. | 29,460,000 | 29,460,000 | ||||||
|
| |||||||
117,731,579 | ||||||||
|
| |||||||
Internet 1.4% | ||||||||
Cogent Communications Group, Inc. | 3,600,000 | 3,582,000 | ||||||
Match Group, Inc. | 56,624,000 | 57,756,480 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Internet (continued) | ||||||||
Netflix, Inc. | ||||||||
5.375%, due 2/1/21 | $ | 10,580,000 | $ | 11,188,350 | ||||
5.50%, due 2/15/22 | 14,265,000 | 14,906,925 | ||||||
5.75%, due 3/1/24 | 19,037,000 | 19,893,665 | ||||||
5.875%, due 2/15/25 | 5,546,000 | 5,812,208 | ||||||
VeriSign, Inc. | 9,800,000 | 10,069,500 | ||||||
|
| |||||||
123,209,128 | ||||||||
|
| |||||||
Investment Company 0.4% | ||||||||
American Capital, Ltd. | 33,330,000 | 33,871,613 | ||||||
|
| |||||||
Investment Management/Advisory Services 0.6% |
| |||||||
Drawbridge Special Opportunities Fund, L.P. / Drawbridge Special Opportunities Finance | 29,020,000 | 27,133,700 | ||||||
National Financial Partners Corp. | 22,882,000 | 22,767,590 | ||||||
|
| |||||||
49,901,290 | ||||||||
|
| |||||||
Iron & Steel 1.2% | ||||||||
Allegheny Ludlum Corp. | 6,860,000 | 5,042,100 | ||||||
Allegheny Technologies, Inc. | 21,940,000 | 17,990,800 | ||||||
BlueScope Steel Finance, Ltd. / BlueScope Steel Finance USA LLC | ||||||||
6.50%, due 5/15/21 (d) | 23,705,000 | 24,179,100 | ||||||
7.125%, due 5/1/18 (d) | 43,043,000 | 44,226,682 | ||||||
Evraz, Inc. N.A. | 22,270,000 | 20,377,050 | ||||||
|
| |||||||
111,815,732 | ||||||||
|
| |||||||
Leisure Time 1.0% | ||||||||
Brunswick Corp. | 19,791,000 | 19,988,910 | ||||||
Carlson Wagonlit B.V. | 68,625,000 | 71,370,000 | ||||||
|
| |||||||
91,358,910 | ||||||||
|
| |||||||
Lodging 1.2% | ||||||||
Boyd Gaming Corp. | 9,000,000 | 9,202,500 | ||||||
Choice Hotels International, Inc. | ||||||||
5.70%, due 8/28/20 | 2,000,000 | 2,145,000 | ||||||
5.75%, due 7/1/22 | 20,500,000 | 22,037,500 | ||||||
FelCor Lodging, L.P. | 10,497,000 | 10,785,668 |
Principal Amount | Value | |||||||
Lodging (continued) | ||||||||
Hilton Worldwide Finance LLC / Hilton Worldwide Finance Corp. | $ | 20,930,000 | $ | 21,799,641 | ||||
MGP Escrow Issuer LLC / MGP Escrow Co-Issuer, Inc. | 41,520,000 | 43,284,600 | ||||||
|
| |||||||
109,254,909 | ||||||||
|
| |||||||
Machinery—Construction & Mining 0.2% |
| |||||||
BlueLine Rental Finance Corp. | 18,325,000 | 16,080,188 | ||||||
Vander Intermediate Holding II Corp. | 3,440,000 | 2,064,000 | ||||||
|
| |||||||
18,144,188 | ||||||||
|
| |||||||
Machinery—Diversified 0.3% | ||||||||
Briggs & Stratton Corp. | 8,945,000 | 9,727,688 | ||||||
Zebra Technologies Corp. | 18,035,000 | 19,524,691 | ||||||
|
| |||||||
29,252,379 | ||||||||
|
| |||||||
Media 6.5% | ||||||||
Altice Financing S.A. | 11,600,000 | 11,614,500 | ||||||
Altice U.S. Finance I Corp. | 20,195,000 | 20,620,105 | ||||||
Cablevision Systems Corp. | 18,620,000 | 19,504,450 | ||||||
¨CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
5.125%, due 2/15/23 | 23,000,000 | 23,575,000 | ||||||
5.125%, due 5/1/23 (d) | 14,873,000 | 15,170,460 | ||||||
5.25%, due 9/30/22 | 3,000,000 | 3,097,500 | ||||||
5.375%, due 5/1/25 (d) | 3,880,000 | 3,972,150 | ||||||
5.875%, due 4/1/24 (d) | 23,695,000 | 24,820,512 | ||||||
5.875%, due 5/1/27 (d) | 9,000,000 | 9,225,000 | ||||||
6.50%, due 4/30/21 | 26,527,000 | 27,450,140 | ||||||
7.00%, due 1/15/19 | 8,657,000 | 8,811,095 | ||||||
CCO Safari II LLC | ||||||||
3.579%, due 7/23/20 (d) | 4,000,000 | 4,152,248 | ||||||
4.464%, due 7/23/22 (d) | 6,165,000 | 6,554,868 | ||||||
CCOH Safari LLC | 14,035,000 | 14,491,137 | ||||||
Cogeco Communications, Inc. | 10,685,000 | 10,965,481 | ||||||
CSC Holdings LLC | 8,885,000 | 9,618,013 | ||||||
DISH DBS Corp. | 2,000,000 | 2,047,500 |
16 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Media (continued) | ||||||||
Midcontinent Communications & Midcontinent Finance Corp. | $ | 6,500,000 | $ | 6,743,750 | ||||
Neptune Finco Corp. | 8,000,000 | 8,780,000 | ||||||
Nielsen Finance LLC / Nielsen Finance Co. | ||||||||
4.50%, due 10/1/20 | 13,665,000 | 14,040,788 | ||||||
5.00%, due 4/15/22 (d) | 69,960,000 | 71,359,200 | ||||||
Numericable-SFR S.A. | ||||||||
6.00%, due 5/15/22 (d) | 47,825,000 | 47,887,172 | ||||||
7.375%, due 5/1/26 (d) | 20,000,000 | 20,300,000 | ||||||
Quebecor Media, Inc. | 48,150,000 | 49,835,250 | ||||||
Videotron, Ltd. | ||||||||
5.00%, due 7/15/22 | 21,754,000 | 22,569,775 | ||||||
5.375%, due 6/15/24 (d) | 28,095,000 | 29,324,156 | ||||||
¨Virgin Media Secured Finance PLC | ||||||||
5.25%, due 1/15/21 | 83,145,000 | 88,029,769 | ||||||
5.25%, due 1/15/26 (d) | 5,000,000 | 5,014,400 | ||||||
5.50%, due 8/15/26 (d) | 4,000,000 | 4,022,520 | ||||||
|
| |||||||
583,596,939 | ||||||||
|
| |||||||
Metal Fabricate & Hardware 0.9% | ||||||||
A. M. Castle & Co. | 3,698,000 | 2,755,010 | ||||||
Optimas OE Solutions Holding LLC / Optimas OE Solutions, Inc. | 19,505,000 | 14,043,600 | ||||||
Wise Metals Group LLC / Wise Alloys Finance Corp. | 65,540,000 | 60,624,500 | ||||||
|
| |||||||
77,423,110 | ||||||||
|
| |||||||
Mining 3.1% | ||||||||
Alamos Gold, Inc. | 55,444,000 | 53,236,220 | ||||||
Aleris International, Inc. | 12,780,000 | 13,355,100 | ||||||
Constellium N.V. | 22,245,000 | 16,850,588 | ||||||
First Quantum Minerals, Ltd. | 22,235,000 | 18,899,750 | ||||||
Hecla Mining Co. | 43,553,000 | 40,504,290 | ||||||
Kaiser Aluminum Corp. | ||||||||
5.875%, due 5/15/24 (d) | 12,315,000 | 12,607,481 | ||||||
8.25%, due 6/1/20 | 21,330,000 | 22,183,200 | ||||||
New Gold, Inc. | ||||||||
6.25%, due 11/15/22 (d) | 13,795,000 | 12,691,400 | ||||||
7.00%, due 4/15/20 (d) | 46,738,000 | 45,569,550 |
Principal Amount | Value | |||||||
Mining (continued) | ||||||||
Petra Diamonds U.S. Treasury PLC | $ | 19,480,000 | $ | 17,775,500 | ||||
St. Barbara, Ltd. | 22,325,000 | 22,548,250 | ||||||
|
| |||||||
276,221,329 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 1.1% |
| |||||||
Actuant Corp. | 2,000,000 | 2,040,000 | ||||||
Amsted Industries, Inc. | 18,225,000 | 18,179,437 | ||||||
CTP Transportation Products LLC / CTP Finance, Inc. | 23,310,000 | 22,610,700 | ||||||
EnPro Industries, Inc. | 15,800,000 | 16,471,500 | ||||||
Gates Global LLC / Gates Global Co. | 29,319,000 | 25,507,530 | ||||||
Koppers, Inc. | 16,144,000 | 16,406,340 | ||||||
|
| |||||||
101,215,507 | ||||||||
|
| |||||||
Oil & Gas 7.8% | ||||||||
Antero Resources Corp. | ||||||||
5.125%, due 12/1/22 | 3,000,000 | 2,880,000 | ||||||
5.375%, due 11/1/21 | 10,000,000 | 9,675,000 | ||||||
Atlas Energy Holdings Operating Co. LLC / Atlas Resource Finance Corp. | ||||||||
7.75%, due 1/15/21 | 2,815,000 | 450,400 | ||||||
9.25%, due 8/15/21 | 10,705,000 | 1,712,800 | ||||||
California Resources Corp. | 65,573,000 | 28,196,390 | ||||||
¨Calumet Specialty Products Partners, L.P. / Calumet Finance Corp. | ||||||||
6.50%, due 4/15/21 | 45,915,000 | 31,681,350 | ||||||
7.625%, due 1/15/22 | 24,680,000 | 16,720,700 | ||||||
7.75%, due 4/15/23 | 4,840,000 | 3,194,400 | ||||||
11.50%, due 1/15/21 (d) | 33,240,000 | 36,065,400 | ||||||
Carrizo Oil & Gas, Inc. | ||||||||
6.25%, due 4/15/23 | 7,000,000 | 6,720,000 | ||||||
7.50%, due 9/15/20 | 14,480,000 | 14,552,400 | ||||||
Chesapeake Energy Corp. | 15,840,000 | 13,543,200 | ||||||
Chesapeake Energy Corp. (Escrow Claim Shares) | 15,000,000 | 4,050,000 | ||||||
Comstock Resources, Inc. | ||||||||
7.75%, due 4/1/19 | 24,520,000 | 3,371,500 | ||||||
9.50%, due 6/15/20 | 38,189,000 | 5,346,460 | ||||||
10.00%, due 3/15/20 (d) | 62,085,000 | 40,976,100 | ||||||
Concho Resources, Inc. | ||||||||
5.50%, due 10/1/22 | 16,000,000 | 16,140,000 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Oil & Gas (continued) | ||||||||
Concho Resources, Inc. (continued) | ||||||||
6.50%, due 1/15/22 | $ | 24,386,000 | $ | 25,361,440 | ||||
7.00%, due 1/15/21 | 10,325,000 | 10,712,188 | ||||||
Continental Resources, Inc. | ||||||||
5.00%, due 9/15/22 | 5,275,000 | 4,925,531 | ||||||
7.125%, due 4/1/21 | 24,260,000 | 24,623,900 | ||||||
7.375%, due 10/1/20 | 20,295,000 | 20,650,162 | ||||||
EnQuest PLC | 35,138,000 | 19,589,435 | ||||||
Gulfport Energy Corp. | 13,921,000 | 14,060,210 | ||||||
Halcon Resources Corp. | 47,185,000 | 39,163,550 | ||||||
Jones Energy Holdings LLC / Jones Energy Finance Corp. | 23,415,000 | 16,039,275 | ||||||
LINN Energy LLC / LINN Energy Finance Corp. | 22,282,000 | 4,233,580 | ||||||
Murphy Oil USA, Inc. | 17,605,000 | 18,408,140 | ||||||
Newfield Exploration Co. | 12,210,000 | 12,423,675 | ||||||
Noble Energy, Inc. | 1,986,000 | 2,040,853 | ||||||
Oasis Petroleum, Inc. | ||||||||
6.50%, due 11/1/21 | 9,768,000 | 8,937,720 | ||||||
6.875%, due 1/15/23 | 5,000,000 | 4,487,500 | ||||||
7.25%, due 2/1/19 | 52,787,000 | 50,147,650 | ||||||
PDC Energy, Inc. | 27,545,000 | 28,509,075 | ||||||
PetroQuest Energy, Inc. | 60,090,000 | 29,444,100 | ||||||
Rex Energy Corp. | 116,325,000 | 16,867,125 | ||||||
RSP Permian, Inc. | 17,780,000 | 18,357,850 | ||||||
Sanchez Energy Corp. | 4,055,000 | 3,335,238 | ||||||
SM Energy Co. | ||||||||
6.50%, due 11/15/21 | 7,000,000 | 6,510,000 | ||||||
6.50%, due 1/1/23 | 2,535,000 | 2,319,525 | ||||||
Stone Energy Corp. | 87,403,000 | 22,506,272 | ||||||
WPX Energy, Inc. | ||||||||
5.25%, due 1/15/17 | 3,635,000 | 3,684,981 | ||||||
6.00%, due 1/15/22 | 43,230,000 | 38,907,000 | ||||||
7.50%, due 8/1/20 | 16,955,000 | 16,149,638 | ||||||
|
| |||||||
697,671,713 | ||||||||
|
|
Principal Amount | Value | |||||||
Oil & Gas Services 1.5% | ||||||||
CSI Compressco, L.P. / Compressco Finance, Inc. | $ | 8,190,000 | $ | 6,429,150 | ||||
Forum Energy Technologies, Inc. | 34,710,000 | 31,586,100 | ||||||
¨Freeport-McMoran Oil & Gas LLC / FCX Oil & Gas, Inc. | ||||||||
6.50%, due 11/15/20 | 16,110,000 | 15,223,950 | ||||||
6.625%, due 5/1/21 | 14,620,000 | 13,797,625 | ||||||
6.75%, due 2/1/22 | 20,996,000 | 18,953,089 | ||||||
6.875%, due 2/15/23 | 50,736,000 | 45,662,400 | ||||||
FTS International, Inc. | ||||||||
6.25%, due 5/1/22 | 13,382,000 | 2,080,901 | ||||||
8.134%, due 6/15/20 (d)(h) | 4,565,000 | 3,332,450 | ||||||
|
| |||||||
137,065,665 | ||||||||
|
| |||||||
Packaging & Containers 0.7% | ||||||||
AEP Industries, Inc. | 18,194,000 | 18,512,395 | ||||||
Novelis, Inc. | ||||||||
8.375%, due 12/15/17 | 28,135,000 | 28,662,531 | ||||||
8.75%, due 12/15/20 | 12,730,000 | 13,143,725 | ||||||
|
| |||||||
60,318,651 | ||||||||
|
| |||||||
Pharmaceuticals 2.9% | ||||||||
Alphabet Holding Co., Inc. | 40,474,000 | 40,959,688 | ||||||
DPx Holdings B.V. | 19,905,000 | 20,153,813 | ||||||
Endo Finance LLC | 7,480,000 | 7,330,400 | ||||||
Endo Finance LLC / Endo Finco, Inc. | 7,300,000 | 6,989,750 | ||||||
Endo Ltd. / Endo Finance LLC / Endo Finco, Inc. | ||||||||
6.00%, due 7/15/23 (d) | 9,850,000 | 9,665,313 | ||||||
6.00%, due 2/1/25 (d) | 13,945,000 | 13,317,475 | ||||||
Grifols Worldwide Operations, Ltd. | 8,996,000 | 9,265,880 | ||||||
NBTY, Inc. | ||||||||
7.625%, due 5/15/21 (d) | 30,685,000 | 31,375,412 | ||||||
9.00%, due 10/1/18 | 20,200,000 | 20,646,218 | ||||||
Quintiles Transnational Corp. | 15,575,000 | 15,944,906 | ||||||
¨Valeant Pharmaceuticals International, Inc. | ||||||||
6.375%, due 10/15/20 (d) | 22,504,000 | 20,394,250 | ||||||
6.75%, due 8/15/18 (d) | 18,620,000 | 17,968,300 | ||||||
7.00%, due 10/1/20 (d) | 7,000,000 | 6,440,000 | ||||||
7.25%, due 7/15/22 (d) | 9,520,000 | 8,401,400 | ||||||
7.50%, due 7/15/21 (d) | 37,600,000 | 34,404,000 | ||||||
|
| |||||||
263,256,805 | ||||||||
|
|
18 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Pipelines 2.8% | ||||||||
ANR Pipeline Co. | ||||||||
7.375%, due 2/15/24 | $ | 2,555,000 | $ | 3,012,708 | ||||
9.625%, due 11/1/21 | 10,349,000 | 13,268,070 | ||||||
Copano Energy LLC / Copano Energy Finance Corp. | 11,307,000 | 11,728,774 | ||||||
EnLink Midstream Partners, L.P. | ||||||||
2.70%, due 4/1/19 | 2,500,000 | 2,307,660 | ||||||
4.15%, due 6/1/25 | 5,000,000 | 4,310,670 | ||||||
4.40%, due 4/1/24 | 4,370,000 | 3,787,060 | ||||||
EnLink Midstream Partners, L.P. / EnLink Midstream Finance Corp. | 1,000,000 | 954,701 | ||||||
Genesis Energy, L.P. / Genesis Energy Finance Corp. | 39,945,000 | 38,349,197 | ||||||
Hiland Partners Holdings LLC / Hiland Partners Finance Corp. | 16,275,000 | 17,027,719 | ||||||
MPLX, L.P. | ||||||||
4.875%, due 12/1/24 (d) | 22,400,000 | 21,832,630 | ||||||
4.875%, due 6/1/25 (d) | 30,695,000 | 29,660,364 | ||||||
5.50%, due 2/15/23 (d) | 12,389,000 | 12,357,321 | ||||||
NuStar Logistics, L.P. | 11,295,000 | 11,182,050 | ||||||
Summit Midstream Holdings LLC / Summit Midstream Finance Corp. | 23,710,000 | 21,576,100 | ||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | ||||||||
5.00%, due 1/15/18 | 2,291,000 | 2,303,876 | ||||||
6.625%, due 10/1/20 (d) | 47,799,000 | 48,784,615 | ||||||
Williams Partners, L.P. / ACMP Finance Corp. | 7,284,000 | 7,245,460 | ||||||
|
| |||||||
249,688,975 | ||||||||
|
| |||||||
Real Estate 1.5% | ||||||||
AAF Holdings LLC / AAF Finance Co. | 32,789,463 | 32,297,621 | ||||||
CBRE Services, Inc. | ||||||||
5.00%, due 3/15/23 | 29,197,000 | 30,121,202 | ||||||
5.25%, due 3/15/25 | 6,000,000 | 6,243,156 | ||||||
Forestar USA Real Estate Group, Inc. | 13,000,000 | 13,260,000 | ||||||
Howard Hughes Corp. (The) | 23,385,000 | 23,677,312 | ||||||
Rialto Holdings LLC / Rialto Corp. | 30,115,000 | 29,512,700 | ||||||
|
| |||||||
135,111,991 | ||||||||
|
|
Principal Amount | Value | |||||||
Real Estate Investment Trusts 2.5% | ||||||||
¨Crown Castle International Corp. | ||||||||
4.875%, due 4/15/22 | $ | 8,995,000 | $ | 9,759,575 | ||||
5.25%, due 1/15/23 | 94,468,000 | 104,859,480 | ||||||
Equinix, Inc. | ||||||||
5.375%, due 1/1/22 | 17,368,000 | 18,149,560 | ||||||
5.375%, due 4/1/23 | 17,500,000 | 18,287,500 | ||||||
5.75%, due 1/1/25 | 21,997,000 | 23,015,021 | ||||||
5.875%, due 1/15/26 | 19,245,000 | 20,363,520 | ||||||
Host Hotels & Resorts, L.P. | ||||||||
5.25%, due 3/15/22 | 2,000,000 | 2,172,070 | ||||||
6.00%, due 10/1/21 | 13,000,000 | 14,653,496 | ||||||
Sabra Health Care, L.P. / Sabra Capital Corp. | ||||||||
5.375%, due 6/1/23 | 5,570,000 | 5,416,825 | ||||||
5.50%, due 2/1/21 | 5,030,000 | 5,080,300 | ||||||
|
| |||||||
221,757,347 | ||||||||
|
| |||||||
Retail 5.1% | ||||||||
AmeriGas Finance LLC / AmeriGas Finance Corp. | ||||||||
6.75%, due 5/20/20 | 11,240,000 | 11,608,560 | ||||||
7.00%, due 5/20/22 | 12,897,000 | 13,622,456 | ||||||
Asbury Automotive Group, Inc. | 34,063,000 | 35,170,047 | ||||||
AutoNation, Inc. | 8,000,000 | 8,591,184 | ||||||
BMC Stock Holdings, Inc. | 22,520,000 | 23,646,000 | ||||||
Cash America International, Inc. | 14,455,000 | 14,563,412 | ||||||
CVS Health Corp. | ||||||||
4.75%, due 12/1/22 (d) | 2,380,000 | 2,676,458 | ||||||
5.00%, due 12/1/24 (d) | 3,900,000 | 4,509,480 | ||||||
Dollar Tree, Inc. | 33,130,000 | 35,376,214 | ||||||
DriveTime Automotive Group, Inc. / DT Acceptance Corp. | 32,064,000 | 28,857,600 | ||||||
Ferrellgas, L.P. / Ferrellgas Finance Corp. | 13,000,000 | 12,122,500 | ||||||
GameStop Corp. | ||||||||
5.50%, due 10/1/19 (d) | 10,925,000 | 10,679,187 | ||||||
6.75%, due 3/15/21 (d) | 11,500,000 | 11,330,375 | ||||||
Group 1 Automotive, Inc. | ||||||||
5.00%, due 6/1/22 | 6,665,000 | 6,598,350 | ||||||
5.25%, due 12/15/23 (d) | 7,000,000 | 6,965,000 | ||||||
Guitar Center, Inc. | 7,225,000 | 6,556,688 | ||||||
L Brands, Inc. | ||||||||
5.625%, due 2/15/22 | 7,725,000 | 8,526,469 | ||||||
6.625%, due 4/1/21 | 13,980,000 | 15,902,250 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Retail (continued) | ||||||||
L Brands, Inc. (continued) | ||||||||
6.875%, due 11/1/35 | $ | 7,000,000 | $ | 7,700,000 | ||||
8.50%, due 6/15/19 | 3,395,000 | 4,006,100 | ||||||
Men’s Wearhouse, Inc. (The) | 82,346,000 | 72,052,750 | ||||||
Outerwall, Inc. | ||||||||
5.875%, due 6/15/21 | 28,840,000 | 23,216,200 | ||||||
6.00%, due 3/15/19 | 9,537,000 | 8,511,773 | ||||||
Penske Automotive Group, Inc. | 26,025,000 | 26,870,812 | ||||||
Radio Systems Corp. | 33,225,000 | 34,554,000 | ||||||
Sonic Automotive, Inc. | 5,625,000 | 5,934,375 | ||||||
Yum! Brands, Inc. | ||||||||
3.75%, due 11/1/21 | 4,710,000 | 4,584,008 | ||||||
3.875%, due 11/1/20 | 3,000,000 | 2,992,500 | ||||||
5.30%, due 9/15/19 | 6,500,000 | 6,922,500 | ||||||
|
| |||||||
454,647,248 | ||||||||
|
| |||||||
Semiconductors 0.9% | ||||||||
Micron Technology, Inc. | ||||||||
5.25%, due 8/1/23 (d) | 13,000,000 | 10,504,130 | ||||||
5.50%, due 2/1/25 | 23,310,000 | 18,881,100 | ||||||
5.625%, due 1/15/26 (d) | 2,500,000 | 1,975,000 | ||||||
5.875%, due 2/15/22 | 4,000,000 | 3,530,000 | ||||||
7.50%, due 9/15/23 (d) | 35,935,000 | 37,192,725 | ||||||
Qorvo, Inc. | ||||||||
6.75%, due 12/1/23 (d) | 5,430,000 | 5,579,325 | ||||||
7.00%, due 12/1/25 (d) | 6,000,000 | 6,150,000 | ||||||
|
| |||||||
83,812,280 | ||||||||
|
| |||||||
Software 1.3% | ||||||||
ACI Worldwide, Inc. | 43,570,000 | 44,986,025 | ||||||
Activision Blizzard, Inc. | 22,580,000 | 23,765,450 | ||||||
Change Healthcare Holdings, Inc. | ||||||||
6.00%, due 2/15/21 (d) | 11,210,000 | 11,322,100 | ||||||
11.00%, due 12/31/19 | 2,000,000 | 2,128,750 | ||||||
First Data Corp. | 3,500,000 | 3,596,250 | ||||||
MSCI, Inc. | ||||||||
5.25%, due 11/15/24 (d) | 21,757,000 | 22,736,065 | ||||||
5.75%, due 8/15/25 (d) | 7,380,000 | 7,850,475 | ||||||
|
| |||||||
116,385,115 | ||||||||
|
| |||||||
Storage & Warehousing 0.4% | ||||||||
Algeco Scotsman Global Finance PLC | ||||||||
8.50%, due 10/15/18 (d) | 33,500,000 | 27,051,250 | ||||||
10.75%, due 10/15/19 (d) | 15,265,000 | 5,686,213 | ||||||
|
| |||||||
32,737,463 | ||||||||
|
|
Principal Amount | Value | |||||||
Telecommunications 5.7% | ||||||||
CenturyLink, Inc. | $ | 16,000,000 | $ | 14,531,840 | ||||
Cogent Communications Finance, Inc. | 38,970,000 | 38,288,025 | ||||||
DigitalGlobe, Inc. | 23,276,000 | 21,035,685 | ||||||
Frontier Communications Corp. | ||||||||
6.25%, due 9/15/21 | 18,410,000 | 17,121,300 | ||||||
8.875%, due 9/15/20 (d) | 2,665,000 | 2,821,569 | ||||||
10.50%, due 9/15/22 (d) | 19,880,000 | 20,453,936 | ||||||
Hughes Satellite Systems Corp. | ||||||||
6.50%, due 6/15/19 | 2,627,000 | 2,892,984 | ||||||
7.625%, due 6/15/21 | 26,500,000 | 29,481,250 | ||||||
Intelsat Jackson Holdings S.A. | ||||||||
5.50%, due 8/1/23 | 2,100,000 | 1,326,938 | ||||||
7.25%, due 4/1/19 | 69,880,000 | 57,301,600 | ||||||
Sable International Finance, Ltd. | 12,750,000 | 13,323,750 | ||||||
Sprint Communications, Inc. | ||||||||
7.00%, due 3/1/20 (d) | 22,370,000 | 22,957,212 | ||||||
9.00%, due 11/15/18 (d) | 12,736,000 | 13,468,320 | ||||||
9.25%, due 4/15/22 | 16,806,000 | 16,385,850 | ||||||
Sprint Corp. | ||||||||
7.125%, due 6/15/24 | 14,335,000 | 10,751,250 | ||||||
7.875%, due 9/15/23 | 10,185,000 | 7,944,300 | ||||||
¨T-Mobile USA, Inc. | ||||||||
6.00%, due 4/15/24 | 16,525,000 | 17,289,281 | ||||||
6.125%, due 1/15/22 | 14,910,000 | 15,683,531 | ||||||
6.25%, due 4/1/21 | 20,085,000 | 20,938,612 | ||||||
6.375%, due 3/1/25 | 41,842,000 | 43,934,100 | ||||||
6.50%, due 1/15/24 | 14,445,000 | 15,383,925 | ||||||
6.50%, due 1/15/26 | 28,215,000 | 29,907,900 | ||||||
6.625%, due 11/15/20 | 975,000 | 1,009,125 | ||||||
6.625%, due 4/1/23 | 34,080,000 | 36,423,000 | ||||||
6.731%, due 4/28/22 | 38,575,000 | 40,600,187 | ||||||
|
| |||||||
511,255,470 | ||||||||
|
| |||||||
Transportation 1.0% |
| |||||||
Florida East Coast Holdings Corp. | ||||||||
6.75%, due 5/1/19 (d) | 50,325,000 | 50,828,250 | ||||||
9.75%, due 5/1/20 (d) | 46,270,000 | 36,090,600 | ||||||
|
| |||||||
86,918,850 | ||||||||
|
| |||||||
Trucking & Leasing 0.2% |
| |||||||
TRAC Intermodal LLC / TRAC Intermodal Corp. | 12,985,000 | 14,056,263 | ||||||
|
| |||||||
Total Corporate Bonds | 8,174,247,625 | |||||||
|
|
20 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Loan Assignments 1.0% (i) | ||||||||
Lodging 0.3% | ||||||||
Cannery Casino Resorts LLC | $ | 9,625,906 | $ | 9,565,744 | ||||
New 2nd Lien Term Loan 12.50%, due 10/2/19 | 17,589,071 | 17,501,126 | ||||||
|
| |||||||
27,066,870 | ||||||||
|
| |||||||
Metal Fabricate & Hardware 0.2% |
| |||||||
Neenah Foundry Co. | 14,801,354 | 14,653,340 | ||||||
|
| |||||||
Pharmaceuticals 0.2% | ||||||||
Phibro Animal Health Corp. | 13,263,750 | 13,114,533 | ||||||
|
| |||||||
Telecommunications 0.2% | ||||||||
Intelsat Jackson Holdings S.A. | 19,000,000 | 17,784,000 | ||||||
|
| |||||||
Transportation 0.1% | ||||||||
Commercial Barge Line Co. | 14,000,000 | 12,110,000 | ||||||
|
| |||||||
Total Loan Assignments | 84,728,743 | |||||||
|
| |||||||
Total Long-Term Bonds | 8,379,974,138 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 0.4% | ||||||||
Auto Parts & Equipment 0.1% | ||||||||
¨Exide Technologies, Inc. (b)(c)(d)(e) | 1,416,537 | 3,966,304 | ||||||
|
| |||||||
Commercial Services 0.1% | ||||||||
Avis Budget Group, Inc. (j) | 188,100 | 4,721,310 | ||||||
|
| |||||||
Electric 0.0%‡ | ||||||||
Upstate New York Power Producers, Inc. (b)(c)(e)(j) | 51,473 | 1,904,501 | ||||||
|
| |||||||
Entertainment 0.0%‡ | ||||||||
Affinity Gaming LLC (b)(e)(j) | 275,000 | 3,712,500 | ||||||
|
|
Shares | Value | |||||||
Lodging 0.1% | ||||||||
Majestic Star Casino LLC Membership Units (b)(c)(e)(j) | 446,020 | $ | 55,752 | |||||
Starwood Hotels & Resorts Worldwide, Inc. | 110,170 | 9,020,720 | ||||||
|
| |||||||
9,076,472 | ||||||||
|
| |||||||
Media 0.0%‡ | ||||||||
ION Media Networks, Inc. (b)(c)(e)(j) | 2,267 | 1,213,706 | ||||||
|
| |||||||
Metal Fabricate & Hardware 0.1% | ||||||||
Neenah Enterprises, Inc. (b)(c)(e)(j) | 717,799 | 9,460,591 | ||||||
|
| |||||||
Oil & Gas 0.0%‡ | ||||||||
Rex Energy Corp. (b)(c)(e)(j) | 1,744,875 | 1,762,324 | ||||||
|
| |||||||
Total Common Stocks | 35,817,708 | |||||||
|
| |||||||
Exchange-Traded Fund 0.2% (k) | ||||||||
SPDR Gold Shares (j) | 169,400 | 20,946,310 | ||||||
|
| |||||||
Total Exchange-Traded Fund | 20,946,310 | |||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 4.9% | ||||||||
Repurchase Agreement 4.9% | ||||||||
Fixed Income Clearing Corp. | $ | 437,416,125 | 437,416,125 | |||||
|
| |||||||
Total Short-Term Investment | 437,416,125 | |||||||
|
| |||||||
Total Investments | 99.2 | % | 8,874,154,281 | |||||
Other Assets, Less Liabilities | 0.8 | 75,738,345 | ||||||
Net Assets | 100.0 | % | $ | 8,949,892,626 |
‡ | Less than one-tenth of a percent. |
(a) | PIK (“Payment-in-Kind”)—issuer may pay interest or dividends with additional securities and/or in cash. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
(b) | Illiquid security—As of April 30, 2016, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $187,255,925, which represented 2.1% of the Fund’s net assets. |
(c) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2016, the total market value of these securities was $168,890,085, which represented 1.9% of the Fund’s net assets. |
(d) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(e) | Restricted security. |
(f) | Issue in default. |
(g) | Step coupon—Rate shown was the rate in effect as of April 30, 2016. |
(h) | Floating rate—Rate shown was the rate in effect as of April 30, 2016. |
(i) | 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 weighted average interest rate of all contracts within the floating rate loan facility as of April 30, 2016. |
(j) | Non-income producing security. |
(k) | Exchange-Traded Fund—An investment vehicle that represents a basket of securities that is traded on an exchange. |
(l) | As of April 30, 2016, cost was $9,181,696,815 for federal income tax purposes and net unrealized depreciation was as follows: |
Gross unrealized appreciation | $ | 247,282,288 | ||
Gross unrealized depreciation | (554,824,822 | ) | ||
|
| |||
Net unrealized depreciation | $ | (307,542,534 | ) | |
|
|
The following abbreviation is used in the preceding pages:
SPDR—Standard & Poor’s Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Convertible Bonds (b) | $ | — | $ | 67,347,578 | $ | 53,650,192 | $ | 120,997,770 | ||||||||
Corporate Bonds (c) | — | 8,077,370,910 | 96,876,715 | 8,174,247,625 | ||||||||||||
Loan Assignments (d) | — | 52,574,277 | 32,154,466 | 84,728,743 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 8,197,292,765 | 182,681,373 | 8,379,974,138 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (e)(f) | 13,742,030 | 5,474,824 | 16,600,854 | 35,817,708 | ||||||||||||
Exchange-Traded Fund | 20,946,310 | — | — | 20,946,310 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 437,416,125 | — | 437,416,125 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 34,688,340 | $ | 8,640,183,714 | $ | 199,282,227 | $ | 8,874,154,281 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 securities valued at $50,438,564 and $3,211,628 are held in Auto Parts & Equipment and Electric, respectively, within the Convertible Bonds section of the Portfolio of Investments. |
(c) | The Level 3 securities valued at $56,514,215, $36,312,500 and $4,050,000 are held in Auto Parts & Equipment, Entertainment and Oil & Gas, respectively, within the Corporate Bonds section of the Portfolio of Investments. |
(d) | Includes $17,501,126, and $14,653,340 of Level 3 securities held in Lodging and Metal Fabricate & Hardware, respectively, within the Loan Assignments section of the Portfolio of Investments. |
(e) | The Level 2 securities valued at $3,712,500 and $1,762,324 are held in Entertainment and Oil & Gas, respectively, within the Common Stocks section of the Portfolio of Investments. |
(f) | The Level 3 securities valued at $3,966,304, $1,904,501, $55,752, $1,213,706 and $9,460,591 are held in Auto Parts & Equipment, Electric, Lodging, Media and Metal Fabricate & Hardware, respectively, 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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, a security with a market value of $15,001,923 transferred from Level 2 to Level 3. The transfer occurred as a result of utilizing significant unobservable inputs. As of October 31, 2015, the fair value obtained for this Loan Assignment, from an independent pricing service, utilized significant observable inputs.
22 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, 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:
Investments in | Balance as of October 31, 2015 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales (a) | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of April 30, 2016 | Change in Unrealized Appreciation (Depre- ciation) from Investments Still Held as of April 30, 2016 (b) | ||||||||||||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Bonds | ||||||||||||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | $ | 53,295,813 | $ | 341,638 | $ | — | $ | (6,038,638 | ) | $ | 2,839,751 | (c) | $ | — | $ | — | $ | — | $ | 50,438,564 | $ | (6,038,638 | ) | |||||||||||||||||||||||||||
Electric | 4,369,159 | — | 98,581 | (62,927 | ) | 400,840 | (c) | (1,594,025 | ) | — | — | 3,211,628 | 107,363 | |||||||||||||||||||||||||||||||||||||
Corporate Bonds | ||||||||||||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | 54,289,499 | 390,436 | — | (783,033 | ) | 2,617,313 | (c) | — | — | — | 56,514,215 | (783,033 | ) | |||||||||||||||||||||||||||||||||||||
Entertainment | 36,312,500 | — | — | — | — | — | — | — | 36,312,500 | — | ||||||||||||||||||||||||||||||||||||||||
Oil & Gas | 3,900,000 | — | — | 150,000 | — | — | — | — | 4,050,000 | 150,000 | ||||||||||||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||||||||||||
Lodging | 14,619,375 | 73,389 | — | 2,169,291 | 639,071 | — | — | — | 17,501,126 | 2,169,291 | ||||||||||||||||||||||||||||||||||||||||
Metal Fabricate & Hardware | — | 84,396 | 6,611 | (10,565 | ) | — | (429,025 | ) | 15,001,923 | — | 14,653,340 | (10,565 | ) | |||||||||||||||||||||||||||||||||||||
Retail | 6,007,500 | — | (765,000 | ) | (7,500 | ) | — | (5,235,000 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | 5,666,148 | — | — | (1,699,844 | ) | — | — | — | — | 3,966,304 | (1,699,844 | ) | ||||||||||||||||||||||||||||||||||||||
Electric | 2,316,285 | — | — | (411,784 | ) | — | — | — | — | 1,904,501 | (411,784 | ) | ||||||||||||||||||||||||||||||||||||||
Lodging | 156,107 | — | — | (100,355 | ) | — | — | — | — | 55,752 | (100,355 | ) | ||||||||||||||||||||||||||||||||||||||
Media | 985,125 | — | — | 228,581 | — | — | — | — | 1,213,706 | 228,581 | ||||||||||||||||||||||||||||||||||||||||
Metal, Fabricate & Hardware | 8,728,436 | — | — | 732,155 | — | — | — | — | 9,460,591 | 732,155 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | $ | 190,645,947 | $ | 889,859 | $ | (659,808 | ) | $ | (5,834,619 | ) | $ | 6,496,975 | $ | (7,258,050 | ) | $ | 15,001,923 | $ | — | $ | 199,282,227 | $ | (5,656,829 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
(c) | Purchases include PIK securities. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 8,874,154,281 | ||
Receivables: | ||||
Dividends and interest | 157,536,123 | |||
Investment securities sold | 44,849,448 | |||
Fund shares sold | 39,538,497 | |||
Other assets | 193,503 | |||
|
| |||
Total assets | 9,116,271,852 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 137,013,151 | |||
Fund shares redeemed | 17,045,022 | |||
Manager (See Note 3) | 3,969,633 | |||
Transfer agent (See Note 3) | 1,954,340 | |||
NYLIFE Distributors (See Note 3) | 1,337,652 | |||
Shareholder communication | 293,154 | |||
Professional fees | 52,701 | |||
Custodian | 27,012 | |||
Trustees | 6,791 | |||
Accrued expenses | 53,999 | |||
Dividend payable | 4,625,771 | |||
|
| |||
Total liabilities | 166,379,226 | |||
|
| |||
Net assets | $ | 8,949,892,626 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 16,294,948 | ||
Additional paid-in capital | 9,496,784,290 | |||
|
| |||
9,513,079,238 | ||||
Distributions in excess of net investment income | (22,749,394 | ) | ||
Accumulated net realized gain (loss) on investments | (235,047,183 | ) | ||
Net unrealized appreciation (depreciation) on investments | (305,390,035 | ) | ||
|
| |||
Net assets | $ | 8,949,892,626 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 3,308,460,016 | ||
|
| |||
Shares of beneficial interest outstanding | 602,534,667 | |||
|
| |||
Net asset value per share outstanding | $ | 5.49 | ||
Maximum sales charge (4.50% of offering price) | 0.26 | |||
|
| |||
Maximum offering price per share outstanding | $ | 5.75 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 284,363,130 | ||
|
| |||
Shares of beneficial interest outstanding | 51,347,344 | |||
|
| |||
Net asset value per share outstanding | $ | 5.54 | ||
Maximum sales charge (4.50% of offering price) | 0.26 | |||
|
| |||
Maximum offering price per share outstanding | $ | 5.80 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 130,232,500 | ||
|
| |||
Shares of beneficial interest outstanding | 23,833,800 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.46 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 636,096,484 | ||
|
| |||
Shares of beneficial interest outstanding | 116,362,485 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.47 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 4,544,281,523 | ||
|
| |||
Shares of beneficial interest outstanding | 826,956,101 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.50 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 43,798 | ||
|
| |||
Shares of beneficial interest outstanding | 7,979 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.49 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 9,092,687 | ||
|
| |||
Shares of beneficial interest outstanding | 1,655,352 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.49 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 47,517 | ||
|
| |||
Shares of beneficial interest outstanding | 8,656 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.49 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 37,274,971 | ||
|
| |||
Shares of beneficial interest outstanding | 6,788,427 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.49 | ||
|
|
24 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 317,115,679 | ||
Dividends | 602,485 | |||
|
| |||
Total income | 317,718,164 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 23,937,371 | |||
Distribution/Service—Class A (See Note 3) | 3,944,850 | |||
Distribution/Service—Investor Class (See Note 3) | 335,125 | |||
Distribution/Service—Class B (See Note 3) | 640,648 | |||
Distribution/Service—Class C (See Note 3) | 3,075,553 | |||
Distribution/Service—Class R2 (See Note 3) | 11,587 | |||
Distribution/Service—Class R3 (See Note 3) | 31 | |||
Transfer agent (See Note 3) | 5,834,913 | |||
Shareholder communication | 854,125 | |||
Professional fees | 235,933 | |||
Registration | 137,109 | |||
Trustees | 102,136 | |||
Custodian | 47,081 | |||
Shareholder service (See Note 3) | 4,661 | |||
Miscellaneous | 133,333 | |||
|
| |||
Total expenses | 39,294,456 | |||
|
| |||
Net investment income (loss) | 278,423,708 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | (144,736,322 | ) | ||
Net change in unrealized appreciation (depreciation) | 21,091,569 | |||
|
| |||
Net realized and unrealized gain (loss) on investments | (123,644,753 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting | $ | 154,778,955 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 278,423,708 | $ | 486,183,601 | ||||
Net realized gain (loss) on investments | (144,736,322 | ) | (89,213,544 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 21,091,569 | (414,564,174 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 154,778,955 | (17,594,117 | ) | |||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (105,884,305 | ) | (189,879,193 | ) | ||||
Investor Class | (9,013,832 | ) | (15,560,192 | ) | ||||
Class B | (3,730,882 | ) | (7,176,004 | ) | ||||
Class C | (17,933,896 | ) | (33,655,695 | ) | ||||
Class I | (158,397,251 | ) | (237,966,632 | ) | ||||
Class R1 | (1,382 | ) | (1,824 | ) | ||||
Class R2 | (306,285 | ) | (535,413 | ) | ||||
Class R3 | (484 | ) | — | |||||
Class R6 | (571,969 | ) | (744,396 | ) | ||||
|
| |||||||
(295,840,286 | ) | (485,519,349 | ) | |||||
|
| |||||||
From return of capital: | ||||||||
Class A | — | (29,948,610 | ) | |||||
Investor Class | — | (2,469,439 | ) | |||||
Class B | — | (1,333,605 | ) | |||||
Class C | — | (6,300,642 | ) | |||||
Class I | — | (37,755,580 | ) | |||||
Class R1 | — | (294 | ) | |||||
Class R2 | — | (85,939 | ) | |||||
Class R6 | — | (119,429 | ) | |||||
|
| |||||||
— | (78,013,538 | ) | ||||||
|
| |||||||
Total dividends and distributions to shareholders | (295,840,286 | ) | (563,532,887 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 1,474,277,142 | 3,627,606,451 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 268,230,519 | 503,314,254 | ||||||
Cost of shares redeemed | (1,987,628,105 | ) | (2,929,574,034 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (245,120,444 | ) | 1,201,346,671 | |||||
|
| |||||||
Net increase (decrease) in net assets | (386,181,775 | ) | 620,219,667 | |||||
Net Assets | ||||||||
Beginning of period | 9,336,074,401 | 8,715,854,734 | ||||||
|
| |||||||
End of period | $ | 8,949,892,626 | $ | 9,336,074,401 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (22,749,394 | ) | $ | (5,332,816 | ) | ||
|
|
26 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | $ | 5.84 | $ | 5.92 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.17 | 0.31 | 0.34 | 0.36 | 0.39 | 0.41 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.07 | ) | (0.31 | ) | (0.09 | ) | 0.06 | 0.27 | (0.07 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | — | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.10 | 0.00 | ‡ | 0.25 | 0.42 | 0.66 | 0.34 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.31 | ) | (0.40 | ) | (0.42 | ) | (0.42 | ) | (0.42 | ) | ||||||||||||||
From return of capital | — | (0.05 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.36 | ) | (0.40 | ) | (0.42 | ) | (0.42 | ) | (0.42 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 5.49 | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | $ | 5.84 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 1.91 | %(c) | 0.06 | % | 4.14 | % | 7.15 | % | 11.76 | % | 5.94 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 6.31 | %†† | 5.45 | % | 5.52 | % | 5.89 | % | 6.56 | % | 6.86 | % | ||||||||||||||
Net expenses | 0.96 | %†† | 0.96 | % | 0.99 | % | 1.01 | % | 1.00 | % | 0.99 | % | ||||||||||||||
Portfolio turnover rate | 20 | % | 38 | % | 41 | % | 40 | % | 29 | % | 45 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,308,460 | $ | 3,364,517 | $ | 3,678,466 | $ | 4,055,185 | $ | 4,086,134 | $ | 3,355,007 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 5.62 | $ | 5.99 | $ | 6.14 | $ | 6.13 | $ | 5.88 | $ | 5.97 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.17 | 0.31 | 0.34 | 0.36 | 0.39 | 0.41 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.07 | ) | (0.31 | ) | (0.09 | ) | 0.07 | 0.28 | (0.08 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | — | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.10 | (0.00 | )‡ | 0.25 | 0.43 | 0.67 | 0.33 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.32 | ) | (0.40 | ) | (0.42 | ) | (0.42 | ) | (0.42 | ) | ||||||||||||||
From return of capital | — | (0.05 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.37 | ) | (0.40 | ) | (0.42 | ) | (0.42 | ) | (0.42 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 5.54 | $ | 5.62 | $ | 5.99 | $ | 6.14 | $ | 6.13 | $ | 5.88 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 1.92 | %(c) | (0.07 | %) | 4.13 | % | 7.24 | % | 11.82 | % | 5.69 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 6.22 | %†† | 5.39 | % | 5.50 | % | 5.88 | % | 6.53 | % | 6.80 | % | ||||||||||||||
Net expenses | 1.05 | %†† | 1.02 | % | 1.01 | % | 1.02 | % | 1.03 | % | 1.05 | % | ||||||||||||||
Portfolio turnover rate | 20 | % | 38 | % | 41 | % | 40 | % | 29 | % | 45 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 284,363 | $ | 282,451 | $ | 296,535 | $ | 307,643 | $ | 301,074 | $ | 285,656 |
* | Unaudited. |
†† | 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. | 27 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 5.54 | $ | 5.90 | $ | 6.05 | $ | 6.05 | $ | 5.81 | $ | 5.90 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.14 | 0.27 | 0.29 | 0.31 | 0.34 | 0.36 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.07 | ) | (0.32 | ) | (0.09 | ) | 0.06 | 0.27 | (0.08 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | — | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.07 | (0.05 | ) | 0.20 | 0.37 | 0.61 | 0.28 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.26 | ) | (0.35 | ) | (0.37 | ) | (0.37 | ) | (0.37 | ) | ||||||||||||||
From return of capital | — | (0.05 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.31 | ) | (0.35 | ) | (0.37 | ) | (0.37 | ) | (0.37 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 5.46 | $ | 5.54 | $ | 5.90 | $ | 6.05 | $ | 6.05 | $ | 5.81 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 1.28 | %(c) | (0.60 | %) | 3.35 | % | 6.36 | % | 10.94 | % | 4.95 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 5.47 | %†† | 4.64 | % | 4.75 | % | 5.13 | % | 5.78 | % | 6.05 | % | ||||||||||||||
Net expenses | 1.80 | %†† | 1.77 | % | 1.76 | % | 1.77 | % | 1.78 | % | 1.80 | % | ||||||||||||||
Portfolio turnover rate | 20 | % | 38 | % | 41 | % | 40 | % | 29 | % | 45 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 130,233 | $ | 139,683 | $ | 172,640 | $ | 197,273 | $ | 221,723 | $ | 267,752 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 5.55 | $ | 5.90 | $ | 6.05 | $ | 6.05 | $ | 5.81 | $ | 5.90 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.14 | 0.27 | 0.29 | 0.31 | 0.34 | 0.36 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.07 | ) | (0.31 | ) | (0.09 | ) | 0.06 | 0.27 | (0.08 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | — | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.07 | (0.04 | ) | 0.20 | 0.37 | 0.61 | 0.28 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.26 | ) | (0.35 | ) | (0.37 | ) | (0.37 | ) | (0.37 | ) | ||||||||||||||
From return of capital | — | (0.05 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.31 | ) | (0.35 | ) | (0.37 | ) | (0.37 | ) | (0.37 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 5.47 | $ | 5.55 | $ | 5.90 | $ | 6.05 | $ | 6.05 | $ | 5.81 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 1.46 | %(c) | (0.60 | %) | 3.34 | % | 6.36 | % | 10.93 | % | 4.95 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 5.46 | %†† | 4.64 | % | 4.75 | % | 5.13 | % | 5.78 | % | 6.05 | % | ||||||||||||||
Net expenses | 1.80 | %†† | 1.77 | % | 1.76 | % | 1.77 | % | 1.78 | % | 1.80 | % | ||||||||||||||
Portfolio turnover rate | 20 | % | 38 | % | 41 | % | 40 | % | 29 | % | 45 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 636,096 | $ | 679,392 | $ | 785,873 | $ | 814,589 | $ | 819,807 | $ | 654,224 |
* | Unaudited. |
†† | 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. |
28 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 5.58 | $ | 5.94 | $ | 6.08 | $ | 6.08 | $ | 5.84 | $ | 5.92 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.17 | 0.33 | 0.35 | 0.37 | 0.40 | 0.42 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | (0.31 | ) | (0.08 | ) | 0.07 | 0.28 | (0.06 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | — | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.11 | 0.02 | 0.27 | 0.44 | 0.68 | 0.36 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.33 | ) | (0.41 | ) | (0.44 | ) | (0.44 | ) | (0.44 | ) | ||||||||||||||
From return of capital | — | (0.05 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.19 | ) | (0.38 | ) | (0.41 | ) | (0.44 | ) | (0.44 | ) | (0.44 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 5.50 | $ | 5.58 | $ | 5.94 | $ | 6.08 | $ | 6.08 | $ | 5.84 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 2.05 | %(c) | 0.32 | % | 4.58 | % | 7.40 | % | 12.02 | % | 6.19 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 6.56 | %†† | 5.70 | % | 5.76 | % | 6.13 | % | 6.81 | % | 7.11 | % | ||||||||||||||
Net expenses | 0.71 | %†† | 0.71 | % | 0.74 | % | 0.76 | % | 0.75 | % | 0.74 | % | ||||||||||||||
Portfolio turnover rate | 20 | % | 38 | % | 41 | % | 40 | % | 29 | % | 45 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 4,544,282 | $ | 4,844,891 | $ | 3,762,169 | $ | 3,393,780 | $ | 2,982,526 | $ | 1,775,230 |
* | Unaudited. |
†† | 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. Class I shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
Six months ended April 30, | Year ended October 31, | June 29, 2012** through October 31, | ||||||||||||||||||||
Class R1 | 2016* | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||
Net asset value at beginning of period | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | $ | 5.92 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.17 | 0.32 | 0.34 | 0.37 | 0.14 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.07 | ) | (0.31 | ) | (0.08 | ) | 0.06 | 0.16 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | — | 0.00 | ‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.10 | 0.01 | 0.26 | 0.43 | 0.30 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.32 | ) | (0.41 | ) | (0.43 | ) | (0.14 | ) | ||||||||||||
From return of capital | — | (0.05 | ) | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.18 | ) | (0.37 | ) | (0.41 | ) | (0.43 | ) | (0.14 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 5.49 | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | ||||||||||||
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Total investment return (b) | 1.99 | %(c) | 0.21 | % | 4.31 | % | 7.32 | % | 5.17 | %(c) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||
Net investment income (loss) | 6.47 | %†† | 5.60 | % | 5.66 | % | 6.03 | % | 6.49 | %†† | ||||||||||||
Net expenses | 0.81 | %†† | 0.81 | % | 0.84 | % | 0.86 | % | 0.87 | %†† | ||||||||||||
Portfolio turnover rate | 20 | % | 38 | % | 41 | % | 40 | % | 29 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 44 | $ | 39 | $ | 29 | $ | 28 | $ | 26 |
* | Unaudited. |
** | Inception date. |
†† | 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. 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. | 29 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class R2 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | $ | 5.84 | $ | 5.93 | ||||||||||||||
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| |||||||||||||||
Net investment income (loss) (a) | 0.16 | 0.31 | 0.33 | 0.35 | 0.38 | 0.40 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | (0.31 | ) | (0.09 | ) | 0.07 | 0.28 | (0.07 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | — | — | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||||||
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Total from investment operations | 0.10 | (0.00 | )‡ | 0.24 | 0.42 | 0.66 | 0.33 | |||||||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.31 | ) | (0.39 | ) | (0.42 | ) | (0.42 | ) | (0.42 | ) | ||||||||||||||
From return of capital | — | (0.05 | ) | — | — | — | — | |||||||||||||||||||
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Total dividends and distributions | (0.18 | ) | (0.36 | ) | (0.39 | ) | (0.42 | ) | (0.42 | ) | (0.42 | ) | ||||||||||||||
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Net asset value at end of period | $ | 5.49 | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | $ | 5.84 | ||||||||||||||
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Total investment return (b) | 1.85 | %(c) | (0.04 | %) | 4.04 | % | 7.06 | % | 11.66 | % | 5.67 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 6.21 | %†† | 5.35 | % | 5.43 | % | 5.79 | % | 6.46 | % | 6.76 | % | ||||||||||||||
Net expenses | 1.06 | %†† | 1.06 | % | 1.09 | % | 1.11 | % | 1.10 | % | 1.09 | % | ||||||||||||||
Portfolio turnover rate | 20 | % | 38 | % | 41 | % | 40 | % | 29 | % | 45 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 9,093 | $ | 10,084 | $ | 11,049 | $ | 15,008 | $ | 14,280 | $ | 9,927 |
* | Unaudited. |
†† | 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. Class R2 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
February 29, through | ||||||||||||
Class R3 | 2016* | |||||||||||
Net asset value at beginning of period | $ | 5.17 | ||||||||||
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| |||||||||||
Net investment income (loss) (a) | 0.06 | |||||||||||
Net realized and unrealized gain (loss) on investments | 0.32 | |||||||||||
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| |||||||||||
Total from investment operations | 0.38 | |||||||||||
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| |||||||||||
Less dividends: | ||||||||||||
From net investment income | (0.06 | ) | ||||||||||
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| |||||||||||
Net asset value at end of period | $ | 5.49 | ||||||||||
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| |||||||||||
Total investment return (b)(c) | 7.30 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 6.12 | %†† | ||||||||||
Net expenses | 1.31 | %†† | ||||||||||
Portfolio turnover rate | 20 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 48 |
* | Unaudited. |
** | Inception date. |
†† | 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. |
30 | MainStay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | June 17, 2013** through October 31, | ||||||||||||||||
Class R6 | 2016* | 2015 | 2014 | 2013 | ||||||||||||||
Net asset value at beginning of period | $ | 5.58 | $ | 5.94 | $ | 6.09 | $ | 6.11 | ||||||||||
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| |||||||||||
Net investment income (loss) (a) | 0.18 | 0.34 | 0.36 | 0.14 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.08 | ) | (0.31 | ) | (0.08 | ) | 0.03 | |||||||||||
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| |||||||||||
Total from investment operations | 0.10 | 0.03 | 0.28 | 0.17 | ||||||||||||||
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| |||||||||||
Less dividends and distributions: | ||||||||||||||||||
From net investment income | (0.19 | ) | (0.34 | ) | (0.43 | ) | (0.19 | ) | ||||||||||
From return of capital | — | (0.05 | ) | — | — | |||||||||||||
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|
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| |||||||||||
Total dividends and distributions | (0.19 | ) | (0.39 | ) | (0.43 | ) | (0.19 | ) | ||||||||||
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| |||||||||||
Net asset value at end of period | $ | 5.49 | $ | 5.58 | $ | 5.94 | $ | 6.09 | ||||||||||
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| |||||||||||
Total investment return (b) | 1.96 | %(c) | 0.50 | % | 4.60 | % | 2.79 | %(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Net investment income (loss) | 6.70 | %†† | 5.84 | % | 5.88 | % | 6.24 | %†† | ||||||||||
Net expenses | 0.58 | %†† | 0.58 | % | 0.58 | % | 0.59 | %†† | ||||||||||
Portfolio turnover rate | 20 | % | 38 | % | 41 | % | 40 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 37,275 | $ | 15,017 | $ | 9,093 | $ | 26 |
* | Unaudited. |
** | Inception date. |
†† | 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 R6 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. | 31 |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay High Yield Corporate Bond Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers nine classes of shares. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Class R2 shares were first offered to the public on December 14, 2007, but did not commence operations until May 1, 2008. Investor Class shares commenced operations on February 28, 2008. Class R1 shares commenced operations on June 29, 2012. Class R6 shares commenced operations on June 17, 2013. Class R3 shares commenced operations on February 29, 2016. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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, Class R1, Class R2, Class R3 and Class R6 shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A shares. The nine 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 Class A, Investor Class, Class R2 and Class R3 shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I, Class R1 and Class R6 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 Fund’s investment objective is to seek maximum current income through investment in a diversified portfolio of high-yield debt securities. Capital appreciation is a secondary objective.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification
Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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
32 | MainStay High Yield Corporate Bond Fund |
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 based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Equity and credit default swap curves | • Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive
upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Equity securities and shares of Exchange-Traded Funds (“ETFs”) are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Investments in mutual funds, including money market funds, are valued at their respective 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 (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. Those values reflect broker/dealer supplied prices and electronic data processing techniques, if the evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of
33 |
Notes to Financial Statements (Unaudited) (continued)
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. These securities are 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 utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, the Fund held Level 3 securities with a value of $32,154,466 that were valued by utilizing significant unobservable inputs.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
The valuation techniques and significant amounts of unobservable inputs used in the fair valuation measurement of the Fund’s Level 3 securities are outlined in the table below. A significant increase or decrease in any of those inputs in isolation would result in a significantly higher or lower fair value measurement.
Asset | Fair Value at 4/30/16* | Valuation Technique | Unobservable Inputs | Range/ (Weighted Average) | ||||||||
Convertible Bonds (2) | $ | 50,438,564 | Market Approach | EBITDA Multiple | 5x | |||||||
Discount Rate | 17 | % | ||||||||||
3,211,628 | Income Approach | Discount Rate | 9 | % | ||||||||
Liquidity Discount | 20 | % | ||||||||||
Corporate Bonds (2) | 56,449,352 | Income Approach | Estimated Yield | 14 | % | |||||||
64,863 | Market Approach | Estimated Remaining Claims/Value | $ | 0.001 | ||||||||
Common Stocks (4) | 3,118,207 | Income Approach | Liquidity Discount | 20 | % | |||||||
Discount Rate | 12 | % | ||||||||||
13,426,895 | Market Approach | EBITDA Multiple | 4.5x–5.5x | |||||||||
Discount Rate | 30 | % | ||||||||||
Liquidity Discount | 20 | % | ||||||||||
|
| |||||||||||
$ | 126,709,509 | |||||||||||
|
|
* | The table above does not include certain Level 3 investments that were valued by brokers and pricing services without adjustment. As of April 30, 2016, the value of these investments was $72,572,718. The inputs for these investments were not readily available or cannot be reasonably estimated. |
A Fund security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security 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 the 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 measuring 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 measures 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 by methods deemed reasonable in good faith in such a manner as the Board deems appropriate to reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was measured as of April 30, 2016 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2016, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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 from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least 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; net of
34 | MainStay High Yield Corporate Bond Fund |
any foreign tax withheld at the source, 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. The straight-line method approximates the effective interest method for short-term investments. 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.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(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/or 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 Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) 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 may invest 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. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. 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. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of April 30, 2016, the Fund did not hold any unfunded commitments.
(I) Foreign Currency Transactions. The Fund’s books and records are maintained 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 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
35 |
Notes to Financial Statements (Unaudited) (continued)
liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(K) Restricted Securities. Restricted securities, as disclosed in Note 5, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
(L) Concentration of Risk. The Fund’s principal investments include high-yield debt securities (sometimes called ‘‘junk bonds’’), which are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility.
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 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. 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 may invest in loans which 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 investments pay investors a higher interest rate than investment grade debt securities because of the increased risk of loss. Although
certain 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 value of these investments could decline significantly. As a result, the Fund’s NAV could go down and you could lose money.
In addition, loan assignments generally are subject to the extended settlement periods that may be longer than seven days. As a result, the Fund may be adversely affected by selling other investments at an unfavorable time and/or under unfavorable conditions or engaging in borrowing transactions, such as borrowing against its credit facility, to raise cash to meet redemption obligations or pursue other investment opportunities.
(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.
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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer 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 the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, 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; 0.55% from $500 million up to $5 billion; 0.525% from $5 billion up to $7 billion; and 0.50% in excess of $7 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and
36 | MainStay High Yield Corporate Bond Fund |
0.01% in excess of $100 million. During the six-month period ended April 30, 2016, the effective management fee rate was 0.55% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $23,937,371.
State Street 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 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, Service and Shareholder 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 Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class 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, Class R1 and Class R6 shares are not subject to a distribution and/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.
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, its affiliates, or independent third party service providers are 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. This is in addition to any fees paid under a distribution plan, where applicable.
During the six-month period ended April 30, 2016, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 20 | ||
Class R2 | 4,635 | |||
Class R3 | 6 |
(C) Sales Charges. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $285,630 and $42,275, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $14,636, $41, $94,401 and $27,832, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 1,948,123 | ||
Investor Class | 283,032 | |||
Class B | 135,253 | |||
Class C | 649,033 | |||
Class I | 2,813,715 | |||
Class R1 | 25 | |||
Class R2 | 5,723 | |||
Class R3 | 9 |
(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. As of April 30, 2016, New York Life and its affiliates beneficially held shares of the Fund with values and percentages of net assets as follows:
Class I | $ | 1,267,905 | 0.0 | %‡ | ||||
Class R1 | 30,081 | 68.7 | ||||||
Class R3 | 26,825 | 56.5 |
‡ | Less than one-tenth of a percent. |
Note 4–Federal Income Tax
As of October 31, 2015, for federal income tax purposes, capital loss carryforwards of $88,176,119 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 share-
37 |
Notes to Financial Statements (Unaudited) (continued)
holders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
Unlimited | $ | 49,512 | $ | 38,664 |
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 485,519,349 | ||
Return of Capital | 78,013,538 | |||
Total | $ | 563,532,887 |
Note 5–Restricted Securities
As of April 30, 2016, the Fund held the following restricted securities:
Security | Date(s) of Acquisition | Principal Amount/ Shares | Cost | 4/30/16 Value | Percent of Net Assets | |||||||||||||||
Affinity Gaming LLC | 5/4/12 | 275,000 | $ | 3,093,750 | $ | 3,712,500 | 0.0 | %‡ | ||||||||||||
Chesapeake Energy Corp. (Escrow Claim Shares) | 11/26/14 | $ | 15,000,000 | — | 4,050,000 | 0.1 | ||||||||||||||
Exide Technologies, Inc. | 4/30/15 | 1,416,537 | 53,286,096 | 3,966,304 | 0.1 | |||||||||||||||
Exide Technologies, Inc. (Escrow Claim Shares) | 8/28/15 | $ | 64,863,000 | — | 64,863 | 0.0 | ‡ | |||||||||||||
ION Media Networks, Inc. | 3/12/10-12/20/10 | 2,267 | 3,435 | 1,213,706 | 0.0 | ‡ | ||||||||||||||
Majestic Star Casino LLC | 12/1/11 | 446,020 | 892,040 | 55,752 | 0.0 | ‡ | ||||||||||||||
Neenah Enterprises, Inc. | 7/29/10 | 717,799 | 6,079,758 | 9,460,591 | 0.1 | |||||||||||||||
Neenah Foundry Co. | 5/10/13 | $ | 14,801,354 | 14,635,644 | 14,653,340 | 0.2 | ||||||||||||||
Rex Energy Corp. | 4/7/16 | 1,744,875 | 52,827,569 | 1,762,324 | 0.0 | ‡ | ||||||||||||||
Sterling Entertainment Enterprises LLC | 12/21/12 | $ | 35,000,000 | 35,000,000 | 36,312,500 | 0.4 | ||||||||||||||
Upstate New York Power Producers, Inc. | 5/11/99-2/28/11 | 51,473 | 875,042 | 1,904,501 | 0.0 | ‡ | ||||||||||||||
Upstate New York Power Producers, Inc. | 12/15/13-6/16/15 | $ | 3,211,628 | 3,211,945 | 3,211,628 | 0.0 | ‡ | |||||||||||||
Total | $ | 169,905,279 | $ | 80,368,009 | 0.9 | % |
‡ | Less than one-tenth of a percent. |
38 | MainStay High Yield Corporate Bond Fund |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $1,637,620 and $1,835,068, respectively.
The Fund may purchase securities from or sell to other portfolios managed by the Subadvisor. These interportfolio transactions are primarily used for cash management purposes and are made pursuant to Rule 17a-7 of the 1940 Act. During the period ended April 30, 2016, such purchases were $43,620.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 64,733,782 | $ | 346,395,258 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 17,106,289 | 91,039,361 | ||||||
Shares redeemed | (82,959,066 | ) | (440,925,070 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,118,995 | ) | (3,490,451 | ) | ||||
Shares converted into Class A (See Note 1) | 1,325,280 | 7,051,215 | ||||||
Shares converted from Class A (See Note 1) | (1,382,567 | ) | (7,410,557 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,176,282 | ) | $ | (3,849,793 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 145,603,396 | $ | 843,020,988 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 32,920,868 | 188,297,147 | ||||||
Shares redeemed | (196,228,275 | ) | (1,126,601,715 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (17,704,011 | ) | (95,283,580 | ) | ||||
Shares converted into Class A (See Note 1) | 3,625,771 | 20,853,918 | ||||||
Shares converted from Class A (See Note 1) | (2,424,134 | ) | (13,745,855 | ) | ||||
|
| |||||||
Net increase (decrease) | (16,502,374 | ) | $ | (88,175,517 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 2,892,711 | $ | 15,492,381 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,556,982 | 8,357,845 | ||||||
Shares redeemed | (4,277,676 | ) | (22,919,043 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 172,017 | 931,183 | ||||||
Shares converted into Investor Class (See Note 1) | 1,932,370 | 10,434,953 | ||||||
Shares converted from Investor Class (See Note 1) | (987,222 | ) | (5,323,976 | ) | ||||
|
| |||||||
Net increase (decrease) | 1,117,165 | $ | 6,042,160 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 4,131,903 | $ | 24,025,968 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,890,081 | 16,677,878 | ||||||
Shares redeemed | (7,353,027 | ) | (42,701,530 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (331,043 | ) | (1,997,684 | ) | ||||
Shares converted into Investor Class (See Note 1) | 3,683,129 | 21,184,403 | ||||||
Shares converted from Investor Class (See Note 1) | (2,652,860 | ) | (15,413,711 | ) | ||||
|
| |||||||
Net increase (decrease) | 699,226 | $ | 3,773,008 | |||||
|
| |||||||
39 |
Notes to Financial Statements (Unaudited) (continued)
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 1,339,279 | $ | 7,102,370 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 633,804 | 3,356,502 | ||||||
Shares redeemed | (2,437,654 | ) | (12,920,073 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (464,571 | ) | (2,461,201 | ) | ||||
Shares converted from Class B (See Note 1) | (892,712 | ) | (4,751,635 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,357,283 | ) | $ | (7,212,836 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 2,303,100 | $ | 13,186,027 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,331,822 | 7,582,582 | ||||||
Shares redeemed | (5,447,055 | ) | (31,118,556 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,812,133 | ) | (10,349,947 | ) | ||||
Shares converted from Class B (See Note 1) | (2,251,668 | ) | (12,878,755 | ) | ||||
|
| |||||||
Net increase (decrease) | (4,063,801 | ) | $ | (23,228,702 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 9,649,774 | $ | 51,107,590 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,768,766 | 14,671,025 | ||||||
Shares redeemed | (18,534,349 | ) | (98,121,250 | ) | ||||
|
| |||||||
Net increase (decrease) | (6,115,809 | ) | $ | (32,342,635 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 15,167,686 | $ | 86,868,866 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,650,404 | 32,165,255 | ||||||
Shares redeemed | (31,470,366 | ) | (179,795,494 | ) | ||||
|
| |||||||
Net increase (decrease) | (10,652,276 | ) | $ | (60,761,373 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 194,591,566 | $ | 1,029,353,056 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 28,174,971 | 150,017,167 | ||||||
Shares redeemed | (264,424,347 | ) | (1,408,748,975 | ) | ||||
|
| |||||||
Net increase (decrease) | (41,657,810 | ) | $ | (229,378,752 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 457,597,569 | $ | 2,647,544,637 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 45,040,797 | 257,291,267 | ||||||
Shares redeemed | (267,882,426 | ) | (1,541,389,780 | ) | ||||
|
| |||||||
Net increase (decrease) | 234,755,940 | $ | 1,363,446,124 | |||||
|
| |||||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 793 | $ | 4,235 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 260 | 1,382 | ||||||
Shares redeemed | (123 | ) | (666 | ) | ||||
|
| |||||||
Net increase (decrease) | 930 | $ | 4,951 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 2,132 | $ | 12,087 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 371 | 2,118 | ||||||
Shares redeemed | (417 | ) | (2,426 | ) | ||||
|
| |||||||
Net increase (decrease) | 2,086 | $ | 11,779 | |||||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 316,752 | $ | 1,680,863 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 40,381 | 214,784 | ||||||
Shares redeemed | (510,796 | ) | (2,684,097 | ) | ||||
|
| |||||||
Net increase (decrease) | (153,663 | ) | $ | (788,450 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 502,307 | $ | 2,865,187 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 75,932 | 434,182 | ||||||
Shares redeemed | (631,881 | ) | (3,642,029 | ) | ||||
|
| |||||||
Net increase (decrease) | (53,642 | ) | $ | (342,660 | ) | |||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Period ended April 30, 2016 (a): | ||||||||
Shares sold | 8,567 | $ | 45,000 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 89 | 484 | ||||||
|
| |||||||
Net increase (decrease) | 8,656 | $ | 45,484 | |||||
|
| |||||||
Class R6 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 4,237,449 | $ | 23,096,389 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 107,483 | 571,969 | ||||||
Shares redeemed | (249,289 | ) | (1,308,931 | ) | ||||
|
| |||||||
Net increase (decrease) | 4,095,643 | $ | 22,359,427 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 1,759,140 | $ | 10,082,691 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 151,151 | 863,825 | ||||||
Shares redeemed | (749,408 | ) | (4,322,504 | ) | ||||
|
| |||||||
Net increase (decrease) | 1,160,883 | $ | 6,624,012 | |||||
|
| |||||||
(a) Inception date was February 29, 2016. |
|
40 | MainStay High Yield Corporate Bond Fund |
Note 10–Litigation
On December 23, 2014, Cynthia Ann Redus-Tarchis and others filed a complaint against New York Life Investments in the United States District Court for the District of New Jersey. The complaint was brought derivatively on behalf of the MainStay Marketfield Fund, the MainStay Large Cap Growth Fund, and the MainStay High Yield Corporate Bond Fund and alleges that New York Life Investments violated Section 36(b) of the 1940 Act by charging excessive investment management fees. The plaintiffs seek monetary damages and other relief from New York Life Investments. New York Life Investments believes the case has no merit, and intends to vigorously defend the matter.
On April 20, 2015, a second amended complaint was filed which, among other things, added MainStay High Yield Opportunities Fund as an additional Fund on whose behalf the complaint was brought.
New York Life Investments filed a motion to dismiss the amended complaint. This motion was denied on October 28, 2015. New York Life Investments filed an answer to the amended complaint on November 30, 2015. Discovery in the case has commenced.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
41 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay High Yield Corporate Bond Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and MacKay Shields in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, and responses from New York Life Investments and MacKay Shields to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Funds’ distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and MacKay Shields; (ii) the investment performance of the Fund, New York Life Investments and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay Shields from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and MacKay Shields. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and MacKay Shields
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
42 | MainStay High Yield Corporate Bond Fund |
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that MacKay Shields provides to the Fund. The Board evaluated MacKay Shields’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined MacKay Shields’ track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay Shields, and MacKay Shields’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay Shields. The Board also reviewed MacKay Shields’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions. The Board noted favorably that the Fund’s investment performance compared favorably to peers for all periods.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments and MacKay Shields under the Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and MacKay Shields must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board,
43 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for
example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to MacKay Shields are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other
44 | MainStay High Yield Corporate Bond Fund |
mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
45 |
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 or proxy voting record 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).
46 | MainStay High Yield Corporate Bond Fund |
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1697743 MS164-16 | MSHY10-06/16 (NYLIM) NL008 |
MainStay Money Market Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support at any time.
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, 30 Hudson Street, Jersey City, NJ 07302 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 B shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses. 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 Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||
Class A Shares3 | No Sales Charge | 0.01 | % | 0.01 | % | 0.01 | % | 0.97 | % | 0.64 | % | |||||||||||
Investor Class Shares3,4 | No Sales Charge | 0.00 | 0.01 | 0.01 | 0.96 | 0.87 | ||||||||||||||||
Class B Shares3 | No Sales Charge | 0.00 | 0.01 | 0.01 | 0.96 | 0.87 | ||||||||||||||||
Class C Shares3 | No Sales Charge | 0.00 | 0.01 | 0.01 | 0.96 | 0.87 | ||||||||||||||||
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, changes 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 may reflect certain fee waivers and/or expense limitations, without which total returns would have been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), 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 April 30, 2016, MainStay Money Market Fund had an effective 7-day yield of 0.01% for Investor Class, Class A, B and C shares. The 7-day current yield was 0.01% for Class A, Investor Class, Class B and C shares. These yields reflect certain expense limitations. Had these expense limitations not been in effect, the effective 7-day yield would have been –0.11%, –0.28%, –0.28%, and –0.28%, for Class A, Investor Class, Class B and C shares, respectively, and the 7-day current yield would have been –0.11%, –0.28%, –0.28% and –0.28%, for Class A, Investor Class, Class B and C shares, respectively. The current yield reflects the Fund’s earnings better than the Fund’s total return. |
4. | 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 would likely have been different. |
The footnote on the next page is an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Average Lipper Money Market Fund5 | 0.02 | % | 0.03 | % | 0.02 | % | 1.00 | % |
5. | The Average Lipper Money Market Fund is an equally weighted performance average adjusted for capital gains distributions and income dividends of all of the 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. Lipper averages are not class specific. Lipper returns are unaudited. 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 Money Market Fund |
Cost in Dollars of a $1,000 Investment in MainStay Money Market Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,000.10 | $ | 1.84 | $ | 1,023.00 | $ | 1.86 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,000.00 | $ | 1.84 | $ | 1,023.00 | $ | 1.86 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,000.00 | $ | 1.84 | $ | 1,023.00 | $ | 1.86 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,000.00 | $ | 1.84 | $ | 1,023.00 | $ | 1.86 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.37% for Class A, 0.37% for Investor Class, and 0.37% for Class B and Class C) multiplied by the average account value over the period, divided by 366 and multiplied by 182 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7 |
Portfolio Composition as of April 30, 2016 (Unaudited)
See Portfolio of Investments beginning on page 10 for specific holdings within these categories.
8 | MainStay Money Market Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Thomas J. Girard and David E. Clement, CFA, of NYL Investors LLC, the Fund’s Subadvisor.
How did MainStay Money Market Fund perform relative to its peers during the six months ended April 30, 2016?
As of April 30, 2016, MainStay Money Market Fund provided a 7-day current yield of 0.01% for Class A, Investor Class, Class B and Class C shares. As of the same date, the Fund provided a 7-day effective yield of 0.01% for all share classes. For the six months ended April 30, 2016, Class A shares returned 0.01%, while Investor Class, Class B and Class C shares all returned 0.00%. All share classes underperformed the 0.02% return of the Average Lipper1 Money Market Fund for the six months ended April 30, 2016. Performance figures for the Fund reflect certain fee waivers and/or expense limitations without which total returns would have been lower.
What factors affected the Fund’s performance during the reporting period?
Money market regulatory reform continued to affect the landscape of the money markets, primarily because some money market funds began to convert from prime funds to government funds; the number of funds that have yet to convert is unknown; and the ultimate impact of these conversions on the prices of money market instruments remained uncertain, which continued to weigh on the market during the reporting period.
What was the Fund’s duration2 strategy during the reporting period?
The Fund maintained a relatively short duration target in anticipation of a Federal Reserve rate hike. During the reporting period, the Fund had a target duration of 40 to 45 days. At the end of the reporting period, the Fund’s duration was 42 days, compared to a duration of 46 days on October 31, 2015, the end of the previous reporting period.
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
The primary factor influencing the market during the reporting period was the Federal Reserve’s decision to raise the federal funds target range by 25 basis points in mid-December 2015. (A basis point is one-hundredth of a percentage point.) In
anticipation of this decision, the Fund maintained a duration target of 40 to 45 days and increased its allocation to floating-rate securities.
During the reporting period, which market segments were the strongest contributors to the Fund’s performance and which market segments were particularly weak?
The floating-rate securities sector remained a strong contributor to the Fund’s performance during the reporting period. (Contributions take weightings and total returns into account.) In addition, short U.S. Treasury coupon securities with one-year maturities helped increase the Fund’s yield. Two of the weakest sectors during the reporting period were U.S. Treasury bills and repurchase agreements backed by U.S. Treasury collateral. U.S. Treasury bills continued to offer lower yields, especially after several funds began to convert from prime funds to government funds, thus increasing the demand for U.S. Treasury bills. Repurchase agreements offered lower yields than commercial paper but were valuable tools for liquidity and duration-management.
Did the Fund make any significant purchases or sales during the reporting period?
Some significant purchases during the reporting period included several floating-rate securities, such as State Street Bank and Trust floating-rate certificate of deposit due 5/20/16 and a Toronto Dominion Bank floating-rate certificate of deposit due 4/6/17. In addition, the Fund made some significant purchases in short U.S. Treasury coupon securities, including a U.S. Treasury 0.875% security due 4/30/17. 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, the Fund increased its weightings in certificates of deposits and repurchase agreements. Over the same period, the Fund decreased its weighting in commercial paper.
1. | See footnote on page 6 for more information on Lipper, Inc. |
2. | 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 or years and is considered to be a more accurate sensitivity gauge than average maturity. |
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 will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of Investments April 30, 2016 (Unaudited)
Principal Amount | Amortized Cost | |||||||
Short-Term Investments 99.0%† | ||||||||
Certificates of Deposit 18.6% | ||||||||
Bank of America N.A. | ||||||||
0.626%, due 5/18/16 (a) | $ | 4,000,000 | $ | 4,000,000 | ||||
0.78%, due 10/13/16 | 5,000,000 | 5,000,000 | ||||||
Bank of Montreal | 10,000,000 | 10,000,000 | ||||||
Bank of Nova Scotia | 10,000,000 | 10,000,000 | ||||||
Canadian Imperial Bank of Commerce | 10,000,000 | 10,005,917 | ||||||
Royal Bank of Canada | 8,000,000 | 8,000,000 | ||||||
State Street Bank & Trust Co. | 9,500,000 | 9,500,000 | ||||||
Toronto-Dominion Bank (The) | ||||||||
0.40%, due 5/19/16 (a) | 5,000,000 | 5,000,000 | ||||||
1.00%, due 4/6/17 (a) | 5,000,000 | 5,000,000 | ||||||
Wells Fargo Bank NA | 10,000,000 | 10,000,000 | ||||||
|
| |||||||
76,505,917 | ||||||||
|
| |||||||
Financial Company Commercial Paper 17.2% |
| |||||||
Caterpillar Financial Services Corp. |
| |||||||
0.39%, due 5/10/16 (b) | 6,000,000 | 5,999,355 | ||||||
0.58%, due 7/18/16 (b) | 4,200,000 | 4,195,450 | ||||||
CPPIB Capital, Inc. | 5,905,000 | 5,904,377 | ||||||
JPMorgan Securities LLC | ||||||||
0.74%, due 7/15/16 (b) | 4,300,000 | 4,300,000 | ||||||
0.91%, due 1/17/17 (b) | 5,000,000 | 5,000,000 | ||||||
Massachusetts Mutual Life Insurance Co. | ||||||||
0.36%, due 5/17/16 (b) | 6,300,000 | 6,298,880 | ||||||
0.363%, due 5/18/16 (b) | 3,500,000 | 3,499,339 | ||||||
National Rural Utilities Cooperative Finance Corp. | 2,000,000 | 1,999,897 | ||||||
Nationwide Life Insurance Co. | ||||||||
0.374%, due 5/9/16 (b) | 2,960,000 | 2,959,691 | ||||||
0.393%, due 5/18/16 (b) | 3,600,000 | 3,599,150 | ||||||
0.449%, due 6/27/16 (b) | 3,000,000 | 2,997,387 | ||||||
Novartis Finance Corp. | 4,000,000 | 3,999,600 | ||||||
Ontario Teachers’ Finance Trust | 5,000,000 | 4,977,379 | ||||||
Private Export Funding Corp. | 4,000,000 | 3,996,938 |
Principal Amount | Amortized Cost | |||||||
Financial Company Commercial Paper (continued) |
| |||||||
Total Capital Canada Ltd. | ||||||||
0.335%, due 5/2/16 (b)(c) | $ | 4,000,000 | $ | 3,999,939 | ||||
0.409%, due 6/20/16 (b)(c) | 7,000,000 | 6,994,458 | ||||||
|
| |||||||
70,721,840 | ||||||||
|
| |||||||
Other Commercial Paper 34.3% | ||||||||
3M Co. | 7,500,000 | 7,499,929 | ||||||
Air Products & Chemicals, Inc. | ||||||||
0.368%, due 5/4/16 (b) | 7,500,000 | 7,499,763 | ||||||
0.393%, due 5/18/16 (b)(c) | 6,000,000 | 5,998,753 | ||||||
Archer-Daniels-Midland Co. | 4,200,000 | 4,199,860 | ||||||
Brown-Forman Corp. | 5,000,000 | 4,999,133 | ||||||
Chevron Corp. | 5,500,000 | 5,499,096 | ||||||
Dover Corp. | 5,600,000 | 5,593,982 | ||||||
Emerson Electric Co. | ||||||||
0.40%, due 5/20/16 (b) | 4,500,000 | 4,499,074 | ||||||
0.424%, due 5/31/16 (b)(c) | 4,000,000 | 3,998,000 | ||||||
0.438%, due 6/7/16 (b) | 4,300,000 | 4,298,276 | ||||||
Exxon Mobil Corp. | 4,375,000 | 4,372,229 | ||||||
Henkel of America, Inc. | ||||||||
0.374%, due 5/9/16 (b)(c) | 5,500,000 | 5,499,389 | ||||||
0.473%, due 7/12/16 (b) | 3,300,000 | 3,296,040 | ||||||
Hershey Co. (The) | ||||||||
0.32%, due 5/4/16 (b) | 3,300,000 | 3,299,890 | ||||||
0.35%, due 5/10/16 (b) | 5,700,000 | 5,699,430 | ||||||
0.355%, due 5/11/16 (b) | 1,000,000 | 999,889 | ||||||
Honeywell International, Inc. | 3,000,000 | 2,999,248 | ||||||
Intel Corp. | 5,500,000 | 5,498,689 | ||||||
International Business Machines Corp. | 4,375,000 | 4,372,273 | ||||||
Parker-Hannifin Corp. | 6,000,000 | 5,999,833 | ||||||
PepsiCo, Inc. | ||||||||
0.31%, due 5/2/16 (b)(c) | 2,000,000 | 1,999,981 | ||||||
0.477%, due 6/21/16 (b) | 5,250,000 | 5,247,025 | ||||||
Praxair, Inc. | 5,000,000 | 4,999,903 | ||||||
Province of Ontario | 4,000,000 | 3,999,898 | ||||||
Southern California Edison Co. | ||||||||
0.435%, due 5/2/16 (b) | 4,750,000 | 4,749,927 | ||||||
0.437%, due 5/4/16 (b) | 6,000,000 | 5,999,765 |
† | Percentages indicated are based on Fund net assets. |
10 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Amortized Cost | |||||||
Short-Term Investments (continued) | ||||||||
Other Commercial Paper (continued) |
| |||||||
Unilever Capital Corp. | $ | 1,000,000 | $ | 999,800 | ||||
UnitedHealth Group, Inc. | 3,800,000 | 3,798,303 | ||||||
W.W. Grainger, Inc. | 5,250,000 | 5,249,265 | ||||||
Walt Disney Co. (The) | 4,000,000 | 3,999,071 | ||||||
WGL Holdings, Inc. | 3,800,000 | 3,798,987 | ||||||
|
| |||||||
140,964,701 | ||||||||
|
| |||||||
Treasury Debt 11.6% | ||||||||
United States Treasury Notes | ||||||||
0.375%, due 5/31/16 | 4,110,000 | 4,110,282 | ||||||
0.375%, due 10/31/16 | 3,900,000 | 3,900,000 | ||||||
0.50%, due 6/30/16 | 4,090,000 | 4,091,174 | ||||||
0.50%, due 7/31/16 | 4,105,000 | 4,106,763 | ||||||
0.50%, due 8/31/16 | 4,100,000 | 4,101,317 | ||||||
0.50%, due 9/30/16 | 3,900,000 | 3,901,294 | ||||||
0.50%, due 11/30/16 | 3,900,000 | 3,899,670 | ||||||
0.50%, due 3/31/17 | 4,000,000 | 3,991,362 | ||||||
0.53%, due 1/31/17 | 4,000,000 | 3,992,194 | ||||||
0.60%, due 4/30/17 | 4,000,000 | 4,009,942 | ||||||
0.625%, due 12/31/16 | 3,800,000 | 3,797,242 | ||||||
0.875%, due 2/28/17 | 4,000,000 | 4,009,019 | ||||||
|
| |||||||
47,910,259 | ||||||||
|
| |||||||
Treasury Repurchase Agreements 17.3% |
| |||||||
Bank of America N.A. | 20,000,000 | 20,000,000 | ||||||
Bank of Montreal | 20,000,000 | 20,000,000 |
Principal Amount | Amortized Cost | |||||||
Treasury Repurchase Agreements (continued) |
| |||||||
TD Securities (U.S.A.) LLC | $ | 31,187,000 | $ | 31,187,000 | ||||
|
| |||||||
71,187,000 | ||||||||
|
| |||||||
Total Short-Term Investments (Amortized Cost $407,289,717) (d) | 99.0 | % | 407,289,717 | |||||
Other Assets, Less Liabilities | 1.0 | 3,907,597 | ||||||
Net Assets | 100.0 | % | $ | 411,197,314 |
(a) | Floating rate—Rate shown was the rate in effect as of April 30, 2016. |
(b) | Interest rate shown represents yield to maturity. |
(c) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Short-Term Investments | ||||||||||||||||
Certificates of Deposit | $ | — | $ | 76,505,917 | $ | — | $ | 76,505,917 | ||||||||
Financial Company Commercial Paper | — | 70,721,840 | — | 70,721,840 | ||||||||||||
Other Commercial Paper | — | 140,964,701 | — | 140,964,701 | ||||||||||||
Treasury Debt | — | 47,910,259 | — | 47,910,259 | ||||||||||||
Treasury Repurchase Agreements | — | 71,187,000 | — | 71,187,000 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | — | $ | 407,289,717 | $ | — | $ | 407,289,717 | ||||||||
|
|
|
|
|
|
|
|
(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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
12 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The table below sets forth the diversification of MainStay Money Market Fund investments by industry.
Industry Diversification
Amortized Cost | Percent † | |||||||
Agriculture | $ | 4,199,860 | 1.0 | % | ||||
Banks | 116,505,917 | 28.3 | ||||||
Beverages | 12,246,139 | 3.0 | ||||||
Chemicals | 18,498,419 | 4.5 | ||||||
Computers | 4,372,273 | 1.1 | ||||||
Distribution & Wholesale | 5,249,265 | 1.3 | ||||||
Diversified Financial Services | 51,461,214 | 12.5 | ||||||
Electric | 10,749,692 | 2.6 | ||||||
Electrical Components & Equipment | 12,795,350 | 3.1 | ||||||
Electronics | 2,999,248 | 0.7 | ||||||
Finance—Investment Banker/Broker | 5,904,377 | 1.4 | ||||||
Food | 10,999,009 | 2.7 | ||||||
Gas | 3,798,987 | 0.9 | ||||||
Health Care—Services | 3,798,303 | 0.9 | ||||||
Household Products & Wares | 8,795,429 | 2.1 | ||||||
Insurance | 19,354,447 | 4.7 | ||||||
Machinery—Construction & Mining | 10,194,805 | 2.5 | ||||||
Media | 3,999,071 | 1.0 | ||||||
Miscellaneous—Manufacturing | 19,093,744 | 4.6 | ||||||
Oil & Gas | 20,865,722 | 5.1 | ||||||
Pharmaceuticals | 3,999,600 | 1.0 | ||||||
Regional (State & Province) | 3,999,898 | 1.0 | ||||||
Semiconductors | 5,498,689 | 1.3 | ||||||
Sovereign | 47,910,259 | 11.7 | ||||||
|
|
|
| |||||
407,289,717 | 99.0 | |||||||
Other Assets, Less Liabilities | 3,907,597 | 1.0 | ||||||
|
|
|
| |||||
Net Assets | $ | 411,197,314 | 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. | 13 |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value (amortized cost $336,102,717) | $ | 336,102,717 | ||
Repurchase agreements, at value (amortized cost $71,187,000) | 71,187,000 | |||
Cash | 976 | |||
Receivables: | ||||
Investment securities sold | 4,155,000 | |||
Fund shares sold | 1,060,147 | |||
Interest | 124,527 | |||
Other assets | 76,416 | |||
|
| |||
Total assets | 412,706,783 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 1,237,313 | |||
Transfer agent (See Note 3) | 123,415 | |||
Manager (See Note 3) | 92,228 | |||
Professional fees | 27,853 | |||
Shareholder communication | 19,937 | |||
Custodian | 6,668 | |||
Trustees | 308 | |||
Accrued expenses | 1,672 | |||
Dividend payable | 75 | |||
|
| |||
Total liabilities | 1,509,469 | |||
|
| |||
Net assets | $ | 411,197,314 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 4,112,441 | ||
Additional paid-in capital | 407,081,387 | |||
|
| |||
411,193,828 | ||||
Undistributed net investment income | 3,672 | |||
Accumulated net realized gain (loss) on investments | (186 | ) | ||
|
| |||
Net assets | $ | 411,197,314 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 247,985,962 | ||
|
| |||
Shares of beneficial interest outstanding | 248,013,950 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 61,674,795 | ||
|
| |||
Shares of beneficial interest outstanding | 61,684,163 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 56,081,450 | ||
|
| |||
Shares of beneficial interest outstanding | 56,088,619 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 45,455,107 | ||
|
| |||
Shares of beneficial interest outstanding | 45,457,390 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
|
14 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 793,435 | ||
Other income | 1,953 | |||
|
| |||
Total income | 795,388 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 976,228 | |||
Transfer agent (See Note 3) | 343,201 | |||
Registration | 58,052 | |||
Professional fees | 35,012 | |||
Shareholder communication | 25,990 | |||
Custodian | 10,433 | |||
Trustees | 4,807 | |||
Miscellaneous | 7,047 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,460,770 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (686,454 | ) | ||
|
| |||
Net expenses | 774,316 | |||
|
| |||
Net investment income (loss) | 21,072 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 15 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 21,087 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 21,072 | $ | 38,719 | ||||
Net realized gain (loss) on investments | 15 | (22 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 21,087 | 38,697 | ||||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (13,011 | ) | (23,334 | ) | ||||
Investor Class | (2,849 | ) | (5,446 | ) | ||||
Class B | (2,829 | ) | (6,058 | ) | ||||
Class C | (2,383 | ) | (3,881 | ) | ||||
|
| |||||||
Total dividends to shareholders | (21,072 | ) | (38,719 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 280,606,465 | 511,947,321 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 18,403 | 33,254 | ||||||
Cost of shares redeemed | (268,658,587 | ) | (499,776,922 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 11,966,281 | 12,203,653 | ||||||
|
| |||||||
Net increase (decrease) in net assets | 11,966,296 | 12,203,631 | ||||||
Net Assets | ||||||||
Beginning of period | 399,231,018 | 387,027,387 | ||||||
|
| |||||||
End of period | $ | 411,197,314 | $ | 399,231,018 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 3,672 | $ | 3,672 | ||||
|
|
16 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return | 0.01 | %(a) | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.01 | %†† | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||
Net expenses | 0.37 | %†† | 0.13 | % | 0.11 | % | 0.15 | % | 0.17 | % | 0.17 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 0.62 | %†† | 0.64 | % | 0.64 | % | 0.65 | % | 0.69 | % | 0.71 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 247,986 | $ | 243,517 | $ | 230,330 | $ | 290,028 | $ | 259,119 | $ | 373,790 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Total investment return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return | 0.00 | %(a)(b) | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.01 | %†† | 0.01 | % | 0.01 | % | 0.01 | % | 0.00 | %‡ | 0.01 | % | ||||||||||||||
Net expenses | 0.37 | %†† | 0.14 | % | 0.11 | % | 0.16 | % | 0.18 | % | 0.18 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 0.82 | %†† | 0.87 | % | 0.89 | % | 0.90 | % | 0.91 | % | 0.91 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 61,675 | $ | 56,512 | $ | 56,177 | $ | 58,774 | $ | 59,129 | $ | 63,169 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Total investment return is not annualized. |
(b) | Less than one-tenth percent. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return | 0.00 | %(a)(b) | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.01 | %†† | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||
Net expenses | 0.37 | %†† | 0.14 | % | 0.11 | % | 0.16 | % | 0.18 | % | 0.18 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 0.82 | %†† | 0.87 | % | 0.89 | % | 0.90 | % | 0.91 | % | 0.91 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 56,081 | $ | 58,152 | $ | 63,581 | $ | 73,803 | $ | 84,982 | $ | 102,908 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Total investment return is not annualized. |
(b) | Less than one-tenth percent. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | �� | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return | 0.00 | %(a)(b) | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.01 | %†† | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||
Net expenses | 0.37 | %†† | 0.13 | % | 0.11 | % | 0.15 | % | 0.18 | % | 0.18 | % | ||||||||||||||
Expenses (before waiver/reimbursement) | 0.82 | %†† | 0.87 | % | 0.89 | % | 0.90 | % | 0.91 | % | 0.91 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 45,455 | $ | 41,050 | $ | 36,939 | $ | 33,254 | $ | 28,212 | $ | 33,898 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Total investment return is not annualized. |
(b) | Less than one-tenth percent. |
18 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Money Market Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers four classes of shares at net asset value (“NAV”) without the imposition of a front-end sales charge or a contingent deferred sales charge (“CDSC”). Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008. Depending upon eligibility, Class B shares convert to either Class A or Investor Class 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 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.
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 is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 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. The Fund 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 a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
(B) Securities Valuation. Securities are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate 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.
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations
under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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 based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
19 |
Notes to Financial Statements (Unaudited) (continued)
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
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 level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016 the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund may utilize some of the following fair value techniques: multi-dimensional relational pricing models and option adjusted spread pricing. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(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 Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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. Dividends from net investment income, if any, are declared daily and paid monthly and distributions from net realized capital and currency gains, if any, are declared and paid at least 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. The straight-line method approximates the effective interest method for short-term investments. 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.
(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) 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 or Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
20 | MainStay Money Market Fund |
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty 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 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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer of the Fund. NYL Investors LLC (“NYL Investors” or the ‘‘Subadvisor’’), a registered investment adviser and a direct, 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 the Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and NYL Investors, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, 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, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the six-month period ended April 30, 2016, the effective management fee rate (exclusive of any applicable waivers/reimbursement) was 0.47% inclusive of a fee for fund accounting services of 0.02% of the Fund’s average daily net assets.
New York Life Investments 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: Class A, 0.70%; Investor Class, 0.80%; Class B, 0.80%; and Class C, 0. 80%. This agreement will remain in effect until March 1, 2017, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval by the Board.
New York Life Investments 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. 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.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $976,228 and waived its fees and/or reimbursed expenses in the amount of $18,086. Additionally, New York Life Investments reimbursed fees in the amount of $668,368, without which the Fund’s total returns would have been lower.
State Street Bank and Trust Company (“State Street”) 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) Sales Charges. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A shares were $882. Although
21 |
Notes to Financial Statements (Unaudited) (continued)
the Fund does not assess a CDSC upon redemption of Class B or Class C shares of the Fund, the applicable CDSC will be assessed when shares are redeemed from the Fund if the shareholder previously exchanged his or her investment into the Fund from another fund within the MainStay Group of Funds. During the six-month period ended April 30, 2016, the Fund was advised that NYLIFE Distributors LLC (the “Distributor”), an indirect wholly owned subsidiary of New York Life, received from shareholders the proceeds from CDSCs of Class A, Investor Class, Class B and Class C of $46,131, $423, $37,145 and $12,241, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 111,389 | ||
Investor Class | 81,873 | |||
Class B | 81,507 | |||
Class C | 68,432 |
(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.
Note 4–Federal Income Tax
As of October 31, 2015, for federal income tax purposes, capital loss carryforwards of $201 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 Available Through | Short-Term Capital Loss | Long-Term Capital Loss | ||||||||
Unlimited | $ | 201 | $ | — |
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 38,719 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Capital Share Transactions
Class A (at $1 per share) | Shares | |||
Six-month period ended April 30, 2016: | ||||
Shares sold | 203,979,779 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 12,199 | |||
Shares redeemed | (201,410,435 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 2,581,543 | |||
Shares converted into Class A (See Note 1) | 4,247,150 | |||
Shares converted from Class A (See Note 1) | (2,359,690 | ) | ||
|
| |||
Net increase (decrease) | 4,469,003 | |||
|
| |||
Year ended October 31, 2015: | ||||
Shares sold | 383,202,123 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 21,773 | |||
Shares redeemed | (374,298,971 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 8,924,925 | |||
Shares converted into Class A (See Note 1) | 8,664,349 | |||
Shares converted from Class A (See Note 1) | (4,401,864 | ) | ||
|
| |||
Net increase (decrease) | 13,187,410 | |||
|
| |||
Investor Class (at $1 per share) | Shares | |||
Six-month period ended April 30, 2016: | ||||
Shares sold | 26,916,463 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,981 | |||
Shares redeemed | (20,027,156 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 6,891,288 | |||
Shares converted into Investor Class (See Note 1) | 2,423,789 | |||
Shares converted from Investor Class (See Note 1) | (4,152,605 | ) | ||
|
| |||
Net increase (decrease) | 5,162,472 | |||
|
| |||
Year ended October 31, 2015: | ||||
Shares sold | 47,654,579 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,579 | |||
Shares redeemed | (43,279,103 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 4,379,055 | |||
Shares converted into Investor Class (See Note 1) | 4,521,490 | |||
Shares converted from Investor Class (See Note 1) | (8,565,508 | ) | ||
|
| |||
Net increase (decrease) | 335,037 | |||
|
| |||
22 | MainStay Money Market Fund |
Class B (at $1 per share) | Shares | |||
Six-month period ended April 30, 2016: | ||||
Shares sold | 7,951,200 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,173 | |||
Shares redeemed | (9,865,513 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (1,912,140 | ) | ||
Shares converted from Class B (See Note 1) | (158,644 | ) | ||
|
| |||
Net increase (decrease) | (2,070,784 | ) | ||
|
| |||
Year ended October 31, 2015: | ||||
Shares sold | 14,563,454 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,636 | |||
Shares redeemed | (19,778,547 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (5,210,457 | ) | ||
Shares converted from Class B (See Note 1) | (218,467 | ) | ||
|
| |||
Net increase (decrease) | (5,428,924 | ) | ||
|
| |||
Class C (at $1 per share) | Shares | |||
Six-month period ended April 30, 2016: | ||||
Shares sold | 41,759,023 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,050 | |||
Shares redeemed | (37,355,483 | ) | ||
|
| |||
Net increase (decrease) | 4,405,590 | |||
|
| |||
Year ended October 31, 2015: | ||||
Shares sold | 66,527,165 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,266 | |||
Shares redeemed | (62,420,301 | ) | ||
|
| |||
Net increase (decrease) | 4,110,130 | |||
|
|
Note 7–Money Market Fund Regulatory Matters
On July 23, 2014, the SEC voted to amend the rules under the 1940 Act that currently govern the operations of the Fund. The majority of these amendments, except for certain disclosure enhancements, will not take effect until October 2016. A significant change resulting from these amendments is a requirement that institutional (i.e., not “retail” money market funds as defined under Rule 2a-7 of the 1940 Act) prime money market funds, including institutional municipal money market funds, transact fund shares based on a market-based NAV, although other types of money market funds may continue to transact fund shares at an NAV calculated using the amortized cost valuation method. Among other requirements, the amendments also will permit a money market fund or, in certain circumstances, require a money market fund (other than a “government money market fund” as defined under Rule 2a-7 of the 1940 Act) to impose liquidity fees on all redemptions, and permit a money market fund to limit (or gate) redemptions for up to 10 business days in any 90-day period. The degree to which a money market fund will be impacted by the rule amendments will depend upon the type of fund and type of investors (retail or institutional). At this time, Fund management is evaluating the implications of these amendments and their impact on the Fund, including potential effects on the Fund’s operations and returns.
Note 8–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
23 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Money Market Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and NYL Investors LLC (“NYL Investors”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and NYL Investors in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and NYL Investors (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including NYL Investors as subadvisor to the Fund, and responses from New York Life Investments and NYL Investors to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Fund’s distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and NYL Investors; (ii) the investment performance of the Fund, New York Life Investments and NYL Investors; (iii) the costs of the services provided, and profits realized, by New York Life Investments and NYL Investors from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and NYL Investors. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and NYL Investors
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including NYL Investors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including oversight and implementation of the Fund’s
24 | MainStay Money Market Fund |
compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that NYL Investors provides to the Fund. The Board evaluated NYL Investors’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined NYL Investors’ track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at NYL Investors, and NYL Investors’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by NYL Investors. The Board also reviewed NYL Investors’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and NYL Investors’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or NYL Investors had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and NYL Investors to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and NYL Investors
The Board considered the costs of the services provided by New York Life Investments and NYL Investors under the Agreements and the profits realized by New York Life Investments and its affiliates, including NYL Investors, due to their relationships with the Fund. Because NYL Investors is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and NYL Investors in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and NYL Investors and profits realized by New York Life Investments and its affiliates, including NYL Investors, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and NYL Investors must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and NYL Investors to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to
25 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund. The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including NYL Investors, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s
management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year. Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to NYL Investors are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and NYL Investors on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board noted that New York Life Investments continues to provide support to the Fund in the form of voluntary waivers and/or reimbursements of fees and expenses in order to maintain a positive yield, as disclosed in the Fund’s prospectus.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service
26 | MainStay Money Market Fund |
Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
27 |
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 or proxy voting record 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 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).
28 | MainStay Money Market Fund |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1694710 MS164-16 | MSMM10-06/16 (NYLIM) NL012 |
MainStay Tax Free Bond Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –0.09 4.62 | %
|
| 1.16 5.92 | %
|
| 5.85 6.83 | %
|
| 4.39 4.87 | %
|
| 0.81 0.81 | %
| |||||||
Investor Class Shares3 | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| 0.00 4.71 |
|
| 1.26 6.04 |
|
| 5.81 6.79 |
|
| 4.34 4.82 |
|
| 0.82 0.82 |
| |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges |
| –0.41 4.59 |
|
| 0.78 5.78 |
|
| 6.20 6.52 |
|
| 4.55 4.55 |
|
| 1.07 1.07 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges |
| 3.59 4.59 |
|
| 4.78 5.78 |
|
| 6.51 6.51 |
|
| 4.56 4.56 |
|
| 1.07 1.07 |
| |||||||
Class I Shares4 | No Sales Charge | 4.85 | 6.29 | 7.09 | 5.12 | 0.56 |
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, changes 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 may 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 (if any), 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 would likely have been different. |
4. | Performance figures for Class I shares, first offered on December 21, 2009, include the historical performance of Class B shares through December 20, 2009, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for Class I shares would likely have been different. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Barclays Municipal Bond Index5 | 3.55 | % | 5.29 | % | 5.37 | % | 4.94 | % | ||||||||
Average Lipper General & Insured Municipal Debt Fund6 | 3.60 | 4.88 | 5.60 | 4.27 |
5. | The Barclays Municipal Bond Index is considered representative of the broad market for investment-grade, tax-exempt bonds with a maturity of at least one year. Bonds subject to the alternative minimum tax or with floating or zero coupons are excluded. The Barclays 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. |
6. | The Average Lipper General & Insured Municipal Debt Fund is representative of funds that, by portfolio practice, either invest primarily in municipal debt issues rated in the top four credit ratings or invest primarily in municipal debt issues insured as to timely payment. 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 Tax Free Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay Tax Free Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,046.20 | $ | 4.02 | $ | 1,020.90 | $ | 3.97 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,047.10 | $ | 4.02 | $ | 1,020.90 | $ | 3.97 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,045.90 | $ | 5.29 | $ | 1,019.70 | $ | 5.22 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,045.90 | $ | 5.29 | $ | 1,019.70 | $ | 5.22 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,048.50 | $ | 2.75 | $ | 1,022.20 | $ | 2.72 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.79% for Class A and Investor Class, 1.04% for Class B and Class C and 0.54% for Class I) multiplied by the average account value over the period, divided by 366 and multiplied by 182 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7 |
Portfolio Composition as of April 30, 2016 (Unaudited)
Illinois | 13.7 | % | ||
New York | 11.2 | |||
California | 11.1 | |||
Texas | 8.7 | |||
Michigan | 7.5 | |||
Puerto Rico | 7.1 | |||
Connecticut | 3.3 | |||
U.S. Virgin Islands | 3.3 | |||
Florida | 3.1 | |||
New Jersey | 3.1 | |||
Ohio | 2.7 | |||
District of Columbia | 2.6 | |||
South Carolina | 2.1 | |||
Nebraska | 2.0 | |||
Tennessee | 2.0 | |||
Guam | 1.8 | |||
Maryland | 1.8 | |||
Indiana | 1.6 | |||
Pennsylvania | 1.6 | |||
Rhode Island | 1.2 | |||
Wisconsin | 1.2 | |||
Georgia | 1.1 | |||
Kentucky | 1.1 | |||
Louisiana | 1.0 |
Missouri | 1.0 | % | ||
Iowa | 0.9 | |||
Hawaii | 0.8 | |||
Massachusetts | 0.8 | |||
Kansas | 0.6 | |||
Arizona | 0.5 | |||
North Carolina | 0.4 | |||
Colorado | 0.3 | |||
Mississippi | 0.3 | |||
Washington | 0.3 | |||
Alaska | 0.2 | |||
Arkansas | 0.2 | |||
Minnesota | 0.2 | |||
North Dakota | 0.2 | |||
New Hampshire | 0.1 | |||
New Mexico | 0.1 | |||
Oregon | 0.1 | |||
South Dakota | 0.1 | |||
Wyoming | 0.1 | |||
Oklahoma | 0.0 | ‡ | ||
Utah | 0.0 | ‡ | ||
Other Assets, Less Liabilities | –3.1 | |||
|
| |||
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 Holdings or Issuers Held as of April 30, 2016 (Unaudited)
1. | North Texas Tollway Authority, Revenue Bonds, 5.00%–6.00%, due 1/1/34–9/1/41 |
2. | Puerto Rico Highways & Transportation Authority, Revenue Bonds, 5.00%–5.50%, due 7/1/21–7/1/36 |
3. | JPMorgan Chase Putters / Drivers Trust, Unlimited General Obligation, 0.75%, due 12/15/16 |
4. | Virgin Islands Public Finance Authority, Revenue Bonds, 5.00%, due 10/1/30–10/1/39 |
5. | Central Plains Energy, Project No. 3, Revenue Bonds, 5.00%–5.25%, due 9/1/32–9/1/42 |
6. | Chicago Board of Education, Unlimited General Obligation, 5.00%–5.50%, due 12/1/32–12/1/39 |
7. | New York State Urban Development Corp., Revenue Bonds, 5.00%, due 3/15/30–3/15/34 |
8. | Chicago, Wastewater Transmission, Revenue Bonds, 5.00%, due 1/1/28–1/1/44 |
9. | Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation 5.00%–6.00%, due 7/1/19–7/1/37 |
10. | Chicago, Illinois O’Hare International Airport, Revenue Bonds, 5.00%–5.625%, due 11/1/17–11/1/35 |
8 | MainStay Tax Free Bond Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers John Loffredo, CFA, Robert DiMella, CFA, Michael Petty, David Dowden, Scott Sprauer and Frances Lewis of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay Tax Free Bond Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay Tax Free Bond Fund returned 4.62% for Class A shares, 4.71% for Investor Class shares and 4.59% for Class B and Class C shares for the six months ended April 30, 2016. Over the same period, Class I shares returned 4.85%. For the six months ended April 30, 2016, all share classes outperformed the 3.55% return of the Barclays Municipal Bond Index,1 which is the Fund’s broad-based securities-market index, and the 3.60% return of the Average Lipper2 General & Insured Municipal Debt Fund. See page 5 for Fund returns with applicable sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund received positive contributions relative to the Barclays Municipal Bond Index from its emphasis on longer-maturity bonds and medium- to lower-quality credits as the municipal yield curve3 flattened and credit spreads4 narrowed during the reporting period. (Contributions take weightings and total returns into account.) Our security selection among Puerto Rico insured bonds and Guam credits also helped performance relative to the Barclays Municipal Bond Index. Detracting slightly from relative performance were an underweight position in high-quality state general obligation bonds and the Fund’s cash position.
What was the Fund’s duration5 strategy during the reporting period?
During the reporting period, the Fund’s duration was targeted to remain in a neutral range relative to the bonds in which the Fund can invest, as outlined in the prospectus. As of April 30, 2016, the Fund’s modified duration to worst6 was 4.9 years.
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
We believed that the Federal Reserve’s desire to raise the target federal funds rate combined with strong demand for longer-term municipal bonds to produce changes in the shape of the yield curve and alter credit spreads. Our expectation of a flatter
yield curve and continued spread tightening were therefore significant drivers of Fund positioning during the reporting period, and the Fund’s positive cash flow was invested accordingly. In the primary and secondary markets alike, we found attractive opportunities to invest in bonds maturing in more than 20 years, with an emphasis on credit-sensitive securities. The Fund continued to increase its exposure to Build America Mutual Insurance Company (BAM) because we felt that spreads for wrapped (insured) bonds would continue to decline, especially for this new entry into the insurance space. The risk of a Puerto Rico debt restructuring continued to loom over the market, and uninsured Puerto Rico bonds produced negative absolute returns during the reporting period. The Fund maintained its Puerto Rico exposure exclusively in bonds insured by a monoline insurer. The Fund also continued to maintain a high degree of liquidity to combat the decline in capital committed to the market from our broker/dealer counterparties.
During the reporting period, which market segments were the strongest positive contributors to the Fund’s performance and which market segments were particularly weak?
The most substantial positive contributions to the Fund’s performance during the reporting period came from the Fund’s overweight positions among bonds with longer-maturities and greater credit sensitivity. An overweight position in bonds wrapped by insurers—in particular, Puerto Rico bonds—added to performance as these securities generally outperformed. Bonds from the electric utilities, special tax and local general obligation sectors also contributed to performance. Exposure to certain Chicago credits detracted from the Fund’s performance.
How did the Fund’s sector weightings change during the reporting period?
As the Fund’s strategy did not materially change from the prior reporting period, there were no major changes to the structure of the Fund. We continued to emphasize a well-diversified portfolio and remained committed to individual security selection (as opposed to a top-down approach to portfolio construction). Sectors that we continued to favor were marginally increased, including toll roads, dedicated tax and hospitals.
1. | See footnote on page 6 for more information on the Barclays Municipal Bond Index. |
2. | See footnote on page 6 for more information on Lipper Inc. |
3. | 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. |
4. | 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. The term “credit spread” typically refers to the difference in yield between corporate or municipal bonds (or a specific category of these bonds) and comparable U.S. Treasury issues. |
5. | 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. |
6. | Modified duration is inversely related to the approximate percentage change in price for a given change in yield. Duration to worst is the duration of a bond computed using the bond’s nearest call date or maturity, whichever comes first. This measure ignores future cash flow fluctuations due to embedded optionality. |
9 |
From a state perspective, we continued to decrease the Fund’s exposure to California securities after their significant outperformance over the past four years.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2016, the Fund was overweight relative to the Barclays Municipal Bond Index in bonds with maturities of
15 years or longer. The Fund also held an overweight position relative to the Index in credits rated BBB7 at the end of the reporting period. As April 30, 2016, the Fund held underweight positions relative to the Index in securities rated AAA8 and in bonds with maturities of less than 10 years.
7. | An obligation rated ‘BBB’ by Standard & Poor’s (“S&P”) is deemed by S&P to exhibit adequate protection parameters. In the opinion of S&P, however, 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. |
8. | An obligation rated ‘AAA’ has the highest rating assigned by S&P, and in the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is extremely strong. 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 will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay Tax Free Bond Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Principal Amount | Value | |||||||
Municipal Bonds 103.1%† | ||||||||
Alaska 0.2% |
| |||||||
Alaska Industrial Development & Export Authority, FairBanks Community Hospital, Revenue Bonds | $ | 3,550,000 | $ | 4,013,240 | ||||
|
| |||||||
Arizona 0.5% |
| |||||||
Arizona Health Facilities Authority, Phoenix Children’s Hospital, Revenue Bonds | 1,000,000 | 1,098,020 | ||||||
Industrial Development Authority of the City of Phoenix, Mayo Clinic, Revenue Bonds | 8,500,000 | 8,500,000 | ||||||
|
| |||||||
9,598,020 | ||||||||
|
| |||||||
Arkansas 0.2% |
| |||||||
University of Arkansas, Ualr Campus, Revenue Bonds | ||||||||
5.00%, due 10/1/29 | 1,315,000 | 1,646,498 | ||||||
5.00%, due 10/1/30 | 1,110,000 | 1,381,939 | ||||||
5.00%, due 10/1/31 | 1,205,000 | 1,493,610 | ||||||
|
| |||||||
4,522,047 | ||||||||
|
| |||||||
California 11.1% |
| |||||||
Alameda County Industrial Development Authority, BEMA Electronics Manufacturing Project, Revenue Bonds | 2,300,000 | 2,300,000 | ||||||
Anaheim Public Financing Authority, Public Improvement Project, Revenue Bonds | 15,675,000 | 16,483,360 | ||||||
Anaheim, California, School District, Unlimited General Obligation | 4,700,000 | 5,785,277 | ||||||
California Educational Facilities Authority, Revenue Bonds | 1,525,000 | 1,890,512 | ||||||
California Health Facilities Financing Authority, Catholic Healthcare, Revenue Bonds | 3,000,000 | 3,447,840 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
California Health Facilities Financing Authority, Sutter Health, Revenue Bonds | $ | 5,000,000 | $ | 6,083,950 | ||||
California State Public Works Board, Capital Projects, Revenue Bonds | 1,060,000 | 1,064,155 | ||||||
California State Public Works Revenue, Various Capital Project, Revenue Bonds | 1,400,000 | 1,628,956 | ||||||
California State, CA, Kindergarten-A6-RMKT, Unlimited General Obligation | 7,300,000 | 7,300,000 | ||||||
California State, CA, Kindergarten-B4-RMKT, Unlimited General Obligation | 7,300,000 | 7,300,000 | ||||||
California State, Unlimited General Obligation | ||||||||
6.00%, due 11/1/35 | 2,500,000 | 2,945,650 | ||||||
6.25%, due 11/1/34 | 4,000,000 | 4,753,640 | ||||||
California Statewide Communities Development Authority, Aspire Public Schools, Revenue Bonds | 780,000 | 891,041 | ||||||
California Statewide Communities Development Authority, Revenue Bonds | 1,475,000 | 1,693,934 | ||||||
Ceres Unified School District, Unlimited General Obligation | 4,150,000 | 1,140,545 | ||||||
City of Escondido, CA, Unlimited General Obligation | 5,000,000 | 6,044,450 | ||||||
City of Long Beach, CA, Airport System, Revenue Bonds | 5,000,000 | 5,694,500 | ||||||
Fontana Public Finance Authority, Revenue Bonds | 2,640,000 | 3,125,206 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2016. 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
California (continued) |
| |||||||
Fontana Unified School District, Unlimited General Obligation | ||||||||
Series C | $ | 14,800,000 | $ | 6,242,492 | ||||
Series C | 15,500,000 | 6,061,895 | ||||||
Fresno, California Unified School District Education, Unlimited General Obligation | ||||||||
Series G | 6,000,000 | 2,617,080 | ||||||
Series G | 10,000,000 | 4,048,400 | ||||||
Series G | 23,485,000 | 5,374,542 | ||||||
Golden State Tobacco Securitization Corp., Asset Backed, Revenue Bonds | 5,410,000 | 6,411,607 | ||||||
Hayward Unified School District, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 12,500,000 | 3,782,625 | ||||||
Series A, Insured: AGM | 7,000,000 | 1,969,660 | ||||||
Irvine Ranch Water District, Improvement District, Special Assessment | 3,140,000 | 3,140,000 | ||||||
Merced Union High School District, Cabs-Election, Unlimited General Obligation Series C | 53,000,000 | 8,324,180 | ||||||
Oakland Unified School District, Alameda County, Unlimited General Obligation | ||||||||
Insured: AGM | 1,160,000 | 1,439,943 | ||||||
Insured: AGM | 1,755,000 | 2,160,282 | ||||||
Insured: AGM | 2,535,000 | 3,099,443 | ||||||
Oceanside Unified School District CA, Unlimited General Obligation | 11,555,000 | 1,487,206 | ||||||
Palomar Community College District, Cabs-Election, Unlimited General Obligation | 5,720,000 | 4,431,627 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
Palomar Pomerado Health Election, Unlimited General Obligation | $ | 7,500,000 | $ | 7,525,425 | ||||
Paramount Unified School District, Unlimited General Obligation | 25,000,000 | 5,359,500 | ||||||
Pomona Unified School District, Election 2008, Unlimited General Obligation | 3,285,000 | 3,907,212 | ||||||
Riverside County Redevelopment Successor Agency, Tax Allocation | ||||||||
Series B, Insured: BAM | 2,510,000 | 3,095,884 | ||||||
Series B, Insured: BAM | 875,000 | 1,072,164 | ||||||
Series B, Insured: BAM | 2,645,000 | 3,216,690 | ||||||
Riverside County Transportation Commission, Revenue Bonds | 3,000,000 | 3,703,860 | ||||||
San Bernardino City Unified School District, Election, Unlimited General Obligation | 1,000,000 | 1,184,890 | ||||||
San Diego Public Facilities Financing Authority, Capital Improvement Projects, Revenue Bonds | 3,000,000 | 3,561,660 | ||||||
San Lorenzo, California Unified School District, Unlimited General Obligation | 4,535,000 | 5,479,595 | ||||||
San Ysidro School District, Unlimited General Obligation | ||||||||
Insured: AGM | 10,000,000 | 2,454,800 | ||||||
Series F, Insured: AGM | 25,705,000 | 3,126,242 | ||||||
Santa Ana Unified School District, Unlimited General Obligation | 50,000,000 | 16,102,000 | ||||||
Santa Clara Valley Transportation Authority, Revenue Bonds | 3,900,000 | 4,737,915 |
12 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
California (continued) |
| |||||||
Southern California Public Power Authority, Apex Power Project, Revenue Bonds | $ | 4,500,000 | $ | 5,490,270 | ||||
Twin Rivers Unified School District, Unlimited General Obligation | 5,350,000 | 3,080,369 | ||||||
Westminster School District, CABS, Election 2008, Unlimited General Obligation | ||||||||
Series B, Insured: BAM | 13,900,000 | 2,082,359 | ||||||
Series B, Insured: BAM | 6,500,000 | 658,710 | ||||||
|
| |||||||
216,003,543 | ||||||||
|
| |||||||
Colorado 0.3% |
| |||||||
Colorado Health Facilities Authority, Evangelical Lutheran Good Sama, Revenue Bonds | 3,280,000 | 3,859,248 | ||||||
Park Creek Metropolitan District, Revenue Bonds | 1,600,000 | 1,954,512 | ||||||
|
| |||||||
5,813,760 | ||||||||
|
| |||||||
Connecticut 3.3% |
| |||||||
Connecticut State Health & Educational Facility Authority, Quinnipiac University, Revenue Bonds | 10,425,000 | 12,361,235 | ||||||
Connecticut State Health & Educational Facility Authority, Trinity Health Corp., Revenue Bonds | 20,625,000 | 24,251,288 | ||||||
Hartford, CT, Unlimited General Obligation | ||||||||
Series A | 2,500,000 | 2,831,725 | ||||||
Series A | 1,250,000 | 1,466,144 | ||||||
Series A, Insured: AGM | 275,000 | 320,725 | ||||||
Series C, Insured: AGM | 7,470,000 | 8,795,850 | ||||||
Series C, Insured: AGM | 2,500,000 | 2,923,825 |
Principal Amount | Value | |||||||
Connecticut (continued) |
| |||||||
State of Connecticut Special Tax Revenue, Transportation Infrastructure, Revenue Bonds | $ | 5,000,000 | $ | 6,125,200 | ||||
State of Connecticut, Unlimited General Obligation | 5,000,000 | 5,951,450 | ||||||
|
| |||||||
65,027,442 | ||||||||
|
| |||||||
District of Columbia 2.6% |
| |||||||
District of Columbia, Friendship Public Charter School, Inc., Revenue Bonds | ||||||||
5.00%, due 6/1/32 | 1,125,000 | 1,242,315 | ||||||
5.00%, due 6/1/42 | 5,500,000 | 5,968,160 | ||||||
District of Columbia, Georgetown University, Revenue Bonds | ||||||||
Series B2 | 11,180,000 | 11,180,000 | ||||||
Series B1 | 9,650,000 | 9,650,000 | ||||||
District of Columbia, KIPP Charter School, Revenue Bonds | ||||||||
6.00%, due 7/1/43 | 1,000,000 | 1,166,860 | ||||||
6.00%, due 7/1/48 | 1,575,000 | 1,826,921 | ||||||
District of Columbia, Tax Allocation | 525,000 | 593,686 | ||||||
Metropolitan Washington Airports Authority, Revenue Bonds | ||||||||
Series C, Insured: AGC | 8,000,000 | 10,335,920 | ||||||
Series B | 7,140,000 | 8,341,305 | ||||||
|
| |||||||
50,305,167 | ||||||||
|
| |||||||
Florida 3.1% |
| |||||||
City of Orlando, Tourist Development Tax Revenue, 3rd Lien, 6th Cent Contract, Revenue Bonds | 15,000,000 | 15,816,450 | ||||||
County of Miami-Dade Florida Transit System Sales Surtax Revenue, Revenue Bonds | 7,265,000 | 8,458,785 | ||||||
County of Miami-Dade Florida Water and Sewer System Revenue, Revenue Bonds | 5,000,000 | 5,772,600 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Florida (continued) |
| |||||||
Miami Beach Florida Parking Revenue, Revenue Bonds | ||||||||
Insured: BAM | $ | 1,000,000 | $ | 1,184,170 | ||||
Insured: BAM | 1,990,000 | 2,345,712 | ||||||
Insured: BAM | 2,500,000 | 2,913,375 | ||||||
Miami-Dade County Florida Aviation, Miami International Airport, Revenue Bonds | 11,000,000 | 11,926,750 | ||||||
Miami-Dade County Florida, Jackson Health System, Revenue Bonds | 3,375,000 | 4,020,840 | ||||||
Miami-Dade County Florida, Revenue Bonds | ||||||||
Series A, Insured: NATL-RE | 10,000,000 | 3,485,800 | ||||||
Series A, Insured: NATL-RE | 10,000,000 | 3,303,400 | ||||||
Series A, Insured: NATL-RE | 245,000 | 76,685 | ||||||
|
| |||||||
59,304,567 | ||||||||
|
| |||||||
Georgia 1.1% |
| |||||||
Atlanta Development Authority, Revenue Bonds | 10,000,000 | 11,862,600 | ||||||
Atlanta Water & Wastewater, Revenue Bonds | 7,120,000 | 8,415,128 | ||||||
Fulton County Georgia Development Authority, Piedmont Healthcare, Inc., Revenue Bonds | 1,700,000 | 1,857,641 | ||||||
|
| |||||||
22,135,369 | ||||||||
|
| |||||||
Guam 1.8% |
| |||||||
Antonio B Won Pat International Airport Authority, Guam Airport, Revenue Bonds | 5,000,000 | 5,984,850 | ||||||
Guam Government Waterworks Authority, Revenue Bonds | 1,750,000 | 2,038,120 |
Principal Amount | Value | |||||||
Guam (continued) |
| |||||||
Guam Government, Revenue Bonds | ||||||||
Series A | $ | 3,085,000 | $ | 3,425,306 | ||||
Series A | 2,000,000 | 2,260,860 | ||||||
Guam Power Authority, Revenue Bonds | ||||||||
Series A, Insured: AGM | 5,610,000 | 6,682,856 | ||||||
Series A, Insured: AGM | 655,000 | 756,591 | ||||||
Territory of Guam, Revenue Bonds | ||||||||
Series D | 8,350,000 | 9,689,424 | ||||||
Series A | 2,700,000 | 3,260,790 | ||||||
|
| |||||||
34,098,797 | ||||||||
|
| |||||||
Hawaii 0.8% |
| |||||||
Hawaii State Department of Budget and Finance, Hawaiian Electric Co., Revenue Bonds | 3,000,000 | 3,420,210 | ||||||
Hawaii State Department of Budget and Finance, Queens Health System, Revenue Bonds | 10,000,000 | 11,929,000 | ||||||
|
| |||||||
15,349,210 | ||||||||
|
| |||||||
Illinois 13.7% |
| |||||||
Carol Stream Park District, Unlimited General Obligation | 4,620,000 | 5,273,869 | ||||||
¨Chicago Board of Education, Unlimited General Obligation | ||||||||
Series C, Insured: AGM | 16,000,000 | 16,407,040 | ||||||
Series A | 7,500,000 | 6,346,275 | ||||||
Series A, Insured: AGM | 12,750,000 | 13,652,700 | ||||||
Chicago, Illinois Motor Fuel Tax, Revenue Bonds | 4,725,000 | 5,188,050 | ||||||
¨Chicago, Illinois O’ Hare International Airport, Revenue Bonds | ||||||||
Series A | 18,455,000 | 18,978,568 | ||||||
Series A, Insured: AGM | 7,000,000 | 7,411,320 | ||||||
Series A | 2,250,000 | 2,613,105 |
14 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Illinois (continued) |
| |||||||
¨Chicago, Wastewater Transmission, Revenue Bonds | ||||||||
5.00%, due 1/1/28 | $ | 1,000,000 | $ | 1,138,320 | ||||
5.00%, due 11/1/29 | 1,000,000 | 1,133,630 | ||||||
5.00%, due 1/1/33 | 2,000,000 | 2,218,700 | ||||||
5.00%, due 1/1/39 | 8,420,000 | 9,221,416 | ||||||
5.00%, due 1/1/44 | 14,340,000 | 15,624,577 | ||||||
City of Chicago, Unlimited General Obligation | 10,000,000 | 10,729,700 | ||||||
Cook County Community College District No. 508, City Colleges of Chicago, Unlimited General Obligation | ||||||||
Insured: BAM | 2,000,000 | 2,257,000 | ||||||
Insured: BAM | 5,000,000 | 5,762,000 | ||||||
Illinois Finance Authority, Northwest Community Hospital, Revenue Bonds | 840,000 | 846,829 | ||||||
Illinois Finance Authority, Rehab Institute of Chicago, Revenue Bonds | 9,600,000 | 11,586,624 | ||||||
Illinois Finance Authority, Swedish Covenant, Revenue Bonds | 6,175,000 | 6,926,683 | ||||||
Illinois Sports Facilities Authority, Revenue Bonds | 5,000,000 | 5,716,750 | ||||||
¨JPMorgan Chase Putters / Drivers Trust, Unlimited General Obligation | 50,000,000 | 50,000,000 | ||||||
Knox & Warren Counties, Illinois Community Unit School District No. 205 Galesburg, Unlimited General Obligation | ||||||||
Series A | 240,000 | 258,269 | ||||||
Series A | 205,000 | 230,617 | ||||||
Metropolitan Pier & Exposition Authority, Revenue Bonds | 14,090,000 | 8,165,014 |
Principal Amount | Value | |||||||
Illinois (continued) |
| |||||||
Northern Illinois Municipal Power Agency, Prairie State Project, Revenue Bonds | $ | 10,000,000 | $ | 10,560,300 | ||||
Rock Island County, Public Building Commission, Revenue Bonds | ||||||||
Insured: AGM | 500,000 | 590,630 | ||||||
Insured: AGM | 2,645,000 | 3,059,392 | ||||||
Insured: AGM | 3,360,000 | 3,844,243 | ||||||
Southwestern Illinois Development Authority, Local Government Program, Revenue Bonds | 5,500,000 | 5,648,335 | ||||||
Springfield IL Electric Revenue, Senior Lien, Revenue Bonds | 10,000,000 | 11,500,400 | ||||||
State of Illinois, Housing & Auxiliary Facilities System, Revenue Bonds | ||||||||
Series B, Insured: BAM | 1,175,000 | 1,418,801 | ||||||
Series B, Insured: BAM | 1,620,000 | 1,912,248 | ||||||
Series B, Insured: BAM | 1,000,000 | 1,171,320 | ||||||
State of Illinois, Unlimited General Obligation | 10,890,000 | 12,092,038 | ||||||
United City of Yorkville, Special Services Area No. 2005-108 and 2005-109, Special Tax | 3,790,000 | 4,452,681 | ||||||
Village of Bellwood IL, Unlimited General Obligation | 1,500,000 | 1,784,595 | ||||||
|
| |||||||
265,722,039 | ||||||||
|
| |||||||
Indiana 1.6% |
| |||||||
Indiana Finance Authority, Sisters of St. Francis, Health Services, Revenue Bonds | 2,000,000 | 2,000,000 | ||||||
Indiana Municipal Power Agency, Revenue Bonds | 3,460,000 | 4,062,663 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Indiana (continued) |
| |||||||
Indiana State Finance Authority, Butler University, Revenue Bonds | ||||||||
Series B | $ | 2,100,000 | $ | 2,475,837 | ||||
Series A | 4,425,000 | 5,182,958 | ||||||
Series B | 2,320,000 | 2,699,018 | ||||||
Indiana State Finance Authority, Republic Services Income Project, Revenue Bonds | 4,000,000 | 4,000,000 | ||||||
Indianapolis, Indiana Public Improvement Bond Bank, Revenue Bonds | 1,100,000 | 1,235,465 | ||||||
St. Joseph County Hospital Authority, Memorial Health System, Revenue Bonds | 10,000,000 | 10,000,000 | ||||||
|
| |||||||
31,655,941 | ||||||||
|
| |||||||
Iowa 0.9% |
| |||||||
Hills, IA, Health Facilities, Mercy Hospital Project, Revenue Bonds | 6,700,000 | 6,700,000 | ||||||
Iowa Finance Authority, Health Facilities, Great River Medical Center Project, Revenue Bonds | 9,000,000 | 9,000,000 | ||||||
Iowa Higher Education Loan Authority, Private College Facility, Revenue Bonds | 1,210,000 | 1,210,000 | ||||||
|
| |||||||
16,910,000 | ||||||||
|
| |||||||
Kansas 0.6% |
| |||||||
University of Kansas Hospital Authority, Revenue Bonds | ||||||||
5.00%, due 9/1/33 | 2,500,000 | 2,923,375 | ||||||
5.00%, due 9/1/34 | 5,000,000 | 5,833,400 | ||||||
5.00%, due 9/1/35 | 2,800,000 | 3,259,256 | ||||||
|
| |||||||
12,016,031 | ||||||||
|
| |||||||
Kentucky 1.1% |
| |||||||
Kentucky Economic Development Finance Authority, Republic Services, Inc., Revenue Bonds | 6,000,000 | 6,000,000 |
Principal Amount | Value | |||||||
Kentucky (continued) |
| |||||||
Kentucky Municipal Power Agency, Revenue Bonds | $ | 13,000,000 | $ | 14,864,330 | ||||
|
| |||||||
20,864,330 | ||||||||
|
| |||||||
Louisiana 1.0% |
| |||||||
City of New Orleans LA Sewerage Service Revenue, Revenue Bonds | 2,745,000 | 3,148,268 | ||||||
Jefferson Parish, Louisiana Hospital Service District No. 1, West Jefferson Medical Center, Revenue Bonds | 3,695,000 | 4,497,517 | ||||||
Louisiana Public Facilities Authority, Ochsner Clinic, Revenue Bonds | 5,690,000 | 6,850,874 | ||||||
Louisiana Stadium & Exposition District, Revenue Bonds | 1,650,000 | 1,913,389 | ||||||
Louisiana State Citizens Property Insurance Corp., Revenue Bonds | ||||||||
Series B, Insured: AMBAC | 2,340,000 | 2,349,547 | ||||||
Series C-3, Insured: AGC | 1,000,000 | 1,105,480 | ||||||
|
| |||||||
19,865,075 | ||||||||
|
| |||||||
Maryland 1.8% |
| |||||||
Maryland Health & Higher Educational Facilities Authority, Adjustable Rate-Pooled LN Progress, Revenue Bonds | 7,200,000 | 7,200,000 | ||||||
Maryland Health & Higher Educational Facilities Authority, John Hopkins University, Revenue Bonds | 5,400,000 | 5,400,000 | ||||||
Maryland Health & Higher Educational Facilities Authority, Peninsula Regional Medical Center, Revenue Bonds | 3,600,000 | 4,133,700 | ||||||
Maryland Stadium Authority, Baltimore City Public Schools, Revenue Bonds | 15,000,000 | 17,886,900 | ||||||
|
| |||||||
34,620,600 | ||||||||
|
|
16 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Massachusetts 0.8% |
| |||||||
Massachusetts Educational Financing Authority, Revenue Bonds | ||||||||
Series B | $ | 1,425,000 | $ | 1,547,949 | ||||
Series I | 1,910,000 | 2,030,960 | ||||||
Massachusetts State Health & Educational Facilities Authority, Suffolk University, Revenue Bonds | ||||||||
Series A | 2,000,000 | 2,278,760 | ||||||
Series A | 6,400,000 | 7,334,976 | ||||||
Metropolitan Boston Transit Parking Corp., Revenue Bonds | 2,000,000 | 2,344,680 | ||||||
|
| |||||||
15,537,325 | ||||||||
|
| |||||||
Michigan 7.5% |
| |||||||
Detroit, Michigan Distribution State Aid, Limited General Obligation | 5,200,000 | 5,664,464 | ||||||
Detroit, Michigan Sewerage Disposal System, Revenue Bonds | 14,150,000 | 15,762,392 | ||||||
Detroit, Michigan Sewerage Disposal System, Revenue Bonds | 2,000,000 | 2,078,920 | ||||||
Detroit, Michigan Water & Sewerage Department, Senior Lien, Revenue Bonds | 5,000,000 | 5,801,350 | ||||||
Detroit, Michigan Water Supply System, Revenue Bonds | ||||||||
Series D, Insured: AGM | 1,535,000 | 1,544,548 | ||||||
Series A, Insured: AGM | 1,600,000 | 1,610,992 | ||||||
Series A | 5,000,000 | 5,514,900 | ||||||
Series A | 5,550,000 | 6,278,770 | ||||||
Detroit, Michigan, City School District, Improvement School Building & Site, Unlimited General Obligation | ||||||||
Series A, Insured: Q-SBLF | 750,000 | 862,995 |
Principal Amount | Value | |||||||
Michigan (continued) |
| |||||||
Detroit, Michigan, City School District, Improvement School Building & Site, Unlimited General Obligation (continued) | ||||||||
Series A, Insured: Q-SBLF | $ | 7,500,000 | $ | 8,586,150 | ||||
Series A, Insured: Q-SBLF | 3,620,000 | 4,104,899 | ||||||
Series A, Insured: Q-SBLF | 4,535,000 | 5,096,297 | ||||||
Kent Hospital Finance Authority, Spectrum Health System, Revenue Bonds | 14,760,000 | 14,760,000 | ||||||
Lincoln, Michigan, Consolidated School District, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 1,030,000 | 1,263,213 | ||||||
Series A, Insured: AGM | 1,300,000 | 1,601,691 | ||||||
Series A, Insured: AGM | 3,985,000 | 4,860,863 | ||||||
Series A, Insured: AGM | 2,030,000 | 2,452,179 | ||||||
Series A, Insured: AGM | 1,455,000 | 1,734,054 | ||||||
Series A, Insured: AGM | 1,500,000 | 1,722,690 | ||||||
Livonia Public School District, Unlimited General Obligation | 2,115,000 | 2,444,644 | ||||||
Michigan Finance Authority Revenue, Local Government Loan Program, Revenue Bonds | ||||||||
Insured: AGM | 500,000 | 591,865 | ||||||
Series C | 7,290,000 | 8,062,011 | ||||||
5.00%, due 7/1/33 | 500,000 | 583,135 | ||||||
5.00%, due 7/1/34 | 500,000 | 580,515 | ||||||
Insured: AGM | 2,000,000 | 2,294,160 | ||||||
Insured: NATL-RE | 7,400,000 | 8,402,108 | ||||||
Michigan Finance Authority, Detroit Water & Sewer, Revenue Bonds | 3,000,000 | 3,467,160 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Michigan (continued) |
| |||||||
Michigan Finance Authority, Revenue Bonds | ||||||||
Insured: NATL-RE | $ | 2,500,000 | $ | 2,885,350 | ||||
5.50%, due 6/1/21 | 5,000,000 | 5,396,950 | ||||||
Michigan Finance Authority, Senior Lien-Detroit Water & Sewer, Revenue Bonds | 2,500,000 | 2,735,475 | ||||||
Michigan Tobacco Settlement Finance Authority, Revenue Bonds | 250,000 | 250,088 | ||||||
Oakland University, Revenue Bonds | 11,255,000 | 11,255,000 | ||||||
Saginaw, Michigan, City of School District, Unlimited General Obligation | ||||||||
Insured: Q-SBLF | 260,000 | 308,201 | ||||||
Insured: Q-SBLF | 350,000 | 412,892 | ||||||
Insured: Q-SBLF | 750,000 | 879,067 | ||||||
Insured: Q-SBLF | 250,000 | 289,428 | ||||||
Insured: Q-SBLF | 350,000 | 403,900 | ||||||
Insured: Q-SBLF | 425,000 | 488,096 | ||||||
Wayne County Michigan, Capital Improvement, Limited General Obligation | 2,500,000 | 2,557,600 | ||||||
|
| |||||||
145,589,012 | ||||||||
|
| |||||||
Minnesota 0.2% |
| |||||||
City of Minneapolis MN/St. Paul Housing & Redevelopment Authority, Allina Health Systems, Revenue Bonds | 4,000,000 | 4,000,000 | ||||||
|
| |||||||
Mississippi 0.3% |
| |||||||
Mississippi Business Finance Corp., Solid Waste Disposal, Gulf Power Co., Revenue Bonds | 5,150,000 | 5,150,000 | ||||||
|
|
Principal Amount | Value | |||||||
Missouri 1.0% |
| |||||||
Joplin Industrial Development Authority, Freeman Health System, Revenue Bonds | $ | 605,000 | $ | 681,127 | ||||
Kansas City, Special Obligation, Refunding & Improvement Downtown Arena Project, Revenue Bonds | 7,555,000 | 8,729,953 | ||||||
Missouri Health & Educational Facilities Authority, Revenue Bonds | 3,505,000 | 3,505,000 | ||||||
Missouri Health and Educational Facilities Authority, St. Louis University, Revenue Bonds | 5,930,000 | 7,030,727 | ||||||
|
| |||||||
19,946,807 | ||||||||
|
| |||||||
Nebraska 2.0% |
| |||||||
¨Central Plains Energy, Project No. 3, Revenue Bonds | ||||||||
5.00%, due 9/1/32 | 5,190,000 | 5,816,744 | ||||||
5.00%, due 9/1/42 | 13,420,000 | 14,763,074 | ||||||
5.25%, due 9/1/37 | 15,535,000 | 17,471,593 | ||||||
|
| |||||||
38,051,411 | ||||||||
|
| |||||||
New Hampshire 0.1% |
| |||||||
Manchester, NH General Airport, Revenue Bonds | 1,800,000 | 2,037,564 | ||||||
|
| |||||||
New Jersey 3.1% |
| |||||||
Hudson County Improvement Authority, Vocational Technical Schools Project, Revenue Bonds | 6,000,000 | 7,031,760 | ||||||
New Brunswick, Parking Authority, Revenue Bonds | ||||||||
Series A, Insured: BAM | 5,880,000 | 7,277,617 | ||||||
Series A, Insured: BAM | 2,370,000 | 2,917,138 | ||||||
Series A, Insured: BAM | 4,605,000 | 5,639,974 | ||||||
Series A, Insured: BAM | 6,780,000 | 8,273,973 |
18 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New Jersey (continued) |
| |||||||
New Jersey Economic Development Authority, MSU Student Housing Project, Provident Group-Montclair LLC, Revenue Bonds | $ | 4,500,000 | $ | 5,074,200 | ||||
New Jersey Economic Development Authority, Revenue Bonds | ||||||||
5.00%, due 1/1/28 (b) | 1,000,000 | 1,130,270 | ||||||
5.50%, due 1/1/26 (b) | 1,000,000 | 1,177,650 | ||||||
New Jersey Health Care Facilities Financing Authority, Revenue Bonds | ||||||||
Series A | 3,710,000 | 4,300,595 | ||||||
Insured: AGC | 1,510,000 | 1,606,247 | ||||||
New Jersey Higher Education Student Assistance Authority, Revenue Bonds | 3,750,000 | 4,242,038 | ||||||
New Jersey State Building Authority, Revenue Bonds | 3,000,000 | 3,521,640 | ||||||
New Jersey State Higher Education Student Assistance Authority, Student Loan, Revenue Bonds | 2,725,000 | 2,933,517 | ||||||
Newark, New Jersey Housing Authority, South Ward Police Facility, Revenue Bonds | ||||||||
Insured: AGC | 1,135,000 | 1,295,954 | ||||||
Insured: AGC | 4,000,000 | 4,696,080 | ||||||
|
| |||||||
61,118,653 | ||||||||
|
| |||||||
New Mexico 0.1% |
| |||||||
Farmington Pollution Control, Revenue Bonds | 2,000,000 | 2,276,460 | ||||||
|
| |||||||
New York 11.2% |
| |||||||
Build NYC Resource Corp., Parking Facility, Revenue Bonds | ||||||||
Insured: AGM | 975,000 | 1,100,843 | ||||||
Insured: AGM | 1,025,000 | 1,185,710 |
Principal Amount | Value | |||||||
New York (continued) |
| |||||||
Build NYC Resource Corp., Parking Facility, Revenue Bonds (continued) | ||||||||
Insured: AGM | $ | 1,075,000 | $ | 1,267,092 | ||||
Insured: AGM | 740,000 | 885,699 | ||||||
City of New York, Unlimited General Obligation | 5,085,000 | 5,085,000 | ||||||
Long Island Power Authority, Electric System, Revenue Bonds | 10,000,000 | 11,690,500 | ||||||
Long Island Power Authority, Revenue Bonds |
| |||||||
Series A, Insured: BAM | 10,000,000 | 11,772,100 | ||||||
Series A | 3,470,000 | 4,014,547 | ||||||
Series B | 8,970,000 | 10,477,139 | ||||||
Metropolitan Transportation Authority, Revenue Bonds | 1,500,000 | 1,806,750 | ||||||
New York City Transitional Finance Authority, Building Aid Revenue, Revenue Bonds | ||||||||
Series S-1 | 6,060,000 | 7,286,423 | ||||||
Series S-1 | 10,000,000 | 11,872,800 | ||||||
Series S-1 | 2,000,000 | 2,383,020 | ||||||
New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds | ||||||||
Series 2A | 8,900,000 | 8,900,000 | ||||||
Series B-1 | 10,000,000 | 12,204,200 | ||||||
Series E-1 | 2,500,000 | 2,954,150 | ||||||
New York City Water & Sewer System, Revenue Bonds | ||||||||
Series AA-3 | 2,000,000 | 2,000,000 | ||||||
Series EE | 11,400,000 | 13,468,416 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New York (continued) |
| |||||||
New York Liberty Development Corp., Bank of America, Revenue Bonds Class 3 | $ | 5,000,000 | $ | 5,635,050 | ||||
New York Liberty Development Corp., Revenue Bonds | 12,315,000 | 14,472,588 | ||||||
New York Liberty Development Corp., World Trade Center, Revenue Bonds | ||||||||
5.00%, due 11/15/31 | 5,000,000 | 5,904,300 | ||||||
5.75%, due 11/15/51 | 11,500,000 | 13,739,165 | ||||||
New York State Dormitory Authority, Revenue Bonds | ||||||||
Series E | 4,190,000 | 5,103,755 | ||||||
Series A | 6,610,000 | 7,926,778 | ||||||
5.50%, due 7/1/40 | 465,000 | 541,279 | ||||||
New York State Housing Finance Agency, 160 Madison Ave, Revenue Bonds | 8,600,000 | 8,600,000 | ||||||
¨New York State Urban Development Corp., Revenue Bonds | ||||||||
Series A | 12,350,000 | 15,452,073 | ||||||
Series A | 12,750,000 | 15,636,982 | ||||||
New York, NY, Unlimited General Obligation | 900,000 | 900,000 | ||||||
Triborough Bridge & Tunnel Authority, Revenue Bonds | 10,820,000 | 13,127,257 | ||||||
|
| |||||||
217,393,616 | ||||||||
|
| |||||||
North Carolina 0.4% |
| |||||||
Charlotte-Mecklenburg Hospital Authority, Carolinas Healthcare System, Revenue Bonds | 2,050,000 | 2,346,984 | ||||||
North Carolina Medical Care Commission, North Carolina Baptist Hospital, Revenue Bonds | 1,000,000 | 1,149,400 |
Principal Amount | Value | |||||||
North Carolina (continued) |
| |||||||
North Carolina Turnpike Authority, Revenue Bonds | $ | 3,000,000 | $ | 3,321,840 | ||||
|
| |||||||
6,818,224 | ||||||||
|
| |||||||
North Dakota 0.2% |
| |||||||
Grand Forks Health Care, ND, Altra Health System, Revenue Bonds | 4,050,000 | 4,458,362 | ||||||
|
| |||||||
Ohio 2.7% |
| |||||||
American Municipal Power, Inc., Prairie Energy Campus, Revenue Bonds | ||||||||
Series A, Insured: BAM | 15,000,000 | 17,788,500 | ||||||
Series A, Insured: BAM | 7,055,000 | 8,350,016 | ||||||
City of Cleveland, OH, Airport System Revenue, Revenue Bonds | 3,000,000 | 3,423,210 | ||||||
City of Cleveland, OH, Income Tax Revenue, Revenue Bonds | 1,500,000 | 1,781,625 | ||||||
Clermont County Port Authority, W. Clermont Local School District Project, Revenue Bonds | ||||||||
Insured: BAM | 650,000 | 770,711 | ||||||
Insured: BAM | 2,200,000 | 2,596,396 | ||||||
Insured: BAM | 1,335,000 | 1,569,413 | ||||||
Cleveland-Cuyahoga County Port Authority, Revenue Bonds | 1,980,000 | 2,305,314 | ||||||
Hamilton County Ohio Health Care Facility, Christ Hospital Project, Revenue Bonds | 2,000,000 | 2,292,980 | ||||||
North Olmsted City School District, Unlimited General Obligation | 7,250,000 | 8,605,822 | ||||||
Ohio Higher Educational Facility Commission, Hospital-Cleveland Clinic, Revenue Bonds | 2,600,000 | 2,600,000 | ||||||
|
| |||||||
52,083,987 | ||||||||
|
|
20 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Oklahoma 0.0%‡ |
| |||||||
Tulsa Airports Improvement Trust, Revenue Bonds | $ | 500,000 | $ | 554,520 | ||||
|
| |||||||
Oregon 0.1% |
| |||||||
Oregon State Facilities Authority, Sacred Heart Medical Center, Revenue Bonds | 2,600,000 | 2,600,000 | ||||||
|
| |||||||
Pennsylvania 1.6% |
| |||||||
Montgomery County Industrial Development Authority, Revenue Bonds | 175,000 | 206,174 | ||||||
Pennsylvania Economic Development Financing Authority, Capitol Region Parking System, Revenue Bonds | 5,800,000 | 7,158,302 | ||||||
Pennsylvania State Turnpike Commission, Revenue Bonds | 4,000,000 | 4,499,800 | ||||||
Pennsylvania Turnpike Commission, Revenue Bonds | 5,500,000 | 6,503,805 | ||||||
Philadelphia, PA, Unlimited General Obligation | 5,125,000 | 6,173,319 | ||||||
State Public School Building Authority, Philadelphia Community College, Revenue Bonds | 5,505,000 | 6,556,125 | ||||||
|
| |||||||
31,097,525 | ||||||||
|
| |||||||
Puerto Rico 7.1% |
| |||||||
¨Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation | ||||||||
Series A, Insured: AGC | 275,000 | 277,780 | ||||||
Series A-4, Insured: AGM | 3,870,000 | 4,010,675 | ||||||
Series A, Insured: AGM | 13,905,000 | 14,069,635 | ||||||
Series A, Insured: NATL-RE | 390,000 | 390,265 |
Principal Amount | Value | |||||||
Puerto Rico (continued) |
| |||||||
Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation (continued) | ||||||||
Series A, Insured: AGM | $ | 1,220,000 | $ | 1,289,089 | ||||
Series C, Insured: AGM | 700,000 | 702,555 | ||||||
Series A, Insured: NATL-RE | 425,000 | 445,664 | ||||||
Series A, Insured: NATL-RE | 3,430,000 | 3,631,787 | ||||||
Series A, Insured: NATL-RE | 660,000 | 696,181 | ||||||
Series C, Insured: AGM | 1,020,000 | 1,023,121 | ||||||
Series C-7, Insured: NATL-RE | 2,490,000 | 2,571,871 | ||||||
Commonwealth of Puerto Rico, Unlimited General Obligation | ||||||||
Insured: AGC | 105,000 | 105,143 | ||||||
Insured: AGC | 500,000 | 501,635 | ||||||
Puerto Rico Commonwealth, Aqueduct & Sewer Authority, Revenue Bonds | ||||||||
Series A, Insured: AGC | 1,415,000 | 1,463,096 | ||||||
Senior Lien—Series A, Insured: AGC | 7,540,000 | 7,693,439 | ||||||
Series A, Insured: AGC | 1,000,000 | 1,071,580 | ||||||
Puerto Rico Electric Power Authority, Revenue Bonds | ||||||||
Series UU, Insured: AGC | 1,120,000 | 1,069,477 | ||||||
Series TT, Insured: AGM | 175,000 | 178,253 | ||||||
Series RR, Insured: NATL-RE | 1,080,000 | 1,094,483 | ||||||
Series RR, Insured: NATL-RE | 515,000 | 521,906 | ||||||
Series SS, Insured: NATL-RE | 800,000 | 810,728 | ||||||
Series UU, Insured: AGM | 2,000,000 | 2,021,760 | ||||||
Series PP, Insured: NATL-RE | 1,005,000 | 1,004,960 | ||||||
Series UU, Insured: AGM | 3,985,000 | 4,026,085 | ||||||
Series UU, Insured: AGC | 505,000 | 509,863 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Electric Power Authority, Revenue Bonds (continued) | ||||||||
Series TT, Insured: AGM | $ | 500,000 | $ | 504,640 | ||||
Insured: AGC | 855,000 | 854,940 | ||||||
Series SS, Insured: AGM | 300,000 | 299,979 | ||||||
Series VV, Insured: NATL-RE | 185,000 | 190,051 | ||||||
Series VV, Insured: NATL-RE | 2,000,000 | 2,047,040 | ||||||
Puerto Rico Highways & Transportation Authority, Commonwealth Highway, Revenue Bonds | 650,000 | 649,955 | ||||||
¨Puerto Rico Highways & Transportation Authority, Revenue Bonds | ||||||||
Series D, Insured: AGM | 700,000 | 701,890 | ||||||
Series L, Insured: NATL-RE | 1,755,000 | 1,796,418 | ||||||
Series N, Insured: NATL-RE | 6,025,000 | 6,153,332 | ||||||
Series CC, Insured: AGM | 1,035,000 | 1,067,530 | ||||||
Series N, Insured: NATL-RE | 5,520,000 | 5,629,462 | ||||||
Series N, Insured: AGC | 3,200,000 | 3,304,224 | ||||||
Series N, Insured: AGC | 21,000,000 | 21,728,490 | ||||||
Series CC, Insured: AGM | 1,635,000 | 1,691,718 | ||||||
Series E, Insured: AGM | 310,000 | 326,554 | ||||||
Series N, Insured: AGM | 335,000 | 356,031 | ||||||
Series N, Insured: AGM | 10,000,000 | 10,651,700 | ||||||
Series CC, Insured: AGC | 845,000 | 891,796 | ||||||
Puerto Rico Municipal Finance Agency, Revenue Bonds | ||||||||
Series A, Insured: AGM | 735,000 | 735,029 | ||||||
Series C, Insured: AGM | 695,000 | 723,273 |
Principal Amount | Value | |||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Municipal Finance Agency, Revenue Bonds (continued) | ||||||||
Series C, Insured: AGC | $ | 100,000 | $ | 103,436 | ||||
Series C, Insured: AGC | 100,000 | 102,938 | ||||||
Puerto Rico Municipal Finance Agency, Unlimited General Obligation | 650,000 | 648,564 | ||||||
Puerto Rico Public Buildings Authority, Government Facilities, Revenue Bonds | ||||||||
Series F, Insured: NATL-RE | 220,000 | 225,463 | ||||||
Series M-3, Insured: NATL-RE | 300,000 | 310,233 | ||||||
Series M-3, Insured: NATL-RE | 7,465,000 | 7,710,449 | ||||||
Puerto Rico Sales Tax Financing Corp., Revenue Bonds | ||||||||
Series A, Insured: NATL-RE | 59,430,000 | 9,212,244 | ||||||
Series A, Insured: AMBAC | 200,000 | 34,108 | ||||||
Series A, Insured: AGM | 4,025,000 | 4,124,578 | ||||||
Series C, Insured: AGM | 3,105,000 | 3,202,590 | ||||||
|
| |||||||
137,159,686 | ||||||||
|
| |||||||
Rhode Island 1.2% |
| |||||||
Providence Public Buildings Authority, Revenue Bonds | 1,565,000 | 1,827,044 | ||||||
Tobacco Settlement Financing Corp., Revenue Bonds | 20,000,000 | 22,235,400 | ||||||
|
| |||||||
24,062,444 | ||||||||
|
| |||||||
South Carolina 2.1% |
| |||||||
Greenwood Fifty Schools Facilities Inc., School District No. 50, Revenue Bonds | 2,225,000 | 2,775,977 | ||||||
Piedmont Municipal Power Agency, Revenue Bonds | 10,345,000 | 12,253,135 |
22 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
South Carolina (continued) |
| |||||||
South Carolina Jobs-Economic Development Authority, Palmetto Health, Revenue Bonds | ||||||||
Series A | $ | 420,000 | $ | 467,233 | ||||
Series A | 2,955,000 | 3,455,784 | ||||||
South Carolina State Public Service Authority, Revenue Bonds | ||||||||
Series C | 3,310,000 | 3,800,476 | ||||||
Series C | 14,975,000 | 17,142,182 | ||||||
Sumter Two School Facilities Inc., Sumter School District Project, Revenue Bonds | 1,100,000 | 1,331,759 | ||||||
|
| |||||||
41,226,546 | ||||||||
|
| |||||||
South Dakota 0.1% |
| |||||||
Harrisburg School District No. 41-2, Unlimited General Obligation | 1,370,000 | 1,546,826 | ||||||
|
| |||||||
Tennessee 2.0% |
| |||||||
City of Memphis, TN, Unlimited General Obligation | 4,160,000 | 4,864,080 | ||||||
Johnson City Health & Educational Facilities Board, Mountain State Health Alliance, Revenue Bonds | 2,000,000 | 2,000,000 | ||||||
Johnson City Health & Educational Facilities Board, Mountain States Health Alliance, Revenue Bonds | 3,605,000 | 4,102,562 | ||||||
Johnson City Tennessee Health & Educational Facilities Board Hospital, Revenue Bonds | 6,500,000 | 7,527,975 | ||||||
Metropolitan Government, Nashville, TN Health and Education Facilities, Vanderbilt University Medical Center, Revenue Bonds | 15,000,000 | 17,490,900 |
Principal Amount | Value | |||||||
Tennessee (continued) |
| |||||||
Shelby County Health Educational & Housing Facilities Board, Revenue Bonds | $ | 3,400,000 | $ | 3,400,000 | ||||
|
| |||||||
39,385,517 | ||||||||
|
| |||||||
Texas 8.7% |
| |||||||
Central Texas Regional Mobility Authority, Revenue Bonds | 2,100,000 | 2,465,946 | ||||||
Central Texas Turnpike System, Revenue Bonds | ||||||||
Series C | 5,000,000 | 5,772,950 | ||||||
Series B | 1,945,000 | 2,261,257 | ||||||
Clifton, Texas Higher Education Finace Corp., Revenue Bonds | 675,000 | 688,082 | ||||||
Dallas/Fort Worth International Airport, Revenue Bonds | 10,000,000 | 11,158,300 | ||||||
Edinburg Local Government Finance Corp., Revenue Bonds | 1,000,000 | 1,122,850 | ||||||
Harris County-Houston Sports Authority, Revenue Bonds | 17,115,000 | 5,619,710 | ||||||
Houston Higher Education Finance Corp., Revenue Bonds | ||||||||
6.50%, due 5/15/31 | 1,050,000 | 1,293,583 | ||||||
Series A | 6,400,000 | 8,219,840 | ||||||
Houston, TX, Revenue Bonds | 2,000,000 | 2,029,907 | ||||||
Midlothian Industrial Development Corp., Environmental Facility, Holcim Project, Revenue Bonds | 6,700,000 | 6,700,000 | ||||||
North Harris County Regional Water Authority, Revenue Bonds | 3,215,000 | 3,872,821 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Texas (continued) |
| |||||||
¨North Texas Tollway Authority, Revenue Bonds |
| |||||||
Series A | $ | 1,400,000 | $ | 1,645,070 | ||||
Series A | 2,950,000 | 3,448,993 | ||||||
Series A, Insured: BAM | 9,500,000 | 11,162,975 | ||||||
Series B | 22,140,000 | 25,389,488 | ||||||
Series A | 6,695,000 | 7,924,202 | ||||||
Series F | 1,800,000 | 1,948,788 | ||||||
Series A | 3,500,000 | 4,246,970 | ||||||
San Juan, Texas Higher Education Finance Authority, Idea Public Schools, Revenue Bonds | 1,275,000 | 1,481,193 | ||||||
Tarrant County, Cultural Education Facilities Finance Corp., Buckner Retirement Services, Revenue Bonds | ||||||||
Series A | 1,245,000 | 1,504,458 | ||||||
Series A | 1,305,000 | 1,597,372 | ||||||
Series A | 1,370,000 | 1,682,744 | ||||||
Series A | 1,440,000 | 1,779,696 | ||||||
Texas Municipal Gas Acquisition & Supply Corp. III, Revenue Bonds | ||||||||
5.00%, due 12/15/30 | 17,100,000 | 19,371,735 | ||||||
5.00%, due 12/15/31 | 4,575,000 | 5,153,326 | ||||||
Texas Private Activity Bond Surface Transportation Corp., LBJ Infrastructure, Revenue Bonds | ||||||||
7.00%, due 6/30/40 | 5,000,000 | 6,002,900 | ||||||
Series Lien-LBG | 4,095,000 | 5,020,060 | ||||||
7.50%, due 6/30/33 | 5,500,000 | 6,752,405 | ||||||
Texas Private Activity Bond Surface Transportation Corp., NTE Mobility, Revenue Bonds | 8,165,000 | 9,637,721 |
Principal Amount | Value | |||||||
Texas (continued) |
| |||||||
Texas State Public Finance Authority, Charter School Finance Corp., Revenue Bonds | $ | 1,000,000 | $ | 1,194,990 | ||||
Viridian Municipal Management District, Unlimited General Obligation Insured: BAM | 500,000 | 643,880 | ||||||
|
| |||||||
168,794,212 | ||||||||
|
| |||||||
U.S. Virgin Islands 3.3% |
| |||||||
Virgin Islands Public Finance Authority, Matching Fund Loan Notes, Revenue Bonds | ||||||||
5.00%, due 9/1/30 (c) | 5,000,000 | 5,890,750 | ||||||
Series A | 5,100,000 | 5,530,338 | ||||||
6.625%, due 10/1/29 | 6,960,000 | 7,775,782 | ||||||
Virgin Islands Public Finance Authority, Matching Fund Loan, Revenue Bonds | 5,000,000 | 5,621,150 | ||||||
¨Virgin Islands Public Finance Authority, Revenue Bonds | ||||||||
Series C | 13,750,000 | 15,213,825 | ||||||
Series A, Insured: AGM | 15,125,000 | 16,877,836 | ||||||
Series C, Insured: AGM | 5,800,000 | 6,620,468 | ||||||
|
| |||||||
63,530,149 | ||||||||
|
| |||||||
Utah 0.0%‡ |
| |||||||
Herriman, Utah, Special Assessment | 425,000 | 440,513 | ||||||
|
| |||||||
Washington 0.3% |
| |||||||
King County Washington Public Hospital District No. 1, Limited General Obligation | 6,000,000 | 6,461,580 | ||||||
|
| |||||||
Wisconsin 1.2% |
| |||||||
Wisconsin Center District, Junior Dedicated, Revenue Bonds | ||||||||
Series A | 3,665,000 | 4,159,042 | ||||||
Series A | 2,850,000 | 3,223,122 |
24 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Wisconsin (continued) |
| |||||||
Wisconsin Health & Educational Facilities Authority, Jewish Home & Care Center, Revenue Bonds | $ | 1,450,000 | $ | 1,450,000 | ||||
Wisconsin State Health & Educational Facilities Authority, Medical College of Wisconsin, Revenue Bonds | 12,250,000 | 14,437,727 | ||||||
|
| |||||||
23,269,891 | ||||||||
|
| |||||||
Wyoming 0.1% |
| |||||||
West Park Hospital District, Revenue Bonds | 1,000,000 | 1,167,190 | ||||||
|
| |||||||
Total Investments | 103.1 | % | 2,003,583,198 | |||||
Other Assets, Less Liabilities | (3.1 | ) | (61,153,166 | ) | ||||
Net Assets | 100.0 | % | $ | 1,942,430,032 |
‡ | Less than one-tenth of a percent. |
(a) | 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 as of April 30, 2016. |
(b) | Interest on these securities was subject to alternative minimum tax. |
(c) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(d) | As of April 30, 2016, cost was $1,910,535,821 for federal income tax purposes and net unrealized appreciation was as follows: |
Gross unrealized appreciation | $ | 94,853,163 | ||
Gross unrealized depreciation | (1,805,786 | ) | ||
|
| |||
Net unrealized appreciation | $ | 93,047,377 | ||
|
|
As of April 30, 2016, the Fund held the following futures contracts1:
Type | Number of Contracts (Short) | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)2 | ||||||||||||
10-Year United States Treasury Note | (2,105 | ) | June 2016 | $ | (273,781,563 | ) | $ | 1,131,721 | ||||||||
|
|
|
| |||||||||||||
$ | (273,781,563 | ) | $ | 1,131,721 | ||||||||||||
|
|
|
|
1. | As of April 30, 2016, cash in the amount of $2,631,250 was on deposit with a broker for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of April 30, 2016. |
The following abbreviations are used in the preceding pages:
AGC—Assured Guaranty Corp.
AGM—Assured Guaranty Municipal Corp.
AMBAC—Ambac Assurance Corp.
BAM—Build America Mutual Assurance Co.
NATL-RE—National Public Finance Guarantee Corp.
Q-SBLF—Qualified School Board Loan Fund
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Municipal Bonds | $ | — | $ | 2,003,583,198 | $ | — | $ | 2,003,583,198 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | — | 2,003,583,198 | — | 2,003,583,198 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts Short (b) | 1,131,721 | — | — | 1,131,721 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 1,131,721 | $ | 2,003,583,198 | $ | — | $ | 2,004,714,919 | ||||||||
|
|
|
|
|
|
|
|
(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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
26 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 2,003,583,198 | ||
Cash collateral on deposit at broker | 2,631,250 | |||
Cash | 219,128 | |||
Receivables: | ||||
Interest | 21,690,474 | |||
Fund shares sold | 17,670,831 | |||
Investment securities sold | 8,671,489 | |||
Other assets | 99,632 | |||
|
| |||
Total assets | 2,054,566,002 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 102,261,638 | |||
Fund shares redeemed | 6,760,216 | |||
Manager (See Note 3) | 667,235 | |||
NYLIFE Distributors (See Note 3) | 295,695 | |||
Variation margin on futures contracts | 230,234 | |||
Transfer agent (See Note 3) | 215,716 | |||
Professional fees | 38,937 | |||
Shareholder communication | 24,343 | |||
Custodian | 6,827 | |||
Accrued expenses | 9,223 | |||
Dividend payable | 1,625,906 | |||
|
| |||
Total liabilities | 112,135,970 | |||
|
| |||
Net assets | $ | 1,942,430,032 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 1,899,742 | ||
Additional paid-in capital | 1,884,092,372 | |||
|
| |||
1,885,992,114 | ||||
Distributions in excess of net investment income | (590,353 | ) | ||
Accumulated net realized gain (loss) on investments and futures transactions | (37,446,499 | ) | ||
Net unrealized appreciation (depreciation) on investments and futures contracts | 94,474,770 | |||
|
| |||
Net assets | $ | 1,942,430,032 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 969,976,995 | ||
|
| |||
Shares of beneficial interest outstanding | 94,882,622 | |||
|
| |||
Net asset value per share outstanding | $ | 10.22 | ||
Maximum sales charge (4.50% of offering price) | 0.48 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.70 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 17,010,126 | ||
|
| |||
Shares of beneficial interest outstanding | 1,656,395 | |||
|
| |||
Net asset value per share outstanding | $ | 10.27 | ||
Maximum sales charge (4.50% of offering price) | 0.48 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.75 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 17,680,417 | ||
|
| |||
Shares of beneficial interest outstanding | 1,730,028 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.22 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 229,907,836 | ||
|
| |||
Shares of beneficial interest outstanding | 22,482,971 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.23 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 707,854,658 | ||
|
| |||
Shares of beneficial interest outstanding | 69,222,199 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.23 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 33,818,213 | ||
|
| |||
Expenses | ||||
Manager (See Note 3) | 3,601,504 | |||
Distribution/Service—Class A (See Note 3) | 1,034,660 | |||
Distribution/Service—Investor Class (See Note 3) | 21,074 | |||
Distribution/Service—Class B (See Note 3) | 43,638 | |||
Distribution/Service—Class C (See Note 3) | 510,646 | |||
Transfer agent (See Note 3) | 673,394 | |||
Registration | 82,198 | |||
Professional fees | 59,775 | |||
Shareholder communication | 34,363 | |||
Trustees | 17,178 | |||
Custodian | 13,816 | |||
Miscellaneous | 25,731 | |||
|
| |||
Total expenses | 6,117,977 | |||
|
| |||
Net investment income (loss) | 27,700,236 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 8,790,150 | |||
Futures transactions | (5,079,739 | ) | ||
|
| |||
Net realized gain (loss) on investments and futures transactions | 3,710,411 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 44,604,442 | |||
Futures contracts | 503,423 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | 45,107,865 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and futures transactions | 48,818,276 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 76,518,512 | ||
|
|
28 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 27,700,236 | $ | 43,792,330 | ||||
Net realized gain (loss) on investments and futures transactions | 3,710,411 | (8,338,708 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | 45,107,865 | (6,941,762 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 76,518,512 | 28,511,860 | ||||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (13,577,157 | ) | (21,306,149 | ) | ||||
Investor Class | (278,540 | ) | (612,453 | ) | ||||
Class B | (265,761 | ) | (487,154 | ) | ||||
Class C | (3,099,467 | ) | (5,621,984 | ) | ||||
Class I | (10,467,019 | ) | (15,774,661 | ) | ||||
|
| |||||||
Total dividends to shareholders | (27,687,944 | ) | (43,802,401 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 574,126,618 | 810,261,947 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 17,894,098 | 27,314,088 | ||||||
Cost of shares redeemed | (191,166,347 | ) | (256,696,846 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 400,854,369 | 580,879,189 | ||||||
|
| |||||||
Net increase (decrease) in net assets | 449,684,937 | 565,588,648 | ||||||
Net Assets | ||||||||
Beginning of period | 1,492,745,095 | 927,156,447 | ||||||
|
| |||||||
End of period | $ | 1,942,430,032 | $ | 1,492,745,095 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (590,353 | ) | $ | (602,645 | ) | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.93 | $ | 10.03 | $ | 9.33 | $ | 10.04 | $ | 9.26 | $ | 9.44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.17 | 0.35 | 0.39 | 0.38 | 0.38 | (a) | 0.43 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.29 | (0.10 | ) | 0.70 | (0.72 | ) | 0.79 | (0.18 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.46 | 0.25 | 1.09 | (0.34 | ) | 1.17 | 0.25 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.35 | ) | (0.39 | ) | (0.37 | ) | (0.39 | ) | (0.43 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 10.22 | $ | 9.93 | $ | 10.03 | $ | 9.33 | $ | 10.04 | $ | 9.26 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 4.62 | %(c) | 2.58 | % | 11.86 | % | (3.52 | %) | 12.81 | % | 2.93 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.28 | %†† | 3.51 | % | 3.99 | % | 3.72 | % | 3.91 | % | 4.76 | % | ||||||||||||
Net expenses | 0.79 | %†† | 0.81 | % | 0.78 | % | 0.78 | % | 0.79 | % | 0.81 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.79 | %†† | 0.82 | % | 0.83 | % | 0.83 | % | 0.84 | % | 0.89 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 46 | % | 68 | % | 111 | % | 125 | % | 138 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 969,977 | $ | 761,278 | $ | 427,586 | $ | 417,984 | $ | 424,757 | $ | 258,892 |
* | Unaudited. |
†† | Annualized. |
(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 return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.97 | $ | 10.08 | $ | 9.38 | $ | 10.08 | $ | 9.31 | $ | 9.48 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.17 | 0.35 | 0.39 | 0.36 | 0.38 | (a) | 0.42 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.30 | (0.11 | ) | 0.69 | (0.70 | ) | 0.77 | (0.16 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.47 | 0.24 | 1.08 | (0.34 | ) | 1.15 | 0.26 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.35 | ) | (0.38 | ) | (0.36 | ) | (0.38 | ) | (0.43 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 10.27 | $ | 9.97 | $ | 10.08 | $ | 9.38 | $ | 10.08 | $ | 9.31 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 4.71 | %(c) | 2.47 | % | 11.76 | % | (3.45 | %) | 12.58 | % | 2.93 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.31 | %†† | 3.54 | % | 3.94 | % | 3.67 | % | 3.92 | % | 4.67 | % | ||||||||||||
Net expenses | 0.79 | %†† | 0.82 | % | 0.84 | % | 0.84 | % | 0.86 | % | 0.90 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.79 | %†† | 0.83 | % | 0.89 | % | 0.89 | % | 0.91 | % | 0.98 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 46 | % | 68 | % | 111 | % | 125 | % | 138 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 17,010 | $ | 17,259 | $ | 18,264 | $ | 19,094 | $ | 21,437 | $ | 21,547 |
* | Unaudited. |
†† | Annualized. |
(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 return is not annualized. |
30 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.92 | $ | 10.03 | $ | 9.33 | $ | 10.03 | $ | 9.26 | $ | 9.44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.15 | 0.33 | 0.35 | 0.34 | 0.35 | (a) | 0.40 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.30 | (0.11 | ) | 0.71 | (0.70 | ) | 0.78 | (0.18 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.45 | 0.22 | 1.06 | (0.36 | ) | 1.13 | 0.22 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.33 | ) | (0.36 | ) | (0.34 | ) | (0.36 | ) | (0.40 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 10.22 | $ | 9.92 | $ | 10.03 | $ | 9.33 | $ | 10.03 | $ | 9.26 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 4.59 | %(c) | 2.21 | % | 11.52 | % | (3.73 | %) | 12.34 | % | 2.58 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.05 | %†† | 3.28 | % | 3.69 | % | 3.41 | % | 3.59 | % | 4.42 | % | ||||||||||||
Net expenses | 1.04 | %†† | 1.07 | % | 1.09 | % | 1.09 | % | 1.11 | % | 1.15 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.04 | %†† | 1.08 | % | 1.14 | % | 1.14 | % | 1.16 | % | 1.23 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 46 | % | 68 | % | 111 | % | 125 | % | 138 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 17,680 | $ | 16,806 | $ | 12,439 | $ | 12,459 | $ | 13,230 | $ | 9,463 |
* | Unaudited. |
†† | Annualized. |
(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 return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.93 | $ | 10.03 | $ | 9.34 | $ | 10.04 | $ | 9.27 | $ | 9.44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.15 | 0.33 | 0.36 | 0.35 | 0.35 | (a) | 0.40 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.30 | (0.10 | ) | 0.69 | (0.71 | ) | 0.78 | (0.17 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.45 | 0.23 | 1.05 | (0.36 | ) | 1.13 | 0.23 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.33 | ) | (0.36 | ) | (0.34 | ) | (0.36 | ) | (0.40 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 10.23 | $ | 9.93 | $ | 10.03 | $ | 9.34 | $ | 10.04 | $ | 9.27 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 4.59 | %(c) | 2.31 | % | 11.40 | % | (3.72 | %) | 12.33 | % | 2.69 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.04 | %†† | 3.28 | % | 3.68 | % | 3.42 | % | 3.58 | % | 4.42 | % | ||||||||||||
Net expenses | 1.04 | %†† | 1.07 | % | 1.09 | % | 1.09 | % | 1.11 | % | 1.15 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.04 | %†† | 1.08 | % | 1.14 | % | 1.14 | % | 1.16 | % | 1.23 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 46 | % | 68 | % | 111 | % | 125 | % | 138 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 229,908 | $ | 183,509 | $ | 154,863 | $ | 150,244 | $ | 142,246 | $ | 81,880 |
* | Unaudited. |
†† | Annualized. |
(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 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. | 31 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.93 | $ | 10.03 | $ | 9.34 | $ | 10.04 | $ | 9.27 | $ | 9.44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.18 | 0.38 | 0.41 | 0.40 | 0.40 | (a) | 0.45 | (a) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.30 | (0.10 | ) | 0.69 | (0.71 | ) | 0.78 | (0.16 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.48 | 0.28 | 1.10 | (0.31 | ) | 1.18 | 0.29 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.38 | ) | (0.41 | ) | (0.39 | ) | (0.41 | ) | (0.46 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 10.23 | $ | 9.93 | $ | 10.03 | $ | 9.34 | $ | 10.04 | $ | 9.27 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 4.85 | %(c) | 2.83 | % | 12.02 | % | (3.18 | %) | 12.97 | % | 3.29 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.53 | %†† | 3.78 | % | 4.21 | % | 4.00 | % | 4.06 | % | 4.99 | % | ||||||||||||
Net expenses | 0.54 | %†† | 0.56 | % | 0.53 | % | 0.54 | % | 0.54 | % | 0.56 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.54 | %†† | 0.57 | % | 0.58 | % | 0.59 | % | 0.59 | % | 0.64 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 46 | % | 68 | % | 111 | % | 125 | % | 138 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 707,855 | $ | 513,893 | $ | 314,005 | $ | 236,531 | $ | 142,603 | $ | 33,888 |
* | Unaudited. |
†† | Annualized. |
(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 return is not annualized. |
32 | MainStay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Tax Free Bond Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers five classes of shares. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008. Class I shares commenced operations on December 21, 2009. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $250,000 or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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 Class A and Investor Class 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 current income exempt from regular federal income tax.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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 based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with
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Notes to Financial Statements (Unaudited) (continued)
investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, there were no securities held by the Fund that were fair valued in such a manner.
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Municipal debt securities are valued at the evaluated mean prices supplied by a pricing agent or broker selected by the Manager, in consultation with the Subadvisor. Those values reflect broker/dealer supplied prices and electronic data processing techniques, if the evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Municipal debt securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. 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. These securities are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A Fund security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or Subadvisor
34 | MainStay Tax Free Bond Fund |
might wish to sell, and these securities could have the effect of decreasing the overall level of the 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 measuring 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 measures 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 by methods deemed reasonable in good faith in such a manner as the Board deems appropriate to reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was measured as of April 30, 2016 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2016, the Fund did not hold any securities deemed to be illiquid under procedures approved by the Board.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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 dividends from net investment income, if any, daily and intends to pay them at least monthly and declares and pays distributions from net realized capital gains, if any, at least 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. The straight-line method approximates the effective interest method for short-term investments. 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.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(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/or 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) 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., interest rate, security, or securities index). The Fund is subject to market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. Government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation 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 or futures commission merchant 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
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Notes to Financial Statements (Unaudited) (continued)
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. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures, and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. 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 futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. 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.
(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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(I) Concentration of Risk. The Fund may invest a substantial amount of its assets in municipal bonds whose interest is paid solely from revenues of similar projects. If the Fund concentrates its investments in this manner, it assumes the legal and economic risks relating to such projects and this may have a significant impact on the Fund’s investment performance. In addition, the Fund may invest more heavily in bonds from certain cities, states, territories or regions than others, which may increase the Fund’s exposure to losses resulting from
economic, political, or regulatory occurrences impacting these particular cities, states, territories or regions. Certain of the issuers in which the Fund may invest have recently experienced, or may experience, significant financial difficulties and repeated credit rating downgrades. For example, in recent years, Puerto Rico has experienced difficult financial and economic conditions, which may negatively affect the value of the Fund’s holdings in Puerto Rico municipal securities. The Fund’s vulnerability to potential losses associated with such developments may be reduced through investing in municipal securities that feature credit enhancements (such as bond insurance).
(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 related to 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. The Fund entered into futures contracts to help manage the duration and yield curve positioning of the portfolio. These derivatives are not accounted for as hedging instruments.
Fair value of derivative instruments as of April 30, 2016:
Asset Derivatives
Statement of Assets and Liabilities Location | Interest Rate Risk | Total | ||||||||
Futures Contracts | Net Assets-Net unrealized appreciation (depreciation) on investments and futures contracts (a) | $ | 1,131,721 | $ | 1,131,721 | |||||
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Total Fair Value | $ | 1,131,721 | $ | 1,131,721 | ||||||
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(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
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The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2016:
Realized Gain (Loss)
Statement of Operations Location | Interest Rate Risk | Total | ||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | (5,079,739 | ) | $ | (5,079,739 | ) | |||
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Total Realized Gain (Loss) | $ | (5,079,739 | ) | $ | (5,079,739 | ) | ||||
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Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Interest Rate Risk | Total | ||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | 503,423 | $ | 503,423 | |||||
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Total Change in Unrealized Appreciation (Depreciation) | $ | 503,423 | $ | 503,423 | ||||||
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Average Notional Amount
Interest Rate Risk | Total | |||||||
Futures Contracts Short | $ | (212,229,883 | ) | $ | (212,229,883 | ) | ||
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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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer 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 the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, which came into effect on February 28, 2015, 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; 0.425% from $500 million to $1 billion; and 0.40% in excess of $1 billion, plus a fee for fund accounting services, previously provided by New York Life Investments under a separate fund accounting agreement, furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. Prior to February 28, 2015, the Fund paid the Manager a monthly fee at an annual rate of the Fund’s average daily net assets as follows: 0.50% up to $500 million; 0.475% from $500 million to $1 billion; and 0.45% in excess of $1 billion plus the fund accounting service fee.
Prior to February 28, 2015, New York Life Investments had contractually agreed to waive a portion of its management fee so that the management fee did not exceed 0.45% up to $500 million; 0.425% from $500 million to $1 billion; and 0.40% in excess of $1 billion.
During the six-month period ended April 30, 2016, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.43% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses for Class A shares do not exceed 0.82% 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. This agreement will remain in effect until March 1, 2017, and shall renew automatically for one year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval by 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.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $3,601,504.
State Street 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 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 Class A and Investor Class Plans, the Distributor receives a monthly distribution fee from the Class A and Investor Class shares at an annual rate of 0.25% of the average daily net assets of the Class A and Investor Class 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
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Notes to Financial Statements (Unaudited) (continued)
distribution fee at an annual rate of 0.25% 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 0.50%. Class I shares are not subject to a distribution and/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. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $37,988 and $5,179, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $77,361, $14,469 and $7,137, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 338,401 | ||
Investor Class | 6,593 | |||
Class B | 6,808 | |||
Class C | 79,339 | |||
Class I | 242,253 |
(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.
Note 4–Federal Income Tax
Under the Regulated Investment Company Modernization Act of 2010, the Fund is 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.
As of October 31, 2015, for federal income tax purposes, capital loss carryforwards of $40,232,940 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 realized 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 Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
2017 | $ | 3,952 | $ | — | ||||
2019 | 2,136 | — | ||||||
Unlimited | 26,867 | 7,278 | ||||||
Total | $ | 32,955 | $ | 7,278 |
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 313,042 | ||
Exempt Interest Dividends | 43,489,359 | |||
Total | $ | 43,802,401 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
38 | MainStay Tax Free Bond Fund |
Note 7–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $823,585 and $356,768, respectively.
Note 8–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 29,053,797 | $ | 294,203,872 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,011,331 | 10,228,232 | ||||||
Shares redeemed | (12,011,424 | ) | (121,761,113 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 18,053,704 | 182,670,991 | ||||||
Shares converted into Class A (See Note 1) | 154,353 | 1,557,324 | ||||||
Shares converted from Class A (See Note 1) | (21,034 | ) | (212,868 | ) | ||||
|
| |||||||
Net increase (decrease) | 18,187,023 | $ | 184,015,447 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 46,277,057 | $ | 463,456,979 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,508,116 | 15,013,515 | ||||||
Shares redeemed | (13,845,124 | ) | (137,611,020 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 33,940,049 | 340,859,474 | ||||||
Shares converted into Class A (See Note 1) | 204,290 | 2,047,068 | ||||||
Shares converted from Class A (See Note 1) | (89,249 | ) | (890,021 | ) | ||||
|
| |||||||
Net increase (decrease) | 34,055,090 | $ | 342,016,521 | |||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 134,408 | $ | 1,362,772 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 24,260 | 246,377 | ||||||
Shares redeemed | (111,481 | ) | (1,127,964 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 47,187 | 481,185 | ||||||
Shares converted into Investor Class (See Note 1) | 27,925 | 283,572 | ||||||
Shares converted from Investor Class (See Note 1) | (149,550 | ) | (1,515,796 | ) | ||||
|
| |||||||
Net increase (decrease) | (74,438 | ) | $ | (751,039 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 164,904 | $ | 1,655,664 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 53,875 | 539,748 | ||||||
Shares redeemed | (214,189 | ) | (2,144,940 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 4,590 | 50,472 | ||||||
Shares converted into Investor Class (See Note 1) | 100,312 | 1,004,190 | ||||||
Shares converted from Investor Class (See Note 1) | (186,853 | ) | (1,882,520 | ) | ||||
|
| |||||||
Net increase (decrease) | (81,951 | ) | $ | (827,858 | ) | |||
|
|
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 238,331 | $ | 2,408,436 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 23,547 | 238,007 | ||||||
Shares redeemed | (214,378 | ) | (2,175,080 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 47,500 | 471,363 | ||||||
Shares converted from Class B (See Note 1) | (11,150 | ) | (112,232 | ) | ||||
|
| |||||||
Net increase (decrease) | 36,350 | $ | 359,131 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 596,022 | $ | 5,952,848 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 42,430 | 422,592 | ||||||
Shares redeemed | (157,372 | ) | (1,564,408 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 481,080 | 4,811,032 | ||||||
Shares converted from Class B (See Note 1) | (27,983 | ) | (278,717 | ) | ||||
|
| |||||||
Net increase (decrease) | 453,097 | $ | 4,532,315 | |||||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 5,185,597 | $ | 52,400,514 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 214,320 | 2,168,378 | ||||||
Shares redeemed | (1,398,935 | ) | (14,128,338 | ) | ||||
|
| |||||||
Net increase (decrease) | 4,000,982 | $ | 40,440,554 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 5,178,766 | $ | 51,727,202 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 377,993 | 3,768,585 | ||||||
Shares redeemed | (2,511,041 | ) | (25,008,168 | ) | ||||
|
| |||||||
Net increase (decrease) | 3,045,718 | $ | 30,487,619 | |||||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 22,117,440 | $ | 223,751,024 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 495,336 | 5,013,104 | ||||||
Shares redeemed | (5,147,090 | ) | (51,973,852 | ) | ||||
|
| |||||||
Net increase (decrease) | 17,465,686 | $ | 176,790,276 | |||||
|
| |||||||
Year ended October 31, 2015 : | ||||||||
Shares sold | 28,783,951 | $ | 287,469,254 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 759,448 | 7,569,648 | ||||||
Shares redeemed | (9,089,348 | ) | (90,368,310 | ) | ||||
|
| |||||||
Net increase (decrease) | 20,454,051 | $ | 204,670,592 | |||||
|
|
39 |
Notes to Financial Statements (Unaudited) (continued)
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
40 | MainStay Tax Free Bond Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Tax Free Bond Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and MacKay Shields in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, and responses from New York Life Investments and MacKay Shields to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Funds’ distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and MacKay Shields; (ii) the investment performance of the Fund, New York Life Investments and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay Shields from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and MacKay Shields. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and MacKay Shields
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
41 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that MacKay Shields provides to the Fund. The Board evaluated MacKay Shields’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined MacKay Shields’ track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay Shields, and MacKay Shields’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay Shields. The Board also reviewed MacKay Shields’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments and MacKay Shields under the Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and MacKay Shields must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to
42 | MainStay Tax Free Bond Fund |
the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed
information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to MacKay Shields are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other
43 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
44 | MainStay Tax Free Bond 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 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 or proxy voting record 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).
45 |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1697008 MS164-16 | MST10-06/16 (NYLIM) NL013 |
MainStay Convertible Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –5.60 –0.11 | %
|
| –9.14 –3.85 | %
|
| 3.98 5.16 | %
|
| 5.73 6.33 | %
|
| 0.99 0.99 | %
| |||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –5.62 –0.13 |
|
| –9.24 –3.96 |
|
| 3.79 4.97 |
|
| 5.56 6.16 |
|
| 1.15 1.15 |
| |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges |
| –5.13 –0.51 |
|
| –9.11 –4.69 |
|
| 3.88 4.18 |
|
| 5.37 5.37 |
|
| 1.90 1.90 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges |
| –1.50 –0.57 |
|
| –5.58 –4.69 |
|
| 4.17 4.17 |
|
| 5.36 5.36 |
|
| 1.90 1.90 |
| |||||||
Class I Shares4 | No Sales Charge | 0.02 | –3.54 | 5.44 | 6.58 | 0.74 |
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, changes 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 may 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 (if any), 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 would likely have been different. |
4. | Performance figures for Class I shares, first offered on November 28, 2008, include the historical performance of Class B shares through November 27, 2008, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for Class I shares would likely have been different. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
BofA Merrill Lynch All U.S. Convertibles Index5 | –2.92 | % | –6.70 | % | 6.15 | % | 6.02 | % | ||||||||
Average Lipper Convertible Securities Fund6 | –2.92 | –7.17 | 3.79 | 4.48 |
5. | The BofA Merrill Lynch All U.S. Convertibles Index is a market-capitalization weighted index of domestic corporate convertible securities. In order to be included in this Index, bonds and preferred stocks must be convertible only to common stock. The BofA Merrill Lynch All U.S. Convertibles Index is the Fund’s broad-based securities market index for comparison purposes. Total returns assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The Average Lipper Convertible Securities Fund is representative of funds that invest primarily in convertible bonds and/or convertible preferred stock. 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 Convertible Fund |
Cost in Dollars of a $1,000 Investment in MainStay Convertible Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 998.90 | $ | 5.02 | $ | 1,019.80 | $ | 5.07 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 998.70 | $ | 5.86 | $ | 1,019.00 | $ | 5.92 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 994.90 | $ | 9.57 | $ | 1,015.30 | $ | 9.67 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 994.30 | $ | 9.57 | $ | 1,015.30 | $ | 9.67 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,000.20 | $ | 3.78 | $ | 1,021.10 | $ | 3.82 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.01% for Class A, 1.18% for Investor Class, 1.93% for Class B and Class C and 0.76% for Class I) multiplied by the average account value over the period, divided by 366 and multiplied by 182 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7 |
Portfolio Composition as of April 30, 2016 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings or Issuers Held as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | Jarden Corp., 1.875%, due 9/15/18 |
2. | Priceline Group, Inc. (The), 0.35%–1.00%, due 3/15/18–6/15/20 |
3. | Danaher Corp., (zero coupon), due 1/22/21 |
4. | Teleflex, Inc., 3.875%, due 8/1/17 |
5. | Air Lease Corp., 3.875%, due 12/1/18 |
6. | JPMorgan Chase & Co. (Convertible into Schlumberger, Ltd.), (zero coupon), due 5/3/17 |
7. | Xilinx, Inc., 2.625%, due 6/15/17 |
8. | Hess Corp. |
9. | BioMarin Pharmaceutical, Inc., 0.75%, due 10/15/18 |
10. | Macquarie Infrastructure Corp., 2.875%, due 7/15/19 |
8 | MainStay Convertible Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio manager Edward Silverstein, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay Convertible Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay Convertible Fund returned –0.11% for Class A shares, –0.13% for Investor Class shares, –0.51% for Class B shares and –0.57% for Class C shares for the six months ended April 30, 2016. Over the same period, Class I shares returned 0.02%. During the reporting period, all share classes outperformed the –2.92% return of the BofA Merrill Lynch All U.S. Convertibles Index,1 which is the Fund’s broad-based securities-market index. During the six months ended April 30, 2016, all share classes also outperformed the –2.92% return of the Average Lipper2 Convertible Securities Fund. See page 5 for Fund returns with applicable sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund was able to avoid most of the securities in the convertible market that suffered outsized declines resulting from company-specific troubles, such as SunEdison, Clovis Oncology and Iconix Brand Group. During the reporting period, the Fund increased its weighting in the energy sector, which enhanced performance relative to the BofA Merrill Lynch All U.S. Convertibles Index. The commodity environment improved meaningfully during the reporting period, which benefited the Fund’s relative performance as crude oil rallied substantially. The Fund purchased convertible preferred shares of crude oil producer Hess during the reporting period, and the position was a strong performer for the Fund.
What was the Fund’s duration3 strategy during the reporting period?
Convertible bond prices tend to vary with changes in the price of the underlying equity security rather than with changes in interest rates. For this reason, duration does not guide our investment decisions regarding the Fund’s convertible security holdings. At the end of the reporting period, the effective duration of the Fund was 3.42 years.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s absolute performance and which sectors were particularly weak?
The strongest positive contributions to absolute performance came from the energy and consumer staples sectors. (Contributions take weightings and total returns into account.)
The Fund experienced large gains in several energy-related holdings. Convertible preferred shares of Hess were the Fund’s second-best performer in terms of dollars earned during the reporting period. The company benefited from improved investor sentiment, as the price for West Texas crude oil surged from $26 to more than $45 per barrel. The Fund also experienced large gains in two other energy-related holdings, Helix Energy and Southwestern Energy. Helix Energy’s bonds rose as investors concluded that the company was unlikely to face financial distress, and the company’s convertible bonds rose. Convertible preferred shares of Southwestern Energy rose during the reporting period, even though most of the company’s revenue comes from the sale of natural gas. Natural gas prices in the U.S. remained depressed despite the rise in crude oil prices. Convertible securities of several consumer staples companies were among the Fund’s largest contributors to absolute performance for the reporting period. Convertible bonds of consumer products company Jarden and convertible preferred shares of consumer products companies Post Holdings and Tyson Foods were among the Fund’s strongest performers. Jarden’s common shares and convertible bonds rose during the reporting period after the company agreed to be acquired by household products company Newell Brands. Post Holdings and Tyson Foods advanced after reporting several consecutive quarters of better-than-expected sales and earnings.
The biggest detractors from the Fund’s absolute performance came from the health care and information technology sectors. Convertible bonds of several health care–related companies were poor performers as investors shunned the sector amid concerns about Canadian drug company Valeant Pharmaceuticals International. There were also general concerns related to biotechnology valuations, as the sector has been a top performer for the past several years. Convertible bonds of BioMarin, Gilead Sciences and Teva Pharmaceutical Industries, Ltd., along with convertible preferred shares of Allergan, were poor performers during the reporting period. In addition to suffering from general sector weakness, BioMarin’s share price declined after the U.S. Food and Drug Administration rejected the company’s drug candidate for muscular dystrophy. Allergan’s share price declined after new U.S. Treasury rules caused the company to cancel its planned merger with Pfizer.
In the information technology sector, convertible bonds of Micron Technology were weak performers, as investors became increasingly concerned that a glut of low-end commodity chips would weigh on pricing. Convertible bonds of Microchip and Xilinx were weak performers after both companies reported earnings and provided disappointing forward guidance. Convertible bonds of analytics company Verint Systems declined
1. | See footnote on page 6 for more information on the BofA Merrill Lynch All U.S. Convertibles Index. |
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 years and is considered a more accurate sensitivity gauge than average maturity. |
9 |
after the company provided earnings guidance for 2016 that was well below investor expectations.
Did the Fund make any significant purchases and sales during the reporting period?
During the reporting period, noteworthy purchases included convertible preferred shares of oil and gas producer Hess and software developer ServiceNow. The Fund increased its position in Medicare health maintenance organization (HMO) Molina Healthcare.
The Fund sold several positions because of either disappointing results or deteriorating fundamentals. These sales included convertible bonds of drug company Horizon Pharmaceutical, Internet company HomeAway and health care products company Insulet.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund decreased its weightings in the financial, health care and information technology sectors.
Over the same period, the Fund increased its weightings in the industrials, consumer staples, energy and consumer discretionary sectors.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2016, the Fund held overweight positions relative to the BofA Merrill Lynch U.S. All Convertibles Index in the consumer discretionary, energy and industrials sectors. As of the same date, the Fund held underweight positions relative to the Index in the financials and utilities sectors and held neutrally weighted positions in the telecommunication services, information technology, health care and materials 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 forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay Convertible Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Principal Amount | Value | |||||||
Convertible Securities 92.6%† Convertible Bonds 76.6% |
| |||||||
Auto Manufacturers 2.1% |
| |||||||
Fiat Chrysler Automobiles N.V. | $ | 7,307,800 | $ | 5,320,992 | ||||
Wabash National Corp. | 8,792,000 | 11,742,815 | ||||||
|
| |||||||
17,063,807 | ||||||||
|
| |||||||
Biotechnology 5.0% |
| |||||||
¨BioMarin Pharmaceutical, Inc. | 15,698,000 | 18,494,206 | ||||||
Illumina, Inc. | 4,300,000 | 4,305,375 | ||||||
0.50%, due 6/15/21 | 6,977,000 | 7,221,195 | ||||||
Ionis Pharmaceuticals, Inc. | 4,375,000 | 4,060,547 | ||||||
Medicines Co. (The) | 4,252,000 | 5,854,473 | ||||||
|
| |||||||
39,935,796 | ||||||||
|
| |||||||
Commercial Services 5.2% |
| |||||||
Carriage Services, Inc. | 6,573,000 | 7,895,816 | ||||||
Live Nation Entertainment, Inc. | 15,125,000 | 15,134,453 | ||||||
¨Macquarie Infrastructure Corp. | 15,982,000 | 18,149,559 | ||||||
|
| |||||||
41,179,828 | ||||||||
|
| |||||||
Computers 1.5% |
| |||||||
SanDisk Corp. | 11,688,000 | 12,162,825 | ||||||
|
| |||||||
Finance—Leasing Companies 2.6% |
| |||||||
¨Air Lease Corp. | 15,781,000 | 20,909,825 | ||||||
|
| |||||||
Health Care—Products 6.5% |
| |||||||
¨Danaher Corp. | 8,558,000 | 24,058,677 | ||||||
Hologic, Inc. | 4,120,000 | 5,219,525 | ||||||
¨Teleflex, Inc. | 8,849,000 | 22,465,399 | ||||||
|
| |||||||
51,743,601 | ||||||||
|
| |||||||
Health Care—Services 3.2% |
| |||||||
Anthem, Inc. | 7,160,000 | 13,939,625 | ||||||
Molina Healthcare, Inc. | 10,151,000 | 11,381,809 | ||||||
|
| |||||||
25,321,434 | ||||||||
|
|
Principal Amount | Value | |||||||
Home Builders 0.9% |
| |||||||
Lennar Corp. | $ | 3,785,000 | $ | 7,333,437 | ||||
|
| |||||||
Household Products & Wares 3.9% |
| |||||||
¨Jarden Corp. | 15,969,000 | 30,846,551 | ||||||
|
| |||||||
Insurance 1.1% |
| |||||||
MGIC Investment Corp. | 2,918,000 | 3,556,312 | ||||||
Radian Group, Inc. | 4,321,000 | 5,482,269 | ||||||
|
| |||||||
9,038,581 | ||||||||
|
| |||||||
Internet 4.5% |
| |||||||
¨Priceline Group, Inc. (The) | 7,782,000 | 9,542,677 | ||||||
1.00%, due 3/15/18 | 12,338,000 | 18,345,064 | ||||||
Twitter, Inc. | 9,161,000 | 8,004,424 | ||||||
|
| |||||||
35,892,165 | ||||||||
|
| |||||||
Machinery—Diversified 1.3% |
| |||||||
Chart Industries, Inc. | 11,153,000 | 10,295,613 | ||||||
|
| |||||||
Media 0.8% |
| |||||||
Liberty Media Corp. | 5,925,000 | 5,984,250 | ||||||
|
| |||||||
Oil & Gas 2.1% |
| |||||||
Whiting Petroleum Corp. | 21,588,000 | 16,406,880 | ||||||
|
| |||||||
Oil & Gas Services 4.6% |
| |||||||
Helix Energy Solutions Group, Inc. | 11,830,000 | 10,950,143 | ||||||
¨JPMorgan Chase & Co. (Convertible into Schlumberger, Ltd.) | 14,750,000 | 20,821,100 | ||||||
Newpark Resources, Inc. | 2,523,000 | 2,299,084 | ||||||
SEACOR Holdings, Inc. | 2,507,000 | 2,458,427 | ||||||
|
| |||||||
36,528,754 | ||||||||
|
| |||||||
Pharmaceuticals 2.3% |
| |||||||
Array BioPharma, Inc. | 2,799,000 | 2,305,676 | ||||||
Depomed, Inc. | 7,180,000 | 7,947,363 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2016, 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Convertible Bonds (continued) | ||||||||
Pharmaceuticals (continued) |
| |||||||
Teva Pharmaceutical Finance Co. LLC | $ | 5,832,000 | $ | 7,701,885 | ||||
|
| |||||||
17,954,924 | ||||||||
|
| |||||||
Real Estate Investment Trusts 1.6% |
| |||||||
SL Green Operating Partnership, L.P. | 9,324,000 | 12,651,502 | ||||||
|
| |||||||
Semiconductors 13.6% |
| |||||||
InvenSense, Inc. | 3,946,000 | 3,691,976 | ||||||
Lam Research Corp. | 6,444,000 | 8,997,435 | ||||||
Microchip Technology, Inc. | 17,384,000 | 18,111,955 | ||||||
Micron Technology, Inc. | 7,770,000 | 5,540,981 | ||||||
NVIDIA Corp. | 8,101,000 | 14,475,474 | ||||||
NXP Semiconductors N.V. | 15,332,000 | 17,440,150 | ||||||
ON Semiconductor Corp. | 9,913,000 | 9,039,417 | ||||||
2.625%, due 12/15/26 | 8,111,000 | 8,653,423 | ||||||
Rambus, Inc. | 3,292,000 | 3,775,513 | ||||||
¨Xilinx, Inc. | 12,326,000 | 18,535,223 | ||||||
|
| |||||||
108,261,547 | ||||||||
|
| |||||||
Software 10.2% |
| |||||||
Bottomline Technologies, Inc. | 8,408,000 | 8,765,340 | ||||||
Citrix Systems, Inc. | 5,382,000 | 6,105,206 | ||||||
CSG Systems International, Inc. | 1,639,000 | 1,775,242 | ||||||
Medidata Solutions, Inc. | 16,200,000 | 17,121,375 | ||||||
Proofpoint, Inc. | 2,051,000 | 2,104,839 | ||||||
1.25%, due 12/15/18 | 1,889,000 | 2,959,827 | ||||||
Red Hat, Inc. | 6,040,000 | 7,470,725 | ||||||
Salesforce.com, Inc. | 9,409,000 | 11,890,624 | ||||||
ServiceNow, Inc. | 6,825,000 | 7,938,328 | ||||||
Verint Systems, Inc. | 17,084,000 | 15,439,665 | ||||||
|
| |||||||
81,571,171 | ||||||||
|
|
Principal Amount | Value | |||||||
Transportation 3.6% |
| |||||||
Atlas Air Worldwide Holdings, Inc. | $ | 5,819,000 | $ | 4,924,329 | ||||
Echo Global Logistics, Inc. | 8,755,000 | 8,421,216 | ||||||
XPO Logistics, Inc. | 8,452,000 | 15,578,092 | ||||||
|
| |||||||
28,923,637 | ||||||||
|
| |||||||
Total Convertible Bonds | 610,006,128 | |||||||
|
| |||||||
Shares | ||||||||
Convertible Preferred Stocks 16.0% | ||||||||
Chemicals 1.3% |
| |||||||
A. Schulman, Inc. | 14,423 | 10,528,790 | ||||||
|
| |||||||
Food 2.4% |
| |||||||
Post Holdings, Inc. | 60,463 | 9,424,670 | ||||||
Tyson Foods, Inc. | 133,648 | 9,748,285 | ||||||
|
| |||||||
19,172,955 | ||||||||
|
| |||||||
Hand & Machine Tools 1.1% |
| |||||||
Stanley Black & Decker, Inc. | 75,479 | 8,938,223 | ||||||
|
| |||||||
Insurance 0.4% |
| |||||||
Maiden Holdings, Ltd. | 61,807 | 2,927,180 | ||||||
|
| |||||||
Mining 0.4% |
| |||||||
Alcoa, Inc. | 88,185 | 3,358,085 | ||||||
|
| |||||||
Oil & Gas 3.2% |
| |||||||
¨Hess Corp. | 243,681 | 18,524,630 | ||||||
Sanchez Energy Corp. | 35,932 | 774,996 | ||||||
Southwestern Energy Co. | 184,819 | 5,856,914 | ||||||
|
| |||||||
25,156,540 | ||||||||
|
| |||||||
Pharmaceuticals 3.2% |
| |||||||
Allergan PLC | 11,408 | 9,257,478 |
12 | MainStay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Convertible Preferred Stocks (continued) | ||||||||
Pharmaceuticals (continued) |
| |||||||
Teva Pharmaceutical Industries, Ltd. | 17,557 | $ | 15,818,857 | |||||
|
| |||||||
25,076,335 | ||||||||
|
| |||||||
Real Estate Investment Trusts 3.3% |
| |||||||
American Tower Corp. | 109,017 | 11,571,064 | ||||||
Crown Castle International Corp. | 109,784 | 11,660,708 | ||||||
Welltower, Inc. | 47,800 | 2,950,694 | ||||||
|
| |||||||
26,182,466 | ||||||||
|
| |||||||
Telecommunications 0.7% |
| |||||||
T-Mobile U.S., Inc. | 85,219 | 5,778,700 | ||||||
|
| |||||||
Total Convertible Preferred Stocks | 127,119,274 | |||||||
|
| |||||||
Total Convertible Securities | 737,125,402 | |||||||
|
| |||||||
Common Stocks 4.6% | ||||||||
Aerospace & Defense 0.7% |
| |||||||
United Technologies Corp. | 53,105 | 5,542,569 | ||||||
|
| |||||||
Airlines 1.3% |
| |||||||
Delta Air Lines, Inc. | 252,338 | 10,514,924 | ||||||
|
| |||||||
Auto Manufacturers 0.5% |
| |||||||
General Motors Co. | 108,269 | 3,442,954 | ||||||
|
| |||||||
Banks 0.7% |
| |||||||
Bank of America Corp. | 398,621 | 5,803,922 | ||||||
|
| |||||||
Internet 0.5% |
| |||||||
Expedia, Inc. | 33,200 | 3,843,564 | ||||||
|
| |||||||
Oil & Gas Services 0.9% |
| |||||||
Baker Hughes, Inc. | 51,357 | 2,483,625 | ||||||
Halliburton Co. | 113,326 | 4,681,497 | ||||||
|
| |||||||
7,165,122 | ||||||||
|
| |||||||
Total Common Stocks |
| 36,313,055 | ||||||
|
| |||||||
Number of Warrants | Value | |||||||
Warrants 0.0%‡ | ||||||||
Auto Manufacturers 0.0%‡ |
| |||||||
General Motors Co. | 1,016 | $ | 14,102 | |||||
|
| |||||||
Total Warrants | 14,102 | |||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 2.8% | ||||||||
Repurchase Agreement 2.8% | ||||||||
Fixed Income Clearing Corp. | $ | 22,607,216 | 22,607,216 | |||||
|
| |||||||
Total Short-Term Investment | 22,607,216 | |||||||
|
| |||||||
Total Investments | 100.0 | % | 796,059,775 | |||||
Other Assets, Less Liabilities | (0.0 | )‡ | (234,470 | ) | ||||
Net Assets | 100.0 | % | $ | 795,825,305 |
‡ | Less than one-tenth of a percent. |
(a) | Step coupon—Rate shown was the rate in effect as of April 30, 2016. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Synthetic Convertible Bond—Security structured by an investment bank that provides exposure to a specific company’s stock. As of April 30, 2016, the total market value of this security was $20,821,100, which represented 2.6% of the Fund’s net assets. |
(d) | Non-income producing security. |
(e) | As of April 30, 2016, cost was $768,964,876 for federal income tax purposes and net unrealized appreciation was as follows: |
Gross unrealized appreciation | $ | 87,170,297 | ||
Gross unrealized depreciation | (60,075,398 | ) | ||
|
| |||
Net unrealized appreciation | $ | 27,094,899 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Convertible Securities | ||||||||||||||||
Convertible Bonds | $ | — | $ | 610,006,128 | $ | — | $ | 610,006,128 | ||||||||
Convertible Preferred Stocks (b) | 116,919,608 | 10,199,666 | — | 127,119,274 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Convertible Securities | 116,919,608 | 620,205,794 | — | 737,125,402 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks | 36,313,055 | — | — | 36,313,055 | ||||||||||||
Warrants | 14,102 | — | — | 14,102 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 22,607,216 | — | 22,607,216 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 153,246,765 | $ | 642,813,010 | $ | — | $ | 796,059,775 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 2 securities valued at $9,424,670 and $774,996 are held in Food and Oil & Gas, respectively, within the Convertible Preferred Stocks section of the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
14 | MainStay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 796,059,775 | ||
Cash | 39,806 | |||
Receivables: | ||||
Dividends and interest | 3,048,047 | |||
Fund shares sold | 2,780,564 | |||
Other assets | 60,581 | |||
|
| |||
Total assets | 801,988,773 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 3,335,393 | |||
Fund shares redeemed | 1,951,727 | |||
Manager (See Note 3) | 385,634 | |||
Transfer agent (See Note 3) | 226,122 | |||
NYLIFE Distributors (See Note 3) | 179,804 | |||
Professional fees | 40,816 | |||
Shareholder communication | 31,876 | |||
Custodian | 4,802 | |||
Trustees | 1,095 | |||
Accrued expenses | 6,199 | |||
|
| |||
Total liabilities | 6,163,468 | |||
|
| |||
Net assets | $ | 795,825,305 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 522,209 | ||
Additional paid-in capital | 761,839,597 | |||
|
| |||
762,361,806 | ||||
Distributions in excess of net investment income | (10,743,372 | ) | ||
Accumulated net realized gain (loss) on investments | 5,333,333 | |||
Net unrealized appreciation (depreciation) on investments | 38,873,538 | |||
|
| |||
Net assets | $ | 795,825,305 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 369,848,482 | ||
|
| |||
Shares of beneficial interest outstanding | 24,263,141 | |||
|
| |||
Net asset value per share outstanding | $ | 15.24 | ||
Maximum sales charge (5.50% of offering price) | 0.89 | |||
|
| |||
Maximum offering price per share outstanding | $ | 16.13 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 80,446,698 | ||
|
| |||
Shares of beneficial interest outstanding | 5,279,791 | |||
|
| |||
Net asset value per share outstanding | $ | 15.24 | ||
Maximum sales charge (5.50% of offering price) | 0.89 | |||
|
| |||
Maximum offering price per share outstanding | $ | 16.13 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 23,389,775 | ||
|
| |||
Shares of beneficial interest outstanding | 1,540,928 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.18 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 82,987,376 | ||
|
| |||
Shares of beneficial interest outstanding | 5,473,629 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.16 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 239,152,974 | ||
|
| |||
Shares of beneficial interest outstanding | 15,663,407 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.27 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 6,179,130 | ||
Dividends (a) | 3,284,978 | |||
|
| |||
Total income | 9,464,108 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 2,403,137 | |||
Distribution/Service—Class A (See Note 3) | 467,184 | |||
Distribution/Service—Investor Class (See Note 3) | 97,248 | |||
Distribution/Service—Class B (See Note 3) | 119,764 | |||
Distribution/Service—Class C (See Note 3) | 422,571 | |||
Transfer agent (See Note 3) | 660,864 | |||
Registration | 50,499 | |||
Professional fees | 49,621 | |||
Shareholder communication | 44,348 | |||
Trustees | 10,029 | |||
Custodian | 6,629 | |||
Miscellaneous | 16,137 | |||
|
| |||
Total expenses | 4,348,031 | |||
|
| |||
Net investment income (loss) | 5,116,077 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 5,359,714 | |||
Net change in unrealized appreciation (depreciation) on investments | (15,335,241 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | (9,975,527 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (4,859,450 | ) | |
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $40,884. |
16 | MainStay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 5,116,077 | $ | 5,177,856 | ||||
Net realized gain (loss) on investments | 5,359,714 | 69,105,724 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (15,335,241 | ) | (73,782,641 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (4,859,450 | ) | 500,939 | |||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (13,247,540 | ) | (9,959,809 | ) | ||||
Investor Class | (2,638,249 | ) | (2,048,298 | ) | ||||
Class B | (741,300 | ) | (568,359 | ) | ||||
Class C | (2,613,611 | ) | (1,754,966 | ) | ||||
Class I | (9,303,287 | ) | (8,710,964 | ) | ||||
|
| |||||||
(28,543,987 | ) | (23,042,396 | ) | |||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | (17,162,761 | ) | (30,640,139 | ) | ||||
Investor Class | (3,477,638 | ) | (6,815,824 | ) | ||||
Class B | (1,106,480 | ) | (2,397,415 | ) | ||||
Class C | (3,897,027 | ) | (7,371,727 | ) | ||||
Class I | (11,748,242 | ) | (24,752,815 | ) | ||||
|
| |||||||
(37,392,148 | ) | (71,977,920 | ) | |||||
|
| |||||||
Total dividends and distributions to shareholders | (65,936,135 | ) | (95,020,316 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 100,192,830 | 331,439,523 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 56,279,969 | 77,975,989 | ||||||
Cost of shares redeemed | (196,355,514 | ) | (315,067,713 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (39,882,715 | ) | 94,347,799 | |||||
|
| |||||||
Net increase (decrease) in net assets | (110,678,300 | ) | (171,578 | ) | ||||
Net Assets | ||||||||
Beginning of period | 906,503,605 | 906,675,183 | ||||||
|
| |||||||
End of period | $ | 795,825,305 | $ | 906,503,605 | ||||
|
| |||||||
Undistributed (distributions in excess of) net investment income at end of period | $ | (10,743,372 | ) | $ | 12,684,538 | |||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Six months April 30, | Year ended October 31, | |||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 16.51 | $ | 18.33 | $ | 17.33 | $ | 14.79 | $ | 15.12 | $ | 15.13 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.10 | 0.11 | 0.15 | 0.18 | 0.29 | 0.33 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.13 | ) | (0.00 | )‡ | 1.59 | 3.29 | 0.46 | (0.02 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.03 | ) | 0.11 | 1.74 | 3.47 | 0.75 | 0.31 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.54 | ) | (0.47 | ) | (0.51 | ) | (0.31 | ) | (0.31 | ) | (0.32 | ) | ||||||||||||
From net realized gain on investments | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | (0.77 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.24 | ) | (1.93 | ) | (0.74 | ) | (0.93 | ) | (1.08 | ) | (0.32 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 15.24 | $ | 16.51 | $ | 18.33 | $ | 17.33 | $ | 14.79 | $ | 15.12 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (0.11 | %)(c) | 0.58 | % | 10.42 | % | 24.78 | % | 5.30 | % | 2.13 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 1.33 | % †† | 0.62 | % | 0.86 | % | 1.13 | % | 1.96 | % | 2.08 | % | ||||||||||||
Net expenses | 1.01 | % †† | 0.99 | % | 0.97 | % | 0.99 | % | 1.00 | % | 0.99 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 60 | % | 59 | % | 77 | % | 61 | % | 80 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 369,848 | $ | 408,067 | $ | 384,987 | $ | 391,577 | $ | 317,267 | $ | 367,398 |
* | Unaudited. |
†† | 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. |
Six months April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 16.50 | $ | 18.33 | $ | 17.32 | $ | 14.79 | $ | 15.11 | $ | 15.12 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.09 | 0.08 | 0.12 | 0.15 | 0.26 | 0.30 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | (0.01 | ) | 1.60 | 3.28 | 0.47 | (0.02 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.03 | ) | 0.07 | 1.72 | 3.43 | 0.73 | 0.28 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.53 | ) | (0.44 | ) | (0.48 | ) | (0.28 | ) | (0.28 | ) | (0.29 | ) | ||||||||||||
From net realized gain on investments | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | (0.77 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.23 | ) | (1.90 | ) | (0.71 | ) | (0.90 | ) | (1.05 | ) | (0.29 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 15.24 | $ | 16.50 | $ | 18.33 | $ | 17.32 | $ | 14.79 | $ | 15.11 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (0.13 | %)(c) | 0.40 | % | 10.21 | % | 24.42 | % | 5.07 | % | 1.98 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 1.16 | % †† | 0.45 | % | 0.67 | % | 0.93 | % | 1.74 | % | 1.89 | % | ||||||||||||
Net expenses | 1.18 | % †† | 1.15 | % | 1.16 | % | 1.22 | % | 1.22 | % | 1.19 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 60 | % | 59 | % | 77 | % | 61 | % | 80 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 80,447 | $ | 82,052 | $ | 85,850 | $ | 86,136 | $ | 80,378 | $ | 85,747 |
* | Unaudited. |
†† | 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. |
18 | MainStay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 16.45 | $ | 18.30 | $ | 17.37 | $ | 14.84 | $ | 15.15 | $ | 15.16 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.03 | (0.05 | ) | (0.01 | ) | 0.03 | 0.15 | 0.18 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.13 | ) | 0.01 | 1.59 | 3.29 | 0.47 | (0.02 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.10 | ) | (0.04 | ) | 1.58 | 3.32 | 0.62 | 0.16 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.47 | ) | (0.35 | ) | (0.42 | ) | (0.17 | ) | (0.16 | ) | (0.17 | ) | ||||||||||||
From net realized gain on investments | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | (0.77 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.17 | ) | (1.81 | ) | (0.65 | ) | (0.79 | ) | (0.93 | ) | (0.17 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 15.18 | $ | 16.45 | $ | 18.30 | $ | 17.37 | $ | 14.84 | $ | 15.15 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (0.51 | %)(c) | (0.36 | %) | 9.41 | % | 23.50 | % | 4.31 | % | 1.19 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.41 | % †† | (0.30 | %) | (0.08 | %) | 0.19 | % | 0.99 | % | 1.13 | % | ||||||||||||
Net expenses | 1.93 | % †† | 1.90 | % | 1.91 | % | 1.97 | % | 1.97 | % | 1.94 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 60 | % | 59 | % | 77 | % | 61 | % | 80 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 23,390 | $ | 26,537 | $ | 29,765 | $ | 32,629 | $ | 33,103 | $ | 43,420 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 16.43 | $ | 18.29 | $ | 17.36 | $ | 14.82 | $ | 15.14 | $ | 15.15 | ||||||||||||
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Net investment income (loss) (a) | 0.03 | (0.05 | ) | (0.01 | ) | 0.03 | 0.15 | 0.18 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.13 | ) | (0.00 | )‡ | 1.59 | 3.30 | 0.46 | (0.02 | ) | |||||||||||||||
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Total from investment operations | (0.10 | ) | (0.05 | ) | 1.58 | 3.33 | 0.61 | 0.16 | ||||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.47 | ) | (0.35 | ) | (0.42 | ) | (0.17 | ) | (0.16 | ) | (0.17 | ) | ||||||||||||
From net realized gain on investments | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | (0.77 | ) | — | |||||||||||||
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Total dividends and distributions | (1.17 | ) | (1.81 | ) | (0.65 | ) | (0.79 | ) | (0.93 | ) | (0.17 | ) | ||||||||||||
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Net asset value at end of period | $ | 15.16 | $ | 16.43 | $ | 18.29 | $ | 17.36 | $ | 14.82 | $ | 15.14 | ||||||||||||
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Total investment return (b) | (0.57 | %)(c) | (0.30 | %) | 9.35 | % | 23.60 | % | 4.24 | % | 1.20 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.41 | % †† | (0.30 | %) | (0.08 | %) | 0.19 | % | 0.98 | % | 1.13 | % | ||||||||||||
Net expenses | 1.93 | % †† | 1.90 | % | 1.91 | % | 1.97 | % | 1.97 | % | 1.94 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 60 | % | 59 | % | 77 | % | 61 | % | 80 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 82,987 | $ | 91,833 | $ | 92,118 | $ | 78,135 | $ | 75,372 | $ | 90,273 |
* | Unaudited. |
†† | 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. | 19 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 16.54 | $ | 18.36 | $ | 17.35 | $ | 14.81 | $ | 15.13 | $ | 15.15 | ||||||||||||
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Net investment income (loss) (a) | 0.12 | 0.15 | 0.20 | 0.22 | 0.33 | 0.38 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.13 | ) | (0.00 | )‡ | 1.60 | 3.29 | 0.47 | (0.04 | ) | |||||||||||||||
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Total from investment operations | (0.01 | ) | 0.15 | 1.80 | 3.51 | 0.80 | 0.34 | |||||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.56 | ) | (0.51 | ) | (0.56 | ) | (0.35 | ) | (0.35 | ) | (0.36 | ) | ||||||||||||
From net realized gain on investments | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | (0.77 | ) | — | |||||||||||||
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Total dividends and distributions | (1.26 | ) | (1.97 | ) | (0.79 | ) | (0.97 | ) | (1.12 | ) | (0.36 | ) | ||||||||||||
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Net asset value at end of period | $ | 15.27 | $ | 16.54 | $ | 18.36 | $ | 17.35 | $ | 14.81 | $ | 15.13 | ||||||||||||
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Total investment return (b) | 0.02 | %(c) | 0.84 | % | 10.74 | % | 25.05 | % | 5.56 | % | 2.39 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 1.57 | % †† | 0.87 | % | 1.11 | % | 1.37 | % | 2.21 | % | 2.33 | % | ||||||||||||
Net expenses | 0.76 | % †† | 0.74 | % | 0.72 | % | 0.74 | % | 0.75 | % | 0.74 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 60 | % | 59 | % | 77 | % | 61 | % | 80 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 239,153 | $ | 298,015 | $ | 313,955 | $ | 258,279 | $ | 180,257 | $ | 242,147 |
* | Unaudited. |
†† | 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. Class I shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
20 | MainStay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Convertible Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers five classes of shares. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008. Class I shares commenced operations on November 28, 2008. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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 Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A 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 Class A and Investor Class 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 capital appreciation together with current income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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 based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks
21 |
Notes to Financial Statements (Unaudited) (continued)
associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Equity and credit default swap curves | • Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities and shares of Exchange-Traded Funds (“ETFs”) are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Investments in mutual funds, including money market funds, are valued at their respective 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 (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or broker selected by the Manager, in consultation with the Subadvisor. Those values reflect broker/dealer supplied prices and electronic data processing techniques, if the evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. 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. These securities are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation
22 | MainStay Convertible Fund |
methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A Fund security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security 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 the 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 measuring 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 measure 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 by methods deemed reasonable in good faith in such a manner as the Board deems appropriate to reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was measured as of April 30, 2016 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2016, the Fund did not hold any securities deemed to be illiquid under procedures approved by the Board.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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 from net investment income, if
any, at least quarterly and distributions from net realized capital and currency gains, if any, at least 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; net of any foreign tax withheld at the source, 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. The straight-line method approximates the effective interest method for short-term investments. 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.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(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/or 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 Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
23 |
Notes to Financial Statements (Unaudited) (continued)
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(H) Rights and Warrants. Rights are certificates that permit the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. 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 such warrants are not exercised by the date of its expiration. The Fund is exposed to risk until the sale or exercise of each right or warrant is completed. As of April 30, 2016, the Fund did not hold any rights.
(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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(J) Concentration of Risk. Convertible securities may be subordinate to other securities. In part, the total return for a convertible security depends upon the performance of the underlying stock into which it can be converted. Also, issuers of convertible securities are often not as strong financially as those issuing securities with higher credit ratings, may be more likely to encounter financial difficulties and
typically are more vulnerable to changes in the economy, such as a recession or a sustained period of rising interest rates, which could affect their ability to make interest and principal payments.
(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 Investments, 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer 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 the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, 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; 0.55% from $500 million to $1 billion; and 0.50% in excess of $1 billion, plus a fee for fund accounting services, previously provided by New York Life Investments under a separate fund accounting agreement, furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the six-month period ended April 30, 2016, the effective management fee rate was 0.59%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $2,403,137.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments.
24 | MainStay Convertible Fund |
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 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 Class A and Investor Class Plans, the Distributor receives a monthly distribution fee from the Class A and Investor Class shares at an annual rate of 0.25% of the average daily net assets of the Class A and Investor Class 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%. Class I shares are not subject to a distribution and/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. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $30,273 and $9,931, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $967, $3, $10,654 and $3,516, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 232,474 | ||
Investor Class | 114,394 | |||
Class B | 35,224 | |||
Class C | 124,281 | |||
Class I | 154,491 |
(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.
Note 4–Federal Income Tax
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 36,755,541 | ||
Long-Term Capital Gain | 58,264,775 | |||
Total | $ | 95,020,316 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $99,351 and $139,459, respectively.
25 |
Notes to Financial Statements (Unaudited) (continued)
Note 8–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 2,017,023 | $ | 30,619,087 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,934,264 | 29,302,409 | ||||||
Shares redeemed | (4,430,014 | ) | (66,335,400 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (478,727 | ) | (6,413,904 | ) | ||||
Shares converted into Class A (See Note 1) | 110,245 | 1,555,662 | ||||||
Shares converted from Class A (See Note 1) | (83,805 | ) | (1,241,991 | ) | ||||
|
| |||||||
Net increase (decrease) | (452,287 | ) | $ | (6,100,233 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 7,918,892 | $ | 135,337,499 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,343,504 | 38,922,718 | ||||||
Shares redeemed | (6,688,098 | ) | (113,357,313 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 3,574,298 | 60,902,904 | ||||||
Shares converted into Class A (See Note 1) | 373,695 | 6,443,999 | ||||||
Shares converted from Class A (See Note 1) | (233,476 | ) | (3,800,236 | ) | ||||
|
| |||||||
Net increase (decrease) | 3,714,517 | $ | 63,546,667 | |||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 179,485 | $ | 2,706,641 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 401,532 | 6,083,027 | ||||||
Shares redeemed | (337,616 | ) | (5,065,922 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 243,401 | 3,723,746 | ||||||
Shares converted into Investor Class | 147,333 | 2,209,032 | ||||||
Shares converted from Investor Class | (82,434 | ) | (1,235,276 | ) | ||||
|
| |||||||
Net increase (decrease) | 308,300 | $ | 4,697,502 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 374,666 | $ | 6,375,908 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 531,485 | 8,827,165 | ||||||
Shares redeemed | (643,508 | ) | (10,933,067 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 262,643 | 4,270,006 | ||||||
Shares converted into Investor Class | 349,784 | 5,751,160 | ||||||
Shares converted from Investor Class | (325,667 | ) | (5,629,332 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 286,760 | $ | 4,391,834 | |||||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 75,473 | $ | 1,128,690 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 107,765 | 1,628,882 | ||||||
Shares redeemed | (170,630 | ) | (2,535,424 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 12,608 | 222,148 | ||||||
Shares converted from Class B (See Note 1) | (85,341 | ) | (1,287,427 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (72,733 | ) | $ | (1,065,279 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 228,782 | $ | 3,884,262 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 158,187 | 2,627,544 | ||||||
Shares redeemed | (234,772 | ) | (3,951,978 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 152,197 | 2,559,828 | ||||||
Shares converted from Class B (See Note 1) | (164,819 | ) | (2,765,591 | ) | ||||
|
| |||||||
Net increase (decrease) | (12,622 | ) | $ | (205,763 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 496,699 | $ | 7,525,212 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 338,000 | 5,102,124 | ||||||
Shares redeemed | (951,269 | ) | (14,140,059 | ) | ||||
|
| |||||||
Net increase (decrease) | (116,570 | ) | $ | (1,512,723 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 1,186,806 | $ | 19,988,767 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 423,024 | 7,017,965 | ||||||
Shares redeemed | (1,057,378 | ) | (17,837,122 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 552,452 | $ | 9,169,610 | |||||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 3,877,188 | $ | 58,213,200 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 933,797 | 14,163,527 | ||||||
Shares redeemed | (7,169,785 | ) | (108,278,709 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,358,800 | ) | $ | (35,901,982 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 9,725,437 | $ | 165,853,087 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,237,516 | 20,580,597 | ||||||
Shares redeemed | (10,042,852 | ) | (168,988,233 | ) | ||||
|
| |||||||
Net increase (decrease) | 920,101 | $ | 17,445,451 | |||||
|
|
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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 Convertible Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Convertible Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and MacKay Shields in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, and responses from New York Life Investments and MacKay Shields to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Funds’ distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and MacKay Shields; (ii) the investment performance of the Fund, New York Life Investments and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay Shields from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and MacKay Shields. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and MacKay Shields
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
27 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that MacKay Shields provides to the Fund. The Board evaluated MacKay Shields’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined MacKay Shields’ track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay Shields, and MacKay Shields’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay Shields. The Board also reviewed MacKay Shields’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments and MacKay Shields under the Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and MacKay Shields must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to
28 | MainStay Convertible Fund |
the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates , including MacKay Shields, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed
information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to MacKay Shields are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
30 | MainStay Convertible 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 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 or proxy voting record 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).
31 |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1695310 MS164-16 | MSC10-06/16 (NYLIM) NL005 |
MainStay Income Builder Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –4.68 0.86 | %
|
| –7.78 –2.41 | %
|
| 5.83 7.03 | %
|
| 5.06 5.66 | %
| | 1.02 1.02 | | |||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | –4.81 0.73 | | | –7.97 –2.61 | | | 5.56 6.77 | | | 4.85 5.44 | | | 1.18 1.18 | | |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | –4.39 0.41 | | | –7.84 –3.28 | | | 5.66 5.98 | | | 4.66 4.66 | | | 1.93 1.93 | | |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | –0.55 0.41 | | | –4.20 –3.29 | | | 5.99 5.99 | | | 4.66 4.66 | | | 1.93 1.93 | | |||||||
Class I Shares | No Sales Charge | 0.93 | –2.19 | 7.29 | 5.97 | 0.77 | ||||||||||||||||||
Class R2 Shares4 | No Sales Charge | 0.82 | –2.49 | 6.62 | 5.34 | 1.12 | ||||||||||||||||||
Class R3 Shares5 | No Sales Charge | 0.63 | –2.87 | 6.41 | 5.08 | 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, changes 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 may 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 (if any), 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 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 would likely have been different. |
4. | Performance figures for Class R2 shares, first offered on February 27, 2015, include the historical performance of Class B shares through February 26, 2015. The performance for these newer share classes is adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for these newer share classes would likely have been different. |
5. | Performance figures for Class R3 shares, first offered on February 29, 2016, include the historical performance of Class B shares through February 28, 2016. Performance for Class R3 shares would likely have been different because of differences in expenses attributable to each share class. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
MSCI World Index6 | –1.05 | % | –4.17 | % | 5.96 | % | 4.13 | % | ||||||||
Barclays U.S. Aggregate Bond Index7 | 2.82 | 2.72 | 3.60 | 4.95 | ||||||||||||
Blended Benchmark Index8 | 0.99 | –0.51 | 5.02 | 4.91 | ||||||||||||
Average Lipper Flexible Portfolio Fund9 | –0.27 | –4.97 | 3.10 | 4.08 |
6. | 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. |
7. | The Barclays 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. The Fund has selected the Barclays U.S. Aggregate Bond Index as an additional benchmark. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
8. | The Blended Benchmark Index consists of the MSCI World Index and the Barclays U.S. Aggregate Bond Index weighted 50%/50%, respectively. The Fund has selected the Blended Benchmark Index as an additional benchmark. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
9. | The Average Lipper Flexible Portfolio Fund is representative of funds that allocate their investments across various asset classes, including domestic common stocks, bonds, and money market instruments, with a focus on total return. 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 Income Builder Fund |
Cost in Dollars of a $1,000 Investment in MainStay Income Builder Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,008.60 | $ | 5.09 | $ | 1,019.80 | $ | 5.12 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,007.30 | $ | 5.84 | $ | 1,019.00 | $ | 5.87 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,004.10 | $ | 9.57 | $ | 1,015.30 | $ | 9.62 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,004.10 | $ | 9.57 | $ | 1,015.30 | $ | 9.62 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,009.30 | $ | 3.85 | $ | 1,021.00 | $ | 3.87 | ||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,008.20 | $ | 5.59 | $ | 1,019.30 | $ | 5.62 | ||||||||||
Class R3 Shares2,3 | $ | 1,000.00 | $ | 1,062.10 | $ | 2.35 | $ | 1,006.10 | $ | 2.29 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.02% for Class A, 1.17% for Investor Class, 1.92% for Class B and Class C, 0.77% for Class I, 1.12% for Class R2 and 1.37% for Class R3) multiplied by the average account value over the period, divided by 366 and multiplied by 182 for Class A, Investor Class, Class B, Class C, Class I and Class R2 (to reflect the six-month period) and 61 days for Class R3 (to reflect the since-inception period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses paid during the period reflect ongoing costs for the period from inception through April 30, 2016. Had these shares been offered for the full six-month period ended April 30, 2016, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $6.87 for Class R3 and the ending account value would have been $1,018.10 for Class R3. |
3. | The inception date for Class R3 shares was February 29, 2016. |
7 |
Portfolio Composition as of April 30, 2016 (Unaudited)
See Portfolio of Investments beginning on page 13 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings or Issuers Held as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | Verizon Communications, Inc. |
2. | Iron Mountain, Inc. |
3. | WEC Energy Group, Inc. |
4. | Welltower, Inc. |
5. | PPL Corp. |
6. | National Grid PLC |
7. | BCE, Inc. |
8. | Philip Morris International, Inc. |
9. | Terna Rete Elettrica Nazionale S.p.A. |
10. | AT&T, Inc. |
8 | MainStay Income Builder Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Michael Kimble, CFA, Louis N. Cohen, CFA, and Taylor Wagenseil of MacKay Shields LLC (“MacKay Shields”), the Subadvisor for the fixed-income portion of the Fund, and Eric Sappenfield, William Priest, CFA, Michael A. Welhoelter, CFA, John Tobin, PhD, CFA, and Kera Van Valen, CFA, of Epoch Investment Partners, Inc. (“Epoch”), the Subadvisor for the equity portion of the Fund.
How did MainStay Income Builder Fund perform relative to its benchmarks and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay Income Builder Fund returned 0.86% for Class A shares, 0.73% for Investor Class shares and 0.41% for Class B and Class C shares for the six months ended April 30, 2016. Over the same period, Class I shares returned 0.93%, Class R2 shares returned 0.82% and Class R3 shares1 returned 0.63%. For the six months ended April 30, 2016, all share classes outperformed the –1.05% return of the MSCI World Index,2 which is the Fund’s primary benchmark, and underperformed the 2.82% return of the Barclays U.S. Aggregate Bond Index,2 which is a secondary benchmark for the Fund (formerly an additional benchmark). For the six months ended April 30, 2016, all share classes underperformed the 0.99% return of the Blended Benchmark Index (formerly known as the Income Builder Composite Index),2 which is an additional benchmark for the Fund. Over the same period, all share classes outperformed the –0.27% return of the Average Lipper3 Flexible Portfolio Fund. See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective February 29, 2016, the Barclay’s U.S. Aggregate Bond Index was added as a secondary benchmark for the Fund and the Russell 1000® Index4 was removed. Also, the name of the Income Builder Composite Index was changed to the Blended Benchmark Index.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
In order to increase the Fund’s beta,5 the fixed-income portion of the Fund held several equity futures positions that detracted from the Fund’s performance. These losses were partially offset by the use of U.S. Treasury futures in the fixed-income portion of the Fund. Overall, however, the use of derivatives made a negative contribution to the Fund’s performance. (Contributions take weightings and total returns into account.)
What factors affected the relative performance in the equity portion of the Fund during the reporting period?
The equity portion of the Fund had a positive return for the six months ended April 30, 2016, and outperformed the MSCI
World Index. This portion of the Fund seeks to invest in a diversified group of companies that achieve growth in free cash flow and provide shareholders with positive returns from cash dividends, share buybacks and debt reduction. During the reporting period, the most significant contributor to relative results in the equity portion of the Fund was stock selection in the financials sector. Overweight positions in the utilities and telecommunication services sectors, which are traditionally known as strong shareholder-yield sectors, also contributed significantly to relative results. From a regional perspective, stock selection in the United States proved strong and contributed positively to relative results. These gains were partially offset by stock selection in the energy and materials sectors.
During the reporting period, which individual stocks made the strongest positive contributions to absolute performance in the equity portion of the Fund and which stocks detracted the most?
Among the stocks with the strongest positive contributions to absolute performance were Iron Mountain, WEC Energy and AT&T. Iron Mountain is a document management/storage company that is classified as a real estate investment trust (REIT) and is more interest rate sensitive than many other companies. Its shares outperformed when the Federal Reserve signaled that it would seek to raise the federal funds target range more slowly than originally anticipated. Management also guided to improved results when it became clear that the company would acquire Recall, a move that could boost cash generation and support an increase in the pace of free cash flow growth at the company. The dividend remained well supported, and management guidance pointed to increased returns should cash flow continue to increase. WEC Energy is a regulated utility company that provides electricity and natural gas services to customers in Wisconsin, Illinois, Minnesota and Michigan. WEC Energy Group was formed after Wisconsin Energy Corporation completed its acquisition of Integrys Energy Group in June 2015. Electric utilities advanced during the reporting period, and WEC shares outperformed as the company’s strong management team continued to execute well on its integration plan. Declining interest rates also helped share performance for the company and the utilities sector in general. AT&T is the largest pay TV and second-largest mobile telecommunication services provider in the United States. The stock benefited as investors focused on the company’s increased cash-generation profile after its DIRECTV acquisition closed,
1. | See footnote on page 5 for more information on Class R3 shares. |
2. | See footnote on page 6 for more information on this index. |
3. | See footnote on page 6 for more information on Lipper Inc. |
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. Total returns assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | Beta is a measure of volatility in relation to the market as a whole. A beta higher than 1 indicates that a security or portfolio will tend to exhibit higher volatility than the market. A beta lower than 1 indicates that a security or portfolio will tend to exhibit lower volatility than the market. |
9 |
creating a more rational competitive environment. We believed that DIRECTV integration may increase free cash flow generation, augmented by reduced capital intensity. AT&T remained committed to maintaining a strong network—one that would drive cash flow growth through increasing subscribers, lowering customer turnover and allowing for greater pricing power.
The stocks that most substantially detracted from absolute performance in the equity portion of the Fund included Kinder Morgan, ConocoPhillips and Seagate Technology. Kinder Morgan is the largest energy infrastructure company in the United States. It provides pipeline transportation, storage, CO2 supply, and terminal services to other energy companies. Kinder Morgan increased its equity stake in a highly leveraged affiliate in late November 2015, which led Moody’s to change the company’s outlook to negative. The downgrade increased the company’s cost of capital for growth projects. The company’s guidance of over $5 billion in cash flow after maintenance capital expenditures was unchanged, but management chose to significantly reduce the cash dividend and redirect the cash flow to growth projects. The equity portion of the Fund sold its position in the company. ConocoPhillips is an independent exploration and production company that operates in North America, Europe, Asia and the Middle East. It explores, produces, transports and markets crude oil, natural gas, natural gas liquids (NGL), liquefied natural gas (LNG) and bitumen. Falling energy prices have significantly reduced ConocoPhillips’ cash flow and dividend coverage. While the company stated that it was dedicated to preserving its dividend, the equity portion of the Fund exited its position in the company as ConocoPhillips’ balance sheet weakened and the risk of a dividend cut rose. ConocoPhillips did cut its dividend after the Fund sold the position. Seagate is the world’s second-largest hard disk drive manufacturer. Seagate was initially hurt by the slowdown in personal computer sales, and management took steps to right-size capacity. In April, however, prereleased operating results highlighted continued worsening conditions in the data storage device industry. Although the company remains committed to its dividend and shareholder-yield policies, visibility for near-term cash generation significantly diminished. The equity portion of the Fund sold its position in the stock.
Did the equity portion of the Fund make any significant purchases or sales during the reporting period?
The equity portion of the Fund made several significant purchases during the reporting period. Among them were positions in capital markets company BlackRock, pharmaceutical company AbbVie and package delivery company United Parcel Service. All three were added to the equity portion of the Fund because of what we perceived to be favorable shareholder-yield attributes.
Among the positions eliminated from the equity portion of the Fund were the previously discussed positions in Kinder Morgan and ConocoPhillips and crop nutrient company PotashCorp, among others. Kinder Morgan was sold because of changes in the company’s capital allocation policy. ConocoPhillips and PotashCorp were sold over concerns about the sustainability of their respective dividends. ConocoPhillips and PotashCorp both cut their dividends after the equity portion of the Fund sold their shares.
How did the sector weightings in the equity portion of the Fund change during the reporting period?
Sector weights are generally a function of our bottom-up stock-selection process. During the reporting period, the most significant weighting reductions in the equity portion of the Fund were in the energy and materials sectors. Among the sectors with the most significantly increased exposure in the equity portion of the Fund were industrials and health care.
How was the equity portion of the Fund positioned at the end of the reporting period?
The equity portion of the Fund continued to seek attractive returns by investing in a diversified group of companies focused on generating significant free cash flow and returning it to shareholders through a combination of dividends, share repurchases and debt reduction. This stock-by-stock process often results in the equity portion of the Fund having a different composition than the MSCI World Index in terms of types of companies held. At the end of the reporting period, the Index contained many companies that either lacked free cash flow or used their free cash flow primarily to reinvest and make acquisitions. The composition of the equity portion of the Fund may also differ in terms of sector weights.
As of April 30, 2016, the most significantly overweight positions relative to the MSCI World Index in the equity portion of the Fund were in utilities and telecommunication services. As of the same date, the most substantially underweight positions in the equity portion of the Fund were in information technology and consumer discretionary.
What factors affected the relative performance of the fixed-income portion of the Fund during the reporting period?
Throughout the reporting period, our strategy in the fixed-income portion of the Fund was to maintain long positions in credit, including investment-grade and high-yield bonds. Corporate bonds trailed comparable-duration6 U.S. Treasury securities, with the performance gap more pronounced for
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. |
10 | MainStay Income Builder Fund |
below-investment-grade securities. Corporate bond underperformance can be explained by dampened investor confidence due to the sluggish recovery and lower commodity prices. The fixed-income portion of the Fund held overweight positions relative to the Barclays U.S. Aggregate Bond Index in investment-grade and high-yield corporate bonds. Hard-asset industries, such as energy and metals/mining, were among the laggards in the fixed-income portion of the Fund, while higher-quality financials and slightly longer duration bonds performed well. During the reporting period, the fixed-income portion of the Fund reduced its exposure to weaker credit profiles within the energy sector.
Though spread product6 underperformed on a relative basis, there was significant spread compression in the market near the end of the reporting period, as the high-yield market rebounded off mid-February lows. This rebound coincided with a sharp turnaround in energy prices as fears abated that the United States would slip into recession or that China’s economy would grind to a halt. Because the Fund holds high-yield bonds that the Index does not, these variations in high-yield performance had a direct impact on the Fund’s relative performance.
What was the duration strategy of the fixed-income portion of the Fund during the reporting period?
To reduce duration and minimize sensitivity to a flattening yield curve,7 the fixed-income portion of the Fund maintained a shorter duration than that of the Barclays U.S. Aggregate Bond Index. At the end of the reporting period, the duration of the fixed-income portion of the Fund was approximately 4.7 years, which was shorter than the 5.5-year duration of the Barclays U.S. Aggregate Bond Index.
What specific factors, risks or market forces prompted significant decisions for the fixed-income portion of the Fund during the reporting period?
Throughout the reporting period, a number of factors were considered in positioning the fixed-income portion of the Fund. These factors included inconsistent economic data, global central-bank monetary policy, volatility in energy prices, China’s slowing economy and a flattening yield curve. Nevertheless, we believed that corporate bonds—investment-grade and high-yield—warranted an overweight position compared to government-related securities. This positioning was due to the current low-interest-rate environment, significant refinancing in the credit markets, improved balance sheet fundamentals and a favorable supply/demand balance for corporate debt.
For these reasons, no major shifts were made in the positioning of the fixed-income portion of the Fund during the reporting period and the fixed-income portion of the Fund maintained its credit bias. During the reporting period, however, the fixed-income portion of the Fund did reduce its exposure to energy and high-yield bonds as a whole, while moderately increasing exposure to investment-grade credit. The fixed-income portion of the Fund also closed out the rate hedge, but it maintained a duration shorter than that of the Barclays U.S. Aggregate Bond Index, in large part because of its exposure to high-yield bonds and, to a lesser degree, bank loans.
Which market segments were the strongest contributors to the performance of the fixed-income portion of the Fund, and which market segments were particularly weak?
In the fixed-income portion of the Fund, the investment-grade credit component was the largest contributor to performance during the reporting period, as longer maturities and higher-quality credits performed better than below-investment-grade credits. Bank loans also performed better than high-yield bonds.
In the Fund’s high-yield bond position, contributors and detractors for the reporting period were defined by a bifurcation in the credit markets. Positions that were the weakest performers in the first half of the reporting period—such as high-yield energy and metals/mining holdings—were the weakest performers overall. The rest of the market, however, held up fairly well compared to commodity-related securities. As energy and commodity prices rebounded toward the end of the reporting period, so did energy and commodity-related bonds.
Did the fixed-income portion of the Fund make any significant purchases or sales during the reporting period?
During the reporting period, the fixed-income portion of the Fund initiated positions in banking company Huntington Bancshares and building materials company Masco Corp. Huntington Bancshares operates as a holding company for The Huntington National Bank, a strong regional bank that provides commercial, small-business, consumer and mortgage banking services. The Fund purchased the bonds on a new-issue basis, and we felt that they offered an attractive coupon. Masco Corp. designs, manufactures, markets and distributes home-improvement and building products in North America and internationally. We believed that the company had a solid balance sheet and could benefit from a strong housing market.
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. The term “spread product” refers to asset classes that typically trade at a spread to comparable U.S. Treasury securities. |
7. | 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. |
11 |
During the reporting period, the fixed-income portion of the Fund sold bonds of pipeline company Energy Transfer Partners and banking company HSBC. Energy Transfer Partners’ merger with another pipeline operator began to unravel, which had a negative impact on the company’s bonds. The HSBC bonds were contingent convertible bonds, a structure the market did not view favorably after payment concerns arose at another bank. As a result, the fixed-income portion of the Fund exited the position.
How did the sector weightings in the fixed-income portion of the Fund change during the reporting period?
The Fund witnessed increased bouts of volatility during the reporting period, and we expected this to persist into the near future because of changing market technical conditions and reduced liquidity. Even so, no significant changes were made to the positioning of the fixed-income portion of the Fund. The high-yield component of the fixed-income portion of the Fund pared back exposure to companies with weaker credit profiles. This, in turn, slightly reduced the overall exposure to high-yield
securities by the end of the reporting period. The fixed-income portion of the Fund also moderately increased exposure to investment-grade bonds. The duration of the fixed-income portion of the Fund increased during the reporting period, but remained shorter than the duration of the Barclays U.S. Aggregate Bond Index.
How was the fixed-income portion of the Fund positioned at the end of the reporting period?
As of April 30, 2016, the fixed-income portion of the Fund maintained an overweight position relative to the Barclays U.S. Aggregate Bond Index in credit, including investment-grade bonds, high-yield bonds and, to a more moderate degree, bank loans. The increased volatility experienced in the third quarter of 2015 created a wider disparity between spreads and defaults, increasing our conviction in our overweight position in high-yield securities. The fixed-income portion of the Fund held underweight positions relative to the Index in sectors that tend to be more interest rate sensitive, such as U.S. Treasury 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 forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
12 | MainStay Income Builder Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 45.7%† Asset-Backed Securities 0.5% |
| |||||||
Home Equity 0.5% | ||||||||
Ameriquest Mortgage Securities, Inc. Series 2003-8, Class AF5 | $ | 32,264 | $ | 32,588 | ||||
Carrington Mortgage Loan Trust | 202,199 | 192,580 | ||||||
Chase Funding Trust | 145,572 | 147,940 | ||||||
CIT Group Home Equity Loan Trust | 15,112 | 15,224 | ||||||
Citigroup Mortgage Loan Trust | 572,912 | 401,536 | ||||||
Countrywide Asset-Backed Certificates Series 2003-5, Class AF5 | 485,496 | 487,851 | ||||||
Equity One Mortgage Pass-Through Trust | ||||||||
Series 2003-4, Class AF6 | 89,010 | 89,632 | ||||||
Series 2003-3, Class AF4 | 303,234 | 300,962 | ||||||
GSAA Home Equity Trust | 5,567,532 | 2,845,063 | ||||||
HSI Asset Securitization Corp. Trust Series 2007-NC1, Class A1 | 3,075 | 2,154 | ||||||
JPMorgan Mortgage Acquisition Trust Series 2007-HE1, Class AF1 | 539,004 | 320,252 | ||||||
MASTR Asset Backed Securities Trust Series 2006-HE4, Class A1 | 716,810 | 316,143 | ||||||
RAMP Trust | ||||||||
Series 2003-RS7, Class AI6 | 12,683 | 12,714 | ||||||
Series 2003-RZ5, Class A7 | 29,851 | 30,706 | ||||||
RASC Trust | 25,742 | 26,107 | ||||||
Saxon Asset Securities Trust | 95,505 | 97,454 |
Principal Amount | Value | |||||||
Home Equity (continued) | ||||||||
Soundview Home Equity Loan Trust Series 2006-EQ2, Class A2 | $ | 1,104,381 | $ | 769,584 | ||||
Specialty Underwriting & Residential Finance Trust | 751,002 | 327,675 | ||||||
Terwin Mortgage Trust | 74,008 | 75,751 | ||||||
|
| |||||||
6,491,916 | ||||||||
|
| |||||||
Student Loans 0.0%‡ | ||||||||
KeyCorp Student Loan Trust | 507,419 | 489,294 | ||||||
|
| |||||||
Total Asset-Backed Securities | 6,981,210 | |||||||
|
| |||||||
Convertible Bond 0.0%‡ | ||||||||
Transportation 0.0%‡ | ||||||||
Hornbeck Offshore Services, Inc. | 760,000 | 473,100 | ||||||
|
| |||||||
Total Convertible Bond | 473,100 | |||||||
|
| |||||||
Corporate Bonds 40.3% | ||||||||
Advertising 0.0%‡ | ||||||||
Lamar Media Corp. | 625,000 | 659,375 | ||||||
|
| |||||||
Aerospace & Defense 0.7% | ||||||||
KLX, Inc. | 3,485,000 | 3,506,781 | ||||||
Spirit AeroSystems, Inc. | 1,000,000 | 1,036,250 | ||||||
TransDigm, Inc. | 1,100,000 | 1,113,420 | ||||||
7.50%, due 7/15/21 | 1,220,000 | 1,275,510 | ||||||
Triumph Group, Inc. | 3,875,000 | 3,681,250 | ||||||
|
| |||||||
10,613,211 | ||||||||
|
| |||||||
Agriculture 0.0%‡ | ||||||||
Reynolds American, Inc. | 255,000 | 304,168 | ||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2016, 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. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Airlines 0.8% | ||||||||
American Airlines Group, Inc. | $ | 3,700,000 | $ | 3,635,250 | ||||
Continental Airlines, Inc. | ||||||||
Class A | 1,606,759 | 1,815,638 | ||||||
Series 2003-ERJ1 | 608,186 | 632,513 | ||||||
U.S. Airways Group, Inc. | ||||||||
Class A Series 2012-1 Pass Through Trust | 1,962,637 | 2,193,247 | ||||||
Class A Series 2010-1 Pass Through Trust | 1,015,808 | 1,127,547 | ||||||
UAL 2007-1 Pass-Through Trust 6.636%, due 1/2/24 | 1,777,224 | 1,866,086 | ||||||
UAL 2009-1 Pass-Through Trust 10.40%, due 5/1/18 | 349,661 | 363,227 | ||||||
|
| |||||||
11,633,508 | ||||||||
|
| |||||||
Auto Manufacturers 0.7% | ||||||||
Ford Motor Co. | 1,500,000 | 1,878,858 | ||||||
7.45%, due 7/16/31 | 450,000 | 597,204 | ||||||
8.90%, due 1/15/32 | 215,000 | 286,676 | ||||||
Ford Motor Credit Co. LLC | 350,000 | 404,033 | ||||||
General Motors Financial Co., Inc. | 1,800,000 | 1,825,495 | ||||||
3.25%, due 5/15/18 | 325,000 | 332,490 | ||||||
3.45%, due 4/10/22 | 3,800,000 | 3,814,041 | ||||||
Navistar International Corp. | 2,425,000 | 1,733,875 | ||||||
|
| |||||||
10,872,672 | ||||||||
|
| |||||||
Auto Parts & Equipment 0.8% | ||||||||
Dana Holding Corp. | 3,780,000 | 3,865,050 | ||||||
Goodyear Tire & Rubber Co. (The) 6.50%, due 3/1/21 | 625,000 | 658,203 | ||||||
MPG Holdco I, Inc. | 3,655,000 | 3,655,000 | ||||||
Schaeffler Finance B.V. | 3,345,000 | 3,436,988 | ||||||
|
| |||||||
11,615,241 | ||||||||
|
| |||||||
Banks 5.1% | ||||||||
Bank of America Corp. | 460,000 | 506,052 | ||||||
5.00%, due 1/21/44 | 1,440,000 | 1,605,077 | ||||||
5.125%, due 12/29/49 (b) | 575,000 | 538,344 |
Principal Amount | Value | |||||||
Banks (continued) | ||||||||
Bank of America Corp. (continued) | ||||||||
5.42%, due 3/15/17 | $ | 135,000 | $ | 139,529 | ||||
5.625%, due 7/1/20 | 645,000 | 724,810 | ||||||
5.875%, due 2/7/42 | 500,000 | 618,915 | ||||||
6.11%, due 1/29/37 | 1,505,000 | 1,748,720 | ||||||
6.30%, due 12/29/49 (b) | 1,050,000 | 1,099,875 | ||||||
7.625%, due 6/1/19 | 1,015,000 | 1,176,990 | ||||||
8.57%, due 11/15/24 | 485,000 | 622,788 | ||||||
Capital One Financial Corp. | 4,595,000 | 4,585,810 | ||||||
CIT Group, Inc. | 1,740,000 | 1,748,700 | ||||||
4.25%, due 8/15/17 | 340,000 | 344,888 | ||||||
5.00%, due 8/15/22 | 1,175,000 | 1,230,812 | ||||||
5.25%, due 3/15/18 | 310,000 | 319,688 | ||||||
6.625%, due 4/1/18 (c) | 750,000 | 790,312 | ||||||
Citigroup, Inc. | 105,000 | 109,913 | ||||||
4.65%, due 7/30/45 | 1,685,000 | 1,801,968 | ||||||
6.30%, due 12/29/49 (b) | 2,820,000 | 2,763,600 | ||||||
6.625%, due 6/15/32 | 770,000 | 916,181 | ||||||
6.875%, due 6/1/25 | 1,715,000 | 2,131,568 | ||||||
Citizens Financial Group, Inc. | 3,405,000 | 3,513,201 | ||||||
Discover Bank | 1,064,000 | 1,238,005 | ||||||
Goldman Sachs Group, Inc. (The) | 3,045,000 | 3,155,610 | ||||||
4.80%, due 7/8/44 | 2,385,000 | 2,561,624 | ||||||
6.75%, due 10/1/37 | 3,815,000 | 4,624,837 | ||||||
Huntington Bancshares, Inc. | 3,535,000 | 3,622,350 | ||||||
JPMorgan Chase & Co. | 730,000 | 789,523 | ||||||
6.125%, due 12/29/49 (b) | 3,005,000 | 3,084,332 | ||||||
6.40%, due 5/15/38 | 820,000 | 1,108,256 | ||||||
Mellon Capital III | GBP | 1,950,000 | 2,842,121 | |||||
Mizuho Financial Group Cayman 3, Ltd. | $ | 2,250,000 | 2,362,430 | |||||
Morgan Stanley | 3,075,000 | 3,122,822 | ||||||
4.875%, due 11/1/22 | 1,125,000 | 1,224,007 | ||||||
5.00%, due 11/24/25 | 2,535,000 | 2,759,216 | ||||||
5.45%, due 7/29/49 (b) | 2,825,000 | 2,690,812 | ||||||
6.375%, due 7/24/42 | 490,000 | 647,466 | ||||||
Royal Bank of Scotland Group PLC 5.125%, due 5/28/24 (United Kingdom) | 800,000 | 783,054 | ||||||
6.125%, due 12/15/22 (United Kingdom) | 1,530,000 | 1,635,841 |
14 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Banks (continued) | ||||||||
Santander Holdings USA, Inc. | $ | 3,875,000 | $ | 3,861,224 | ||||
Wachovia Corp. | 315,000 | 355,511 | ||||||
Wells Fargo & Co. | 55,000 | 59,470 | ||||||
5.375%, due 11/2/43 | 690,000 | 786,075 | ||||||
5.90%, due 12/29/49 (b) | 2,520,000 | 2,579,850 | ||||||
Wells Fargo Bank N.A. | 140,000 | 171,054 | ||||||
Wells Fargo Capital X | 715,000 | 733,590 | ||||||
|
| |||||||
75,836,821 | ||||||||
|
| |||||||
Beverages 0.4% | ||||||||
Anheuser-Busch InBev Finance, Inc. 3.65%, due 2/1/26 (Belgium) | 4,000,000 | 4,216,380 | ||||||
Constellation Brands, Inc. | 2,100,000 | 2,194,500 | ||||||
|
| |||||||
6,410,880 | ||||||||
|
| |||||||
Biotechnology 0.5% | ||||||||
Biogen, Inc. | 3,480,000 | 3,713,236 | ||||||
Celgene Corp. | 3,600,000 | 3,750,736 | ||||||
|
| |||||||
7,463,972 | ||||||||
|
| |||||||
Building Materials 1.3% | ||||||||
Fortune Brands Home & Security, Inc. 4.00%, due 6/15/25 | 4,420,000 | 4,594,842 | ||||||
Masco Corp. | 1,575,000 | 1,622,250 | ||||||
Masonite International Corp. | 3,725,000 | 3,892,625 | ||||||
Standard Industries, Inc. | 2,940,000 | 3,064,950 | ||||||
USG Corp. | 4,695,000 | 4,826,460 | ||||||
9.75%, due 1/15/18 | 1,330,000 | 1,492,925 | ||||||
|
| |||||||
19,494,052 | ||||||||
|
| |||||||
Chemicals 0.4% | ||||||||
Ashland, Inc. | 1,890,000 | 1,900,867 | ||||||
Dow Chemical Co. (The) | 1,605,000 | 1,762,205 | ||||||
8.55%, due 5/15/19 | 75,000 | 89,563 | ||||||
Hexion, Inc. | 870,000 | 728,625 | ||||||
WR Grace & Co. | 1,885,000 | 1,973,595 | ||||||
|
| |||||||
6,454,855 | ||||||||
|
|
Principal Amount | Value | |||||||
Commercial Services 0.9% | ||||||||
Avis Budget Car Rental LLC / Avis Budget Finance, Inc. | $ | 3,000,000 | $ | 2,848,125 | ||||
5.50%, due 4/1/23 | 175,000 | 167,265 | ||||||
Hertz Corp. (The) | 450,000 | 456,980 | ||||||
7.375%, due 1/15/21 | 2,245,000 | 2,315,156 | ||||||
Service Corporation International 5.375%, due 1/15/22 | 3,600,000 | 3,771,000 | ||||||
United Rentals North America, Inc. | 1,350,000 | 1,344,937 | ||||||
5.75%, due 11/15/24 | 1,600,000 | 1,622,000 | ||||||
6.125%, due 6/15/23 | 710,000 | 736,625 | ||||||
|
| |||||||
13,262,088 | ||||||||
|
| |||||||
Computers 0.4% | ||||||||
International Business Machines Corp. 7.00%, due 10/30/25 | 2,050,000 | 2,757,820 | ||||||
NCR Corp. | 3,530,000 | 3,538,825 | ||||||
|
| |||||||
6,296,645 | ||||||||
|
| |||||||
Diversified Financial Services 0.1% | ||||||||
Alterra Finance LLC | 200,000 | 227,543 | ||||||
Peachtree Corners Funding Trust 3.976%, due 2/15/25 (c) | 940,000 | 950,218 | ||||||
|
| |||||||
1,177,761 | ||||||||
|
| |||||||
Electric 0.7% | ||||||||
Calpine Corp. | 3,340,000 | 3,373,400 | ||||||
FirstEnergy Transmission LLC | 3,405,000 | 3,656,612 | ||||||
Great Plains Energy, Inc. | 1,130,000 | 1,263,041 | ||||||
Puget Energy, Inc. | 815,000 | 913,662 | ||||||
¨WEC Energy Group, Inc. | 1,554,717 | 1,282,642 | ||||||
|
| |||||||
10,489,357 | ||||||||
|
| |||||||
Entertainment 0.2% | ||||||||
Mohegan Tribal Gaming Authority 9.75%, due 9/1/21 | 1,935,000 | 2,017,237 | ||||||
Scientific Games International, Inc. 7.00%, due 1/1/22 (c) | 325,000 | 331,297 | ||||||
|
| |||||||
2,348,534 | ||||||||
|
| |||||||
Finance—Auto Loans 0.3% | ||||||||
Ally Financial, Inc. | 3,250,000 | 3,229,688 | ||||||
8.00%, due 11/1/31 | 770,000 | 922,075 | ||||||
|
| |||||||
4,151,763 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Finance—Consumer Loans 0.6% | ||||||||
Navient Corp. | $ | 2,005,000 | $ | 2,105,250 | ||||
OneMain Financial Holdings LLC | 3,305,000 | 3,437,200 | ||||||
Springleaf Finance Corp. | 700,000 | 664,125 | ||||||
6.00%, due 6/1/20 | 775,000 | 742,063 | ||||||
7.75%, due 10/1/21 | 1,765,000 | 1,742,937 | ||||||
|
| |||||||
8,691,575 | ||||||||
|
| |||||||
Finance—Credit Card 0.1% | ||||||||
Discover Financial Services | 1,491,000 | 1,509,834 | ||||||
|
| |||||||
Finance—Investment Banker/Broker 0.1% |
| |||||||
Jefferies Group LLC | 722,000 | 754,978 | ||||||
6.45%, due 6/8/27 | 1,000,000 | 1,072,110 | ||||||
|
| |||||||
1,827,088 | ||||||||
|
| |||||||
Finance—Leasing Companies 0.3% | ||||||||
AerCap Ireland Capital, Ltd. / AerCap Global Aviation Trust | 3,265,000 | 3,395,600 | ||||||
International Lease Finance Corp. 5.875%, due 4/1/19 | 1,255,000 | 1,345,988 | ||||||
|
| |||||||
4,741,588 | ||||||||
|
| |||||||
Food 1.4% | ||||||||
Kerry Group Financial Services | 2,899,000 | 2,877,988 | ||||||
Kraft Heinz Foods Co. | 2,123,000 | 2,348,728 | ||||||
5.00%, due 6/4/42 | 1,600,000 | 1,783,771 | ||||||
Pilgrim’s Pride Corp. | 2,530,000 | 2,574,275 | ||||||
Smithfield Foods, Inc. | 575,000 | 608,063 | ||||||
7.75%, due 7/1/17 | 925,000 | 982,812 | ||||||
Tyson Foods, Inc. | 4,235,000 | 4,572,263 | ||||||
Whole Foods Market, Inc. | 4,250,000 | 4,475,926 | ||||||
|
| |||||||
20,223,826 | ||||||||
|
| |||||||
Food Services 0.2% | ||||||||
Aramark Services, Inc. | 2,500,000 | 2,581,250 | ||||||
|
|
Principal Amount | Value | |||||||
Hand & Machine Tools 0.2% | ||||||||
Milacron LLC / Mcron Finance Corp. 7.75%, due 2/15/21 (c) | $ | 2,950,000 | $ | 2,961,063 | ||||
|
| |||||||
Health Care—Products 1.3% |
| |||||||
Alere, Inc. | 3,300,000 | 3,374,250 | ||||||
Boston Scientific Corp. | 3,740,000 | 3,825,975 | ||||||
Hologic, Inc. | 3,545,000 | 3,713,388 | ||||||
Mallinckrodt International Finance S.A. 4.75%, due 4/15/23 | 1,125,000 | 917,336 | ||||||
Mallinckrodt International Finance S.A. / Mallinckrodt CB LLC | ||||||||
4.875%, due 4/15/20 (c) | 1,275,000 | 1,224,000 | ||||||
5.75%, due 8/1/22 (c) | 1,120,000 | 1,057,000 | ||||||
Stryker Corp. | 2,955,000 | 3,035,654 | ||||||
Thermo Fisher Scientific, Inc. | 1,425,000 | 1,444,256 | ||||||
|
| |||||||
18,591,859 | ||||||||
|
| |||||||
Health Care—Services 1.2% | ||||||||
CHS / Community Health Systems, Inc. 5.125%, due 8/1/21 | 3,750,000 | 3,760,912 | ||||||
Cigna Corp. | 270,000 | 293,374 | ||||||
DaVita HealthCare Partners, Inc. | 2,370,000 | 2,370,000 | ||||||
Fresenius Medical Care U.S. Finance II, Inc. | 1,985,000 | 2,183,500 | ||||||
HCA, Inc. | 3,750,000 | 3,881,250 | ||||||
Tenet Healthcare Corp. | 2,950,000 | 2,953,688 | ||||||
6.00%, due 10/1/20 | 2,750,000 | 2,915,000 | ||||||
|
| |||||||
18,357,724 | ||||||||
|
| |||||||
Home Builders 1.8% | ||||||||
Beazer Homes USA, Inc. | 885,000 | 820,838 | ||||||
7.25%, due 2/1/23 | 1,185,000 | 995,400 | ||||||
CalAtlantic Group, Inc. | 1,345,000 | 1,422,337 | ||||||
8.375%, due 5/15/18 | 2,000,000 | 2,220,000 | ||||||
K. Hovnanian Enterprises, Inc. | 5,435,000 | 4,853,346 | ||||||
KB Home | 1,660,000 | 1,694,694 |
16 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Home Builders (continued) | ||||||||
Lennar Corp. | $ | 2,400,000 | $ | 2,482,500 | ||||
4.50%, due 11/15/19 | 750,000 | 778,594 | ||||||
MDC Holdings, Inc. | 2,750,000 | 2,791,250 | ||||||
Shea Homes, L.P. / Shea Homes Funding Corp. | 3,320,000 | 3,344,900 | ||||||
Toll Brothers Finance Corp. | 1,340,000 | 1,447,200 | ||||||
TRI Pointe Group, Inc. / TRI Pointe Homes, Inc. | 1,000,000 | 1,002,500 | ||||||
5.875%, due 6/15/24 | 2,935,000 | 2,949,675 | ||||||
|
| |||||||
26,803,234 | ||||||||
|
| |||||||
Household Products & Wares 0.1% | ||||||||
Spectrum Brands, Inc. | 1,165,000 | 1,235,657 | ||||||
|
| |||||||
Housewares 0.4% |
| |||||||
Newell Brands, Inc. | 5,750,000 | 6,012,298 | ||||||
|
| |||||||
Insurance 3.1% |
| |||||||
Allstate Corp. (The) | 3,790,000 | 4,093,200 | ||||||
Berkshire Hathaway Finance Corp. 1.45%, due 3/7/18 | 3,515,000 | 3,547,883 | ||||||
Chubb Corp. (The) | 1,660,000 | 1,427,600 | ||||||
Genworth Holdings, Inc. | 1,910,000 | 1,365,650 | ||||||
6.15%, due 11/15/66 (b) | 1,320,000 | 369,600 | ||||||
Hartford Financial Services Group, Inc. (The) | 4,100,000 | 4,885,556 | ||||||
Liberty Mutual Group, Inc. | 250,000 | 261,936 | ||||||
6.50%, due 3/15/35 (c) | 220,000 | 260,953 | ||||||
7.80%, due 3/7/87 (c) | 1,760,000 | 1,922,800 | ||||||
10.75%, due 6/15/88 (b)(c) | 750,000 | 1,095,000 | ||||||
Markel Corp. | 2,350,000 | 2,421,393 | ||||||
Oil Insurance, Ltd. | 1,320,000 | 1,188,000 | ||||||
Pacific Life Insurance Co. | 2,575,000 | 3,252,511 | ||||||
Progressive Corp. (The) | 3,700,000 | 3,492,430 |
Principal Amount | Value | |||||||
Insurance (continued) | ||||||||
Protective Life Corp. | $ | 1,640,000 | $ | 2,191,903 | ||||
Provident Cos., Inc. | 2,115,000 | 2,543,328 | ||||||
Prudential Financial, Inc. | 1,760,000 | 1,834,395 | ||||||
Swiss Re Capital I, L.P. | 1,350,000 | 1,350,000 | ||||||
Validus Holdings, Ltd. | 1,690,000 | 2,229,005 | ||||||
Voya Financial, Inc. | 1,860,000 | 2,087,846 | ||||||
XLIT, Ltd. | ||||||||
4.45%, due 3/31/25 (Ireland) | 2,615,000 | 2,627,853 | ||||||
6.50%, due 10/29/49 (Ireland) (b) | 2,120,000 | 1,484,000 | ||||||
|
| |||||||
45,932,842 | ||||||||
|
| |||||||
Internet 0.3% | ||||||||
eBay, Inc. | 3,840,000 | 4,015,288 | ||||||
|
| |||||||
Iron & Steel 0.7% | ||||||||
AK Steel Corp. | 2,710,000 | 2,235,750 | ||||||
8.75%, due 12/1/18 | 1,900,000 | 1,961,750 | ||||||
ArcelorMittal | 1,500,000 | 1,577,812 | ||||||
8.00%, due 10/15/39 (Luxembourg) | 2,300,000 | 2,139,000 | ||||||
Cliffs Natural Resources, Inc. | 1,085,000 | 455,700 | ||||||
5.95%, due 1/15/18 | 645,000 | 399,900 | ||||||
United States Steel Corp. | 2,250,000 | 2,120,625 | ||||||
|
| |||||||
10,890,537 | ||||||||
|
| |||||||
Lodging 0.8% | ||||||||
Boyd Gaming Corp. | 1,465,000 | 1,497,962 | ||||||
MGM Resorts International | 4,600,000 | 4,910,500 | ||||||
8.625%, due 2/1/19 | 80,000 | 91,000 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 265,000 | 289,224 | ||||||
7.15%, due 12/1/19 | 1,900,000 | 2,200,162 | ||||||
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. | 1,850,000 | 1,706,625 | ||||||
5.50%, due 3/1/25 (c) | 1,905,000 | 1,822,847 | ||||||
|
| |||||||
12,518,320 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Machinery—Construction & Mining 0.2% |
| |||||||
Terex Corp. | $ | 440,000 | $ | 435,600 | ||||
6.50%, due 4/1/20 | 2,400,000 | 2,401,200 | ||||||
|
| |||||||
2,836,800 | ||||||||
|
| |||||||
Machinery—Diversified 0.5% | ||||||||
CNH Industrial Capital LLC | 3,945,000 | 3,945,000 | ||||||
Zebra Technologies Corp. | 3,210,000 | 3,475,146 | ||||||
|
| |||||||
7,420,146 | ||||||||
|
| |||||||
Media 1.3% | ||||||||
CCO Holdings LLC / CCO Holdings Capital Corp. | 1,555,000 | 1,630,806 | ||||||
CCO Safari II LLC | 3,890,000 | 4,136,000 | ||||||
Clear Channel Worldwide Holdings, Inc. Series B | 3,150,000 | 3,165,750 | ||||||
DISH DBS Corp. | 2,050,000 | 1,993,625 | ||||||
iHeartCommunications, Inc. | 3,070,000 | 2,172,025 | ||||||
NBC Universal Media LLC | 160,000 | 181,958 | ||||||
Time Warner Entertainment Co., L.P. 8.375%, due 3/15/23 | 800,000 | 1,042,420 | ||||||
Time Warner, Inc. | 2,500,000 | 2,611,447 | ||||||
7.70%, due 5/1/32 | 300,000 | 389,781 | ||||||
UPCB Finance IV, Ltd. | 2,050,000 | 2,085,875 | ||||||
|
| |||||||
19,409,687 | ||||||||
|
| |||||||
Mining 0.1% | ||||||||
Aleris International, Inc. | 2,338,000 | 2,074,975 | ||||||
|
| |||||||
Miscellaneous—Manufacturing 0.6% |
| |||||||
Amsted Industries, Inc. | 3,785,000 | 3,775,538 | ||||||
Gates Global LLC / Gates Global Co. 6.00%, due 7/15/22 (c) | 3,180,000 | 2,766,600 | ||||||
Siemens Financieringsmaatschappij N.V. | 300,000 | 389,541 | ||||||
Textron Financial Corp. | 3,540,000 | 2,478,000 | ||||||
|
| |||||||
9,409,679 | ||||||||
|
|
Principal Amount | Value | |||||||
Oil & Gas 0.9% | ||||||||
CHC Helicopter S.A. | $ | 2,871,000 | $ | 1,277,595 | ||||
CITGO Petroleum Corp. | 1,980,000 | 1,930,500 | ||||||
Denbury Resources, Inc. | 2,550,000 | 1,657,500 | ||||||
Precision Drilling Corp. | 1,485,000 | 1,277,100 | ||||||
6.625%, due 11/15/20 (Canada) | 635,000 | 565,944 | ||||||
SM Energy Co. | 1,970,000 | 1,640,025 | ||||||
6.125%, due 11/15/22 | 2,240,000 | 2,027,200 | ||||||
Sunoco, L.P. / Sunoco Finance Corp. 5.50%, due 8/1/20 (c) | 2,000,000 | 2,000,000 | ||||||
6.375%, due 4/1/23 (c) | 475,000 | 482,125 | ||||||
|
| |||||||
12,857,989 | ||||||||
|
| |||||||
Oil & Gas Services 0.2% | ||||||||
Basic Energy Services, Inc. | 1,635,000 | 506,850 | ||||||
PHI, Inc. | 2,005,000 | 1,848,369 | ||||||
|
| |||||||
2,355,219 | ||||||||
|
| |||||||
Packaging & Containers 1.4% | ||||||||
Albea Beauty Holdings S.A. | 1,850,000 | 1,942,500 | ||||||
Ball Corp. | 3,700,000 | 3,876,120 | ||||||
Crown Americas LLC / Crown Americas Capital Corp. IV | 1,400,000 | 1,428,000 | ||||||
Crown European Holdings S.A. | EUR 2,150,000 | 2,646,498 | ||||||
Kloeckner Pentaplast of America, Inc. 7.125%, due 11/1/20 (c) | $ | 1,045,000 | 1,264,783 | |||||
Owens-Brockway Glass Container, Inc. 5.00%, due 1/15/22 (c) | 3,890,000 | 4,006,700 | ||||||
Reynolds Group Issuer, Inc. | 2,000,000 | 2,075,000 | ||||||
9.875%, due 8/15/19 (New Zealand) | 1,110,000 | 1,147,462 | ||||||
Sealed Air Corp. | 475,000 | 494,594 | ||||||
5.50%, due 9/15/25 (c) | 1,900,000 | 2,016,375 | ||||||
|
| |||||||
20,898,032 | ||||||||
|
| |||||||
Pharmaceuticals 0.4% | ||||||||
Actavis Funding SCS | 4,050,000 | 4,149,010 |
18 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Pharmaceuticals (continued) | ||||||||
Endo Ltd. / Endo Finance LLC / Endo Finco, Inc. | $ | 1,688,000 | $ | 1,612,040 | ||||
|
| |||||||
5,761,050 | ||||||||
|
| |||||||
Pipelines 1.6% | ||||||||
Columbia Pipeline Group, Inc. | 2,995,000 | 3,033,150 | ||||||
Crestwood Midstream Partners, L.P. / Crestwood Midstream Finance Corp. 6.25%, due 4/1/23 (c) | 2,710,000 | 2,472,875 | ||||||
Hiland Partners Holdings LLC / Hiland Partners Finance Corp. | 3,210,000 | 3,173,185 | ||||||
Kinder Morgan, Inc. | 950,000 | 1,023,401 | ||||||
MPLX, L.P. | 100,000 | 96,629 | ||||||
5.50%, due 2/15/23 (c) | 1,975,000 | 1,969,950 | ||||||
Plains All American Pipeline, L.P. / PAA Finance Corp. | 2,770,000 | 2,231,556 | ||||||
Spectra Energy Partners, L.P. | 1,740,000 | 1,873,878 | ||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. 4.25%, due 11/15/23 | 2,165,000 | 1,995,870 | ||||||
5.25%, due 5/1/23 | 2,120,000 | 2,035,200 | ||||||
Tesoro Logistics, L.P. / Tesoro Logistics Finance Corp. | 1,845,000 | 1,881,900 | ||||||
5.875%, due 10/1/20 | 1,725,000 | 1,759,500 | ||||||
|
| |||||||
23,547,094 | ||||||||
|
| |||||||
Private Equity 0.2% | ||||||||
Icahn Enterprises, L.P. / Icahn Enterprises Finance Corp. | 1,195,000 | 1,139,731 | ||||||
6.00%, due 8/1/20 | 2,110,000 | 2,104,936 | ||||||
|
| |||||||
3,244,667 | ||||||||
|
| |||||||
Real Estate Investment Trusts 1.3% | ||||||||
Corrections Corporation of America | ||||||||
4.625%, due 5/1/23 | 810,000 | 825,187 | ||||||
5.00%, due 10/15/22 | 3,010,000 | 3,141,687 | ||||||
Crown Castle International Corp. | ||||||||
3.40%, due 2/15/21 | 2,080,000 | 2,154,454 | ||||||
5.25%, due 1/15/23 | 3,510,000 | 3,896,100 | ||||||
Essex Portfolio, L.P. | 1,490,000 | 1,507,420 | ||||||
GEO Group, Inc. (The) | 4,000,000 | 4,080,000 |
Principal Amount | Value | |||||||
Real Estate Investment Trusts (continued) |
| |||||||
¨Iron Mountain, Inc. | $ | 3,300,000 | $ | 3,390,750 | ||||
¨Welltower, Inc. | 290,000 | 300,707 | ||||||
|
| |||||||
19,296,305 | ||||||||
|
| |||||||
Retail 1.6% | ||||||||
AmeriGas Finance LLC / AmeriGas Finance Corp. | 1,140,000 | 1,177,381 | ||||||
7.00%, due 5/20/22 | 1,400,000 | 1,478,750 | ||||||
Brinker International, Inc. | 1,885,000 | 1,894,597 | ||||||
CVS Pass-Through Trust | 202,565 | 223,405 | ||||||
Dollar Tree, Inc. | 3,550,000 | 3,790,690 | ||||||
Macy’s Retail Holdings, Inc. | 1,750,000 | 1,793,537 | ||||||
QVC, Inc. | 2,500,000 | 2,528,202 | ||||||
Signet UK Finance PLC | 3,200,000 | 3,152,934 | ||||||
Suburban Propane Partners, L.P. / Suburban Energy Finance Corp. 5.50%, due 6/1/24 | 2,465,000 | 2,435,420 | ||||||
Tiffany & Co. | 4,715,000 | 4,879,176 | ||||||
Wal-Mart Stores, Inc. | 314,000 | 409,436 | ||||||
|
| |||||||
23,763,528 | ||||||||
|
| |||||||
Semiconductors 1.0% | ||||||||
Freescale Semiconductor, Inc. | 400,000 | 416,000 | ||||||
6.00%, due 1/15/22 (c) | 3,200,000 | 3,392,000 | ||||||
NXP B.V. / NXP Funding LLC | 4,350,000 | 4,513,125 | ||||||
Qorvo, Inc. | 3,740,000 | 3,833,500 | ||||||
Sensata Technologies B.V. | 2,990,000 | 3,004,950 | ||||||
|
| |||||||
15,159,575 | ||||||||
|
| |||||||
Software 0.5% | ||||||||
First Data Corp. | 2,725,000 | 2,752,250 | ||||||
5.375%, due 8/15/23 (c) | 1,150,000 | 1,188,813 | ||||||
MSCI, Inc. | 3,610,000 | 3,840,137 | ||||||
|
| |||||||
7,781,200 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Telecommunications 2.2% | ||||||||
AT&T, Inc. | $ | 3,800,000 | $ | 3,965,091 | ||||
CenturyLink, Inc. | 4,000,000 | 3,950,000 | ||||||
CommScope Technologies Finance LLC | 850,000 | 871,250 | ||||||
CommScope, Inc. | 3,090,000 | 3,136,350 | ||||||
Hughes Satellite Systems Corp. | 990,000 | 1,090,238 | ||||||
7.625%, due 6/15/21 | 1,200,000 | 1,335,000 | ||||||
Inmarsat Finance PLC | 2,680,000 | 2,546,000 | ||||||
Sprint Communications, Inc. | 1,900,000 | 1,397,469 | ||||||
Sprint Corp. | 1,300,000 | 1,049,750 | ||||||
T-Mobile USA, Inc. | 3,515,000 | 3,697,358 | ||||||
Telecom Italia Capital S.A. | 315,000 | 337,050 | ||||||
Telefonica Emisiones SAU | 2,552,000 | 2,808,093 | ||||||
5.462%, due 2/16/21 (Spain) | 395,000 | 449,146 | ||||||
¨Verizon Communications, Inc. | ||||||||
4.862%, due 8/21/46 | 2,250,000 | 2,411,348 | ||||||
5.15%, due 9/15/23 | 2,325,000 | 2,673,966 | ||||||
5.85%, due 9/15/35 | 1,005,000 | 1,198,023 | ||||||
|
| |||||||
32,916,132 | ||||||||
|
| |||||||
Transportation 0.4% | ||||||||
Hapag-Lloyd A.G. | 186,000 | 188,790 | ||||||
Hornbeck Offshore Services, Inc. | 215,000 | 136,794 | ||||||
5.875%, due 4/1/20 | 1,700,000 | 1,100,750 | ||||||
XPO Logistics, Inc. | 3,950,000 | 3,846,510 | ||||||
|
| |||||||
5,272,844 | ||||||||
|
| |||||||
Total Corporate Bonds | 599,983,808 | |||||||
|
| |||||||
Foreign Bonds 0.3% | ||||||||
Banks 0.2% | ||||||||
Barclays Bank PLC | GBP 1,186,000 | 2,156,313 | ||||||
|
|
Principal Amount | Value | |||||||
Packaging & Containers 0.1% | ||||||||
Rexam PLC | EUR 1,250,000 | $ | 1,443,336 | |||||
|
| |||||||
Total Foreign Bonds | 3,599,649 | |||||||
|
| |||||||
Loan Assignments 4.3% (e) | ||||||||
Auto Parts & Equipment 0.1% | ||||||||
Allison Transmission, Inc. | $ | 1,744,414 | 1,745,867 | |||||
|
| |||||||
Commercial Services 0.1% | ||||||||
Allied Security Holdings LLC | 1,815,068 | 1,760,616 | ||||||
|
| |||||||
Entertainment 0.1% | ||||||||
Scientific Games International, Inc. 2014 Term Loan B1 | 2,443,750 | 2,403,531 | ||||||
|
| |||||||
Health Care—Products 0.1% | ||||||||
Ortho-Clinical Diagnostics, Inc. | 2,303,963 | 2,183,484 | ||||||
|
| |||||||
Health Care—Services 0.5% | ||||||||
MPH Acquisition Holdings LLC Term Loan | 5,279,330 | 5,248,974 | ||||||
U.S. Renal Care, Inc. | 1,700,000 | 1,700,000 | ||||||
|
| |||||||
6,948,974 | ||||||||
|
| |||||||
Household Products & Wares 0.9% | ||||||||
KIK Custom Products, Inc. | 9,950,000 | 9,626,625 | ||||||
Prestige Brands, Inc. Term Loan B3 3.522%, due 9/3/21 | 3,271,841 | 3,277,976 | ||||||
|
| |||||||
12,904,601 | ||||||||
|
| |||||||
Iron & Steel 0.6% | ||||||||
Signode Industrial Group U.S., Inc. | 8,578,431 | 8,492,647 | ||||||
|
|
20 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Loan Assignments (continued) | ||||||||
Machinery—Construction & Mining 0.1% |
| |||||||
Terex Corp. | $ | 2,000,000 | $ | 1,965,000 | ||||
|
| |||||||
Media 0.2% | ||||||||
iHeartCommunications, Inc. | 1,966,831 | 1,464,676 | ||||||
Virgin Media Investment Holdings, Ltd. USD Term Loan F | 1,009,982 | 1,007,457 | ||||||
|
| |||||||
2,472,133 | ||||||||
|
| |||||||
Packaging & Containers 0.5% | ||||||||
Berry Plastics Holding Corp. | 8,120,357 | 8,136,598 | ||||||
|
| |||||||
Pharmaceuticals 0.1% | ||||||||
Valeant Pharmaceuticals International, Inc. | 1,378,032 | 1,338,988 | ||||||
|
| |||||||
Semiconductors 0.3% | ||||||||
Avago Technologies Cayman, Ltd. 2016 USD Term Loan B1 | 4,025,000 | 4,027,238 | ||||||
|
| |||||||
Telecommunications 0.7% | ||||||||
Level 3 Financing, Inc. 2015 | 10,000,000 | 10,010,420 | ||||||
|
| |||||||
Total Loan Assignments |
| 64,390,097 | ||||||
|
| |||||||
Mortgage-Backed Securities 0.3% | ||||||||
Commercial Mortgage Loans |
| |||||||
Banc of America Commercial Mortgage Trust | 384,883 | 390,158 | ||||||
Bayview Commercial Asset Trust | 172,451 | 151,511 | ||||||
Bear Stearns Commercial Mortgage Securities Trust | 307,391 | 317,005 |
Principal Amount | Value | |||||||
Commercial Mortgage Loans |
| |||||||
Citigroup Commercial Mortgage Trust Series 2008-C7, Class A4 | $ | 169,857 | $ | 177,251 | ||||
Four Times Square Trust | 860,000 | 969,523 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust | 10,316 | 10,309 | ||||||
LB-UBS Commercial Mortgage Trust Series 2006-C7, Class A3 | 460,562 | 463,984 | ||||||
Morgan Stanley Capital I Trust | 79,446 | 79,946 | ||||||
Series 2006-HQ9, Class AM | 500,000 | 501,668 | ||||||
TimberStar Trust 1 | 280,000 | 283,694 | ||||||
Wachovia Bank Commercial Mortgage Trust | 500,000 | 505,396 | ||||||
|
| |||||||
3,850,445 | ||||||||
|
| |||||||
Residential Mortgages (Collateralized Mortgage Obligations) 0.1% |
| |||||||
Mortgage Equity Conversion Asset Trust Series 2007-FF2, Class A | 525,651 | 446,443 | ||||||
WaMu Mortgage Pass- | 514,133 | 444,046 | ||||||
|
| |||||||
890,489 | ||||||||
|
| |||||||
Total Mortgage-Backed Securities |
| 4,740,934 | ||||||
|
| |||||||
U.S. Government & Federal Agencies 0.0%‡ | ||||||||
Federal Home Loan Mortgage Corporation |
| |||||||
6.50%, due 11/1/16 | 803 | 808 | ||||||
6.50%, due 2/1/27 | 74 | 84 | ||||||
6.50%, due 5/1/29 | 27,577 | 31,411 | ||||||
6.50%, due 6/1/29 | 8,556 | 9,745 | ||||||
6.50%, due 7/1/29 | 34,177 | 38,970 | ||||||
6.50%, due 8/1/29 | 9,635 | 10,975 | ||||||
6.50%, due 9/1/29 | 811 | 923 | ||||||
6.50%, due 6/1/32 | 3,574 | 4,206 | ||||||
6.50%, due 1/1/37 | 2,867 | 3,331 | ||||||
7.00%, due 3/1/26 | 160 | 163 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
Federal Home Loan Mortgage Corporation |
| |||||||
7.00%, due 9/1/26 | $ | 6,000 | $ | 6,794 | ||||
7.00%, due 7/1/32 | 14,128 | 16,857 | ||||||
7.50%, due 5/1/32 | 7,448 | 8,538 | ||||||
|
| |||||||
132,805 | ||||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
4.50%, due 7/1/20 | 1,864 | 1,942 | ||||||
4.50%, due 3/1/21 | 3,489 | 3,594 | ||||||
6.00%, due 4/1/19 | 644 | 733 | ||||||
7.00%, due 10/1/37 | 752 | 855 | ||||||
7.00%, due 11/1/37 | 19,863 | 24,751 | ||||||
|
| |||||||
31,875 | ||||||||
|
| |||||||
Government National Mortgage Association |
| |||||||
5.00%, due 12/15/37 | 3,018 | 3,358 | ||||||
5.50%, due 9/15/35 | 6,888 | 7,748 | ||||||
6.50%, due 4/15/29 | 15 | 17 | ||||||
6.50%, due 8/15/29 | 19 | 22 | ||||||
6.50%, due 10/15/31 | 2,989 | 3,483 | ||||||
7.00%, due 12/15/25 | 3,630 | 3,681 | ||||||
7.00%, due 11/15/27 | 9,824 | 11,001 | ||||||
7.00%, due 12/15/27 | 50,278 | 56,804 | ||||||
7.00%, due 6/15/28 | 4,045 | 4,164 | ||||||
7.50%, due 6/15/26 | 389 | 436 | ||||||
7.50%, due 10/15/30 | 17,525 | 18,430 | ||||||
8.00%, due 9/15/26 | 125 | 126 | ||||||
8.00%, due 10/15/26 | 4,688 | 5,127 | ||||||
8.50%, due 11/15/26 | 19,747 | 20,123 | ||||||
|
| |||||||
134,520 | ||||||||
|
| |||||||
Total U.S. Government & Federal Agencies |
| 299,200 | ||||||
|
| |||||||
Total Long-Term Bonds |
| 680,467,998 | ||||||
|
| |||||||
Shares | ||||||||
Common Stocks 44.1% | ||||||||
Aerospace & Defense 0.9% |
| |||||||
BAE Systems PLC (United Kingdom) | 1,186,080 | 8,271,809 | ||||||
Lockheed Martin Corp. | 24,750 | 5,751,405 | ||||||
|
| |||||||
14,023,214 | ||||||||
|
| |||||||
Agriculture 3.6% |
| |||||||
Altria Group, Inc. | 166,733 | 10,455,826 | ||||||
British American Tobacco PLC (United Kingdom) | 158,797 | 9,675,500 | ||||||
Imperial Brands PLC (United Kingdom) | 205,765 | 11,179,809 | ||||||
¨Philip Morris International, Inc. | 123,748 | 12,142,154 | ||||||
Reynolds American, Inc. | 212,864 | 10,558,054 | ||||||
|
| |||||||
54,011,343 | ||||||||
|
|
Shares | Value | |||||||
Auto Manufacturers 0.5% |
| |||||||
Daimler A.G. Registered (Germany) | 111,185 | $ | 7,726,591 | |||||
|
| |||||||
Banks 1.5% |
| |||||||
Commonwealth Bank of Australia (Australia) | 79,660 | 4,475,478 | ||||||
Svenska Handelsbanken AB Class A (Sweden) | 462,990 | 6,163,245 | ||||||
Wells Fargo & Co. | 109,250 | 5,460,315 | ||||||
Westpac Banking Corp. (Australia) | 270,894 | 6,395,500 | ||||||
|
| |||||||
22,494,538 | ||||||||
|
| |||||||
Beverages 0.9% |
| |||||||
Coca-Cola Co. (The) | 93,350 | 4,182,080 | ||||||
Diageo PLC (United Kingdom) | 180,700 | 4,873,993 | ||||||
PepsiCo., Inc. | 43,560 | 4,484,938 | ||||||
|
| |||||||
13,541,011 | ||||||||
|
| |||||||
Chemicals 1.5% |
| |||||||
Agrium, Inc. (Canada) | 44,095 | 3,797,461 | ||||||
BASF S.E. (Germany) | 85,664 | 7,077,165 | ||||||
Dow Chemical Co. (The) | 151,405 | 7,965,417 | ||||||
Yara International ASA (Norway) | 101,610 | 4,068,514 | ||||||
|
| |||||||
22,908,557 | ||||||||
|
| |||||||
Commercial Services 0.7% |
| |||||||
Automatic Data Processing, Inc. | 51,220 | 4,529,897 | ||||||
R.R. Donnelley & Sons Co. | 372,480 | 6,481,152 | ||||||
|
| |||||||
11,011,049 | ||||||||
|
| |||||||
Cosmetics & Personal Care 0.8% |
| |||||||
Procter & Gamble Co. (The) | 62,895 | 5,039,148 | ||||||
Unilever PLC (United Kingdom) | 143,160 | 6,389,353 | ||||||
|
| |||||||
11,428,501 | ||||||||
|
| |||||||
Electric 5.8% |
| |||||||
Ameren Corp. | 169,305 | 8,126,640 | ||||||
Duke Energy Corp. | 146,853 | 11,569,079 | ||||||
Entergy Corp. | 127,795 | 9,607,628 | ||||||
¨PPL Corp. | 363,040 | 13,664,826 | ||||||
Southern Co. (The) | 112,995 | 5,661,049 | ||||||
SSE PLC (United Kingdom) | 319,015 | 7,038,549 | ||||||
TECO Energy, Inc. | 180,435 | 5,010,680 | ||||||
¨Terna Rete Elettrica Nazionale S.p.A. (Italy) | 2,131,120 | 12,015,741 | ||||||
¨WEC Energy Group, Inc. | 224,491 | 13,067,621 | ||||||
|
| |||||||
85,761,813 | ||||||||
|
| |||||||
Electrical Components & Equipment 0.3% |
| |||||||
Emerson Electric Co. | 92,770 | 5,068,025 | ||||||
|
| |||||||
Engineering & Construction 0.6% |
| |||||||
Vinci S.A. (France) | 116,095 | 8,672,655 | ||||||
|
| |||||||
Entertainment 0.4% |
| |||||||
Regal Entertainment Group Class A | 249,300 | 5,197,905 | ||||||
|
|
22 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Environmental Controls 0.3% |
| |||||||
Waste Management, Inc. | 84,820 | $ | 4,986,568 | |||||
|
| |||||||
Finance—Other Services 0.6% |
| |||||||
CME Group, Inc. | 56,340 | 5,178,209 | ||||||
Singapore Exchange, Ltd. (Singapore) | 748,986 | 4,193,676 | ||||||
|
| |||||||
9,371,885 | ||||||||
|
| |||||||
Food 0.7% |
| |||||||
Nestle S.A. Registered (Switzerland) | 52,915 | 3,943,941 | ||||||
Orkla ASA (Norway) | 688,920 | 6,014,900 | ||||||
|
| |||||||
9,958,841 | ||||||||
|
| |||||||
Gas 1.2% |
| |||||||
Gas Natural SDG S.A. (Spain) | 231,630 | 4,817,867 | ||||||
¨National Grid PLC (United Kingdom) | 946,760 | 13,484,986 | ||||||
|
| |||||||
18,302,853 | ||||||||
|
| |||||||
Health Care—Services 0.3% |
| |||||||
Sonic Healthcare, Ltd. (Australia) | 253,570 | 3,744,213 | ||||||
|
| |||||||
Household Products & Wares 0.5% |
| |||||||
Kimberly-Clark Corp. | 58,065 | 7,269,157 | ||||||
|
| |||||||
Insurance 2.1% |
| |||||||
Allianz S.E. Registered (Germany) | 32,740 | 5,557,737 | ||||||
Arthur J. Gallagher & Co. | 81,090 | 3,733,384 | ||||||
AXA S.A. (France) | 275,450 | 6,943,622 | ||||||
Muenchener Rueckversicherungs-Gesellschaft A.G. Registered (Germany) | 58,070 | 10,768,554 | ||||||
SCOR S.E. (France) | 138,216 | 4,705,988 | ||||||
|
| |||||||
31,709,285 | ||||||||
|
| |||||||
Investment Management/Advisory Services 0.3% |
| |||||||
BlackRock, Inc. | 12,175 | 4,338,318 | ||||||
|
| |||||||
Media 0.6% |
| |||||||
ION Media Networks, Inc. (d)(g)(h)(i) | 12 | 6,425 | ||||||
Shaw Communications, Inc. | 229,920 | 4,254,995 | ||||||
Vivendi S.A. (France) | 201,458 | 3,866,189 | ||||||
|
| |||||||
8,127,609 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 0.8% |
| |||||||
Eaton Corp. PLC | 82,235 | 5,203,008 | ||||||
Siemens A.G. Registered (Germany) | 68,390 | 7,135,607 | ||||||
|
| |||||||
12,338,615 | ||||||||
|
| |||||||
Oil & Gas 3.1% |
| |||||||
Exxon Mobil Corp. | 69,705 | 6,161,922 | ||||||
Occidental Petroleum Corp. | 126,630 | 9,706,189 | ||||||
Royal Dutch Shell PLC Class A, Sponsored ADR (Netherlands) | 179,295 | 9,482,913 | ||||||
Statoil ASA (Norway) | 609,835 | 10,777,588 |
Shares | Value | |||||||
Oil & Gas (continued) | ||||||||
Total S.A. (France) | 205,188 | $ | 10,321,380 | |||||
|
| |||||||
46,449,992 | ||||||||
|
| |||||||
Pharmaceuticals 3.1% |
| |||||||
AbbVie, Inc. | 96,560 | 5,890,160 | ||||||
AstraZeneca PLC, Sponsored ADR (United Kingdom) | 288,290 | 8,348,878 | ||||||
GlaxoSmithKline PLC (United Kingdom) | 473,820 | 10,100,986 | ||||||
Johnson & Johnson | 40,505 | 4,539,800 | ||||||
Merck & Co., Inc. | 90,209 | 4,947,061 | ||||||
Pfizer, Inc. | 125,470 | 4,104,124 | ||||||
Roche Holding A.G. (Switzerland) | 17,935 | 4,533,762 | ||||||
Sanofi (France) | 40,975 | 3,383,289 | ||||||
|
| |||||||
45,848,060 | ||||||||
|
| |||||||
Pipelines 0.3% |
| |||||||
Enterprise Products Partners, L.P. | 161,080 | 4,299,225 | ||||||
|
| |||||||
Real Estate Investment Trusts 2.8% |
| |||||||
Corrections Corporation of America | 245,315 | 7,462,482 | ||||||
¨Iron Mountain, Inc. | 308,755 | 11,278,820 | ||||||
Unibail-Rodamco S.E. (France) | 33,840 | 9,067,151 | ||||||
¨Welltower, Inc. | 193,010 | 13,398,754 | ||||||
|
| |||||||
41,207,207 | ||||||||
|
| |||||||
Retail 0.6% |
| |||||||
McDonald’s Corp. | 74,542 | 9,428,818 | ||||||
|
| |||||||
Savings & Loans 0.3% |
| |||||||
People’s United Financial, Inc. | 307,340 | 4,763,770 | ||||||
|
| |||||||
Semiconductors 1.1% |
| |||||||
Microchip Technology, Inc. | 106,730 | 5,186,011 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR (Taiwan) | 239,890 | 5,659,005 | ||||||
Texas Instruments, Inc. | 105,310 | 6,006,882 | ||||||
|
| |||||||
16,851,898 | ||||||||
|
| |||||||
Software 0.3% |
| |||||||
Microsoft Corp. | 82,518 | 4,115,173 | ||||||
|
| |||||||
Telecommunications 6.9% |
| |||||||
¨AT&T, Inc. | 305,162 | 11,846,389 | ||||||
¨BCE, Inc. (Canada) | 267,960 | 12,566,164 | ||||||
CenturyLink, Inc. | 210,926 | 6,528,160 | ||||||
Cisco Systems, Inc. | 180,500 | 4,961,945 | ||||||
Deutsche Telekom A.G. Registered (Germany) | 285,130 | 4,990,373 | ||||||
Rogers Communications, Inc. Class B (Canada) | 289,650 | 11,265,577 | ||||||
Singapore Telecommunications, Ltd. (Singapore) | 1,679,815 | 4,821,419 | ||||||
Swisscom A.G. Registered (Switzerland) | 18,513 | 9,388,694 | ||||||
Telstra Corp., Ltd. (Australia) | 2,091,580 | 8,524,183 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Telecommunications (continued) | ||||||||
TELUS Corp. (Canada) | 150,846 | $ | 4,782,541 | |||||
¨Verizon Communications, Inc. | 222,199 | 11,318,817 | ||||||
Vodafone Group PLC (United Kingdom) | 3,612,298 | 11,569,623 | ||||||
|
| |||||||
102,563,885 | ||||||||
|
| |||||||
Transportation 0.7% |
| |||||||
Deutsche Post A.G. Registered (Germany) | 160,210 | 4,703,620 | ||||||
United Parcel Service, Inc. Class B | 50,100 | 5,264,007 | ||||||
|
| |||||||
9,967,627 | ||||||||
|
| |||||||
Total Common Stocks |
| 657,488,201 | ||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 8.2% | ||||||||
Repurchase Agreement 8.2% | ||||||||
Fixed Income Clearing Corp. | $ | 122,816,798 | 122,816,798 | |||||
|
| |||||||
Total Short-Term Investment | 122,816,798 | |||||||
|
| |||||||
Total Investments | 98.0 | % | 1,460,772,997 | |||||
Other Assets, Less Liabilities | 2.0 | 29,586,206 | ||||||
Net Assets | 100.0 | % | $ | 1,490,359,203 |
‡ | Less than one-tenth of a percent. |
(a) | Step coupon—Rate shown was the rate in effect as of April 30, 2016. |
(b) | Floating rate—Rate shown was the rate in effect as of April 30, 2016. |
(c) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(d) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2016, the total market value of these securities was $676,273, which represented less than one-tenth of a percent of the Fund’s net assets. |
(e) | 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 weighted average interest rate of all contracts within the floating rate loan facility as of April 30, 2016. |
(f) | Collateral strip rate—A bond whose interest was based on the weighted net interest rate of the collateral. The coupon rate adjusts periodically based on a predetermined schedule. Rate shown was the rate in effect as of April 30, 2016. |
(g) | Illiquid security—As of April 30, 2016, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $452,868, which represented less than one-tenth of a percent of the Fund’s net assets. |
(h) | Restricted security. |
(i) | Non-income producing security. |
(j) | As of April 30, 2016, cost was $1,421,346,026 for federal income tax purposes and net unrealized appreciation was as follows: |
Gross unrealized appreciation | $ | 85,283,728 | ||
Gross unrealized depreciation | (45,856,757 | ) | ||
|
| |||
Net unrealized appreciation | $ | 39,426,971 | ||
|
|
24 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
As of April 30, 2016, the Fund held the following foreign currency forward contracts:
Foreign Currency Buy Contracts | Expiration Date | Counterparty | Contract | Contract Amount Sold | Unrealized | |||||||||||||||||
Canadian Dollar vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | CAD | 21,918,000 | $ | 17,414,588 | $ | 54,002 | ||||||||||||||
Euro vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | EUR | 70,373,000 | 79,732,609 | 864,209 | ||||||||||||||||
Pound Sterling vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | GBP | 33,223,000 | 48,366,043 | 178,628 | ||||||||||||||||
Foreign Currency Sales Contracts | Contract | Contract Amount Purchased | ||||||||||||||||||||
Canadian Dollar vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | CAD | 21,918,000 | 15,688,267 | (1,780,322 | ) | |||||||||||||||
Canadian Dollar vs. U.S. Dollar | 7/28/16 | JPMorgan Chase Bank | 20,546,000 | 16,324,228 | (51,132 | ) | ||||||||||||||||
Euro vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | EUR | 70,373,000 | 80,069,344 | (527,474 | ) | |||||||||||||||
Euro vs. U.S. Dollar | 7/28/16 | JPMorgan Chase Bank | 72,053,000 | 81,834,195 | (889,078 | ) | ||||||||||||||||
Pound Sterling vs. U.S. Dollar | 5/10/16 | JPMorgan Chase Bank | GBP | 33,223,000 | 47,994,942 | (549,729 | ) | |||||||||||||||
Pound Sterling vs. U.S. Dollar | 7/28/16 | JPMorgan Chase Bank | 31,505,000 | 45,874,525 | (171,237 | ) | ||||||||||||||||
Net unrealized appreciation (depreciation) on foreign currency forward contracts |
| $ | (2,872,133 | ) |
As of April 30, 2016, the Fund held the following futures contracts1:
Type | Number of Contracts Long | Expiration Date | Notional Amount | Unrealized Appreciation (Depreciation)2 | ||||||||||||
Euro Stoxx 50 | 1,965 | June 2016 | $ | 66,983,216 | $ | (225,542 | ) | |||||||||
Nikkei 225 | 595 | June 2016 | 44,345,395 | (2,406,456 | ) | |||||||||||
Standard & Poor’s 500 Index Mini | 1,710 | June 2016 | 176,053,050 | 6,806,381 | ||||||||||||
United States Treasury Bond | 217 | June 2016 | 35,438,812 | (388,702 | ) | |||||||||||
|
|
|
| |||||||||||||
$ | 322,820,473 | $ | 3,785,681 | |||||||||||||
|
|
|
|
1. | As of April 30, 2016, cash in the amount of $18,830,899 was on deposit with brokers for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of April 30, 2016. |
The following abbreviations are used in the preceding pages:
ADR—American Depositary Receipt
CAD—Canadian Dollar
EUR—Euro
GBP—British Pound Sterling
TBD—To Be Determined
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 6,981,210 | $ | — | $ | 6,981,210 | ||||||||
Convertible Bond | — | 473,100 | — | 473,100 | ||||||||||||
Corporate Bonds | — | 599,983,808 | — | 599,983,808 | ||||||||||||
Foreign Bonds | — | 3,599,649 | — | 3,599,649 | ||||||||||||
Loan Assignments (b) | — | 62,425,097 | 1,965,000 | 64,390,097 | ||||||||||||
Mortgage-Backed Securities (c) | — | 4,294,491 | 446,443 | 4,740,934 | ||||||||||||
U.S. Government & Federal Agencies | — | 299,200 | — | 299,200 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 678,056,555 | 2,411,443 | 680,467,998 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (d) | 657,481,776 | — | 6,425 | 657,488,201 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 122,816,798 | — | 122,816,798 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 657,481,776 | 800,873,353 | 2,417,868 | 1,460,772,997 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (e) | — | 1,096,839 | — | 1,096,839 | ||||||||||||
Futures Contracts Long (e) | 6,806,381 | — | — | 6,806,381 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | 6,806,381 | 1,096,839 | — | 7,903,220 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 664,288,157 | $ | 801,970,192 | $ | 2,417,868 | $ | 1,468,676,217 | ||||||||
|
|
|
|
|
|
|
|
Liability Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (e) | $ | — | $ | (3,968,972 | ) | $ | — | $ | (3,968,972 | ) | ||||||
Futures Contracts Long (e) | (3,020,700 | ) | — | — | (3,020,700 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | $ | (3,020,700 | ) | $ | (3,968,972 | ) | $ | — | $ | (6,989,672 | ) | |||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $1,965,000 is held in Machinery—Construction & Mining within the Loan Assignments section of the Portfolio of Investments. |
(c) | The Level 3 security valued at $446,443 is held in Residential Mortgages (Collateralized Mortgage Obligations) within the Mortgage-Backed Securities section of the Portfolio of Investments. |
(d) | The Level 3 security valued at $6,425 is held in Media within the Common Stocks 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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
26 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, 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:
Investments in Securities | Balance as of October 31, 2015 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of April 30, 2016 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at April 30, 2016 (a) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Machinery—Construction & Mining | $ | — | $ | — | $ | — | $ | 5,000 | $ | 1,960,000 | $ | — | $ | — | $ | — | $ | 1,965,000 | $ | 5,000 | ||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | 431,121 | — | — | 15,322 | — | — | — | — | 446,443 | 15,322 | ||||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Media | 5,215 | — | — | 1,210 | — | — | — | — | 6,425 | 1,210 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 436,336 | $ | — | $ | — | $ | 21,532 | $ | 1,960,000 | $ | — | $ | — | $ | — | $ | 2,417,868 | $ | 21,532 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. | 27 |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value (identified cost $1,422,322,052) | $ | 1,460,772,997 | ||
Cash collateral on deposit at broker | 18,830,899 | |||
Cash denominated in foreign currencies (identified cost $3,479,545) | 3,520,836 | |||
Receivables: | ||||
Dividends and interest | 11,281,458 | |||
Fund shares sold | 5,298,469 | |||
Investment securities sold | 4,639,085 | |||
Other assets | 98,172 | |||
Unrealized appreciation on foreign currency forward contracts | 1,096,839 | |||
|
| |||
Total assets | 1,505,538,755 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Variation margin on futures contracts | 4,286,648 | |||
Fund shares redeemed | 3,286,080 | |||
Investment securities purchased | 1,960,000 | |||
Manager (See Note 3) | 748,779 | |||
NYLIFE Distributors (See Note 3) | 368,954 | |||
Transfer agent (See Note 3) | 358,661 | |||
Shareholder communication | 66,931 | |||
Professional fees | 51,565 | |||
Custodian | 36,833 | |||
Trustees | 1,231 | |||
Accrued expenses | 11,671 | |||
Interest expense and fees payable | 33,227 | |||
Unrealized depreciation on foreign currency forward contracts | 3,968,972 | |||
|
| |||
Total liabilities | 15,179,552 | |||
|
| |||
Net assets | $ | 1,490,359,203 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 824,215 | ||
Additional paid-in capital | 1,508,475,182 | |||
|
| |||
1,509,299,397 | ||||
Undistributed net investment income | 4,140,197 | |||
Accumulated net realized gain (loss) on investments, futures transactions and foreign currency transactions | (61,288,377 | ) | ||
Net unrealized appreciation (depreciation) on investments and futures contracts | 42,236,626 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | (4,028,640 | ) | ||
|
| |||
Net assets | $ | 1,490,359,203 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 552,846,568 | ||
|
| |||
Shares of beneficial interest outstanding | 30,686,892 | |||
|
| |||
Net asset value per share outstanding | $ | 18.02 | ||
Maximum sales charge (5.50% of offering price) | 1.05 | |||
|
| |||
Maximum offering price per share outstanding | $ | 19.07 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 156,930,341 | ||
|
| |||
Shares of beneficial interest outstanding | 8,706,966 | |||
|
| |||
Net asset value per share outstanding | $ | 18.02 | ||
Maximum sales charge (5.50% of offering price) | 1.05 | |||
|
| |||
Maximum offering price per share outstanding | $ | 19.07 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 41,282,862 | ||
|
| |||
Shares of beneficial interest outstanding | 2,278,610 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.12 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 232,893,999 | ||
|
| |||
Shares of beneficial interest outstanding | 12,877,593 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.09 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 506,088,832 | ||
|
| |||
Shares of beneficial interest outstanding | 27,853,897 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.17 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 289,986 | ||
|
| |||
Shares of beneficial interest outstanding | 16,106 | |||
|
| |||
Net asset value and offering price per share outstanding (a) | $ | 18.01 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 26,615 | ||
|
| |||
Shares of beneficial interest outstanding | 1,477 | |||
|
| |||
Net asset value and offering price per share outstanding (a) | $ | 18.01 | ||
|
|
(a) | The difference between the recalculated and stated NAV was caused by rounding. |
28 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 17,436,119 | ||
Dividends (a) | 14,929,804 | |||
|
| |||
Total income | 32,365,923 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 4,472,607 | |||
Distribution/Service—Class A (See Note 3) | 685,188 | |||
Distribution/Service—Investor Class (See Note 3) | 189,918 | |||
Distribution/Service—Class B (See Note 3) | 205,154 | |||
Distribution/Service—Class C (See Note 3) | 1,123,931 | |||
Distribution/Service—Class R2 (See Note 3) | 290 | |||
Distribution/Service—Class R3 (See Note 3) | 22 | |||
Transfer agent (See Note 3) | 1,061,044 | |||
Shareholder communication | 91,207 | |||
Registration | 77,287 | |||
Professional fees | 69,053 | |||
Custodian | 66,222 | |||
Interest expense | 30,902 | |||
Trustees | 17,161 | |||
Shareholder service (See Note 3) | 120 | |||
Miscellaneous | 37,524 | |||
|
| |||
Total expenses | 8,127,630 | |||
|
| |||
Net investment income (loss) | 24,238,293 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (49,403,985 | ) | ||
Futures transactions | 3,263,807 | |||
Foreign currency transactions | 3,695,186 | |||
|
| |||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | (42,444,992 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 45,430,437 | |||
Futures contracts | (15,235,986 | ) | ||
Translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | (5,552,826 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency transactions | 24,641,625 | |||
|
| |||
Net realized and unrealized gain (loss) on investments, futures transactions and foreign currency transactions | (17,803,367 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 6,434,926 | ||
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $894,281. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 24,238,293 | $ | 50,533,559 | ||||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | (42,444,992 | ) | 36,547,082 | |||||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency transactions | 24,641,625 | (106,496,141 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 6,434,926 | (19,415,500 | ) | |||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (9,753,756 | ) | (20,260,907 | ) | ||||
Investor Class | (2,565,757 | ) | (5,497,054 | ) | ||||
Class B | (527,776 | ) | (1,264,373 | ) | ||||
Class C | (2,934,746 | ) | (5,462,078 | ) | ||||
Class I | (9,109,447 | ) | (18,919,025 | ) | ||||
Class R2 | (4,101 | ) | (1,946 | ) | ||||
Class R3 | (206 | ) | — | |||||
|
| |||||||
(24,895,789 | ) | (51,405,383 | ) | |||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | (18,546,003 | ) | (21,407,906 | ) | ||||
Investor Class | (4,978,803 | ) | (6,933,839 | ) | ||||
Class B | (1,339,617 | ) | (2,085,743 | ) | ||||
Class C | (7,349,774 | ) | (6,203,537 | ) | ||||
Class I | (15,949,232 | ) | (18,852,587 | ) | ||||
Class R2 | (6,680 | ) | — | |||||
|
| |||||||
(48,170,109 | ) | (55,483,612 | ) | |||||
|
| |||||||
Total dividends and distributions to shareholders | (73,065,898 | ) | (106,888,995 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 229,508,604 | 665,174,116 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 66,501,120 | 97,104,538 | ||||||
Cost of shares redeemed | (274,808,678 | ) | (373,579,040 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 21,201,046 | 388,699,614 | ||||||
|
| |||||||
Net increase (decrease) in net assets | (45,429,926 | ) | 262,395,119 | |||||
Net Assets | ||||||||
Beginning of period | 1,535,789,129 | 1,273,394,010 | ||||||
|
| |||||||
End of period | $ | 1,490,359,203 | $ | 1,535,789,129 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 4,140,197 | $ | 4,797,693 | ||||
|
|
30 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 18.79 | $ | 20.51 | $ | 19.83 | $ | 17.46 | $ | 15.92 | $ | 15.58 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.30 | 0.68 | 0.82 | 0.69 | 0.67 | 0.66 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.98 | ) | 0.96 | 2.43 | 1.40 | 0.35 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | 0.15 | 0.14 | (0.06 | ) | 0.14 | (0.05 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.13 | (0.15 | ) | 1.92 | 3.06 | 2.21 | 0.96 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.31 | ) | (0.70 | ) | (0.72 | ) | (0.69 | ) | (0.67 | ) | (0.62 | ) | ||||||||||||
From net realized gain on investments | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.90 | ) | (1.57 | ) | (1.24 | ) | (0.69 | ) | (0.67 | ) | (0.62 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 18.02 | $ | 18.79 | $ | 20.51 | $ | 19.83 | $ | 17.46 | $ | 15.92 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 0.86 | %(c) | (0.81 | %) | 10.08 | % | 17.90 | % | 14.16 | % | 6.21 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.44 | %†† | 3.49 | % | 4.06 | % | 3.71 | % | 4.03 | % | 4.05 | % | ||||||||||||
Net expenses | 1.02 | %†† | 1.02 | % | 1.01 | % | 1.04 | % | 1.06 | % | 1.08 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 30 | % | 15 | % | 31 | % | 25 | % | 33 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 552,847 | $ | 581,920 | $ | 497,591 | $ | 397,101 | $ | 292,603 | $ | 242,939 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 18.80 | $ | 20.52 | $ | 19.84 | $ | 17.46 | $ | 15.93 | $ | 15.58 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.29 | 0.65 | 0.78 | 0.64 | 0.62 | 0.60 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.16 | ) | (0.99 | ) | 0.95 | 2.44 | 1.39 | 0.37 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | 0.15 | 0.14 | (0.06 | ) | 0.14 | (0.05 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.11 | (0.19 | ) | 1.87 | 3.02 | 2.15 | 0.92 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.30 | ) | (0.66 | ) | (0.67 | ) | (0.64 | ) | (0.62 | ) | (0.57 | ) | ||||||||||||
From net realized gain on investments | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.89 | ) | (1.53 | ) | (1.19 | ) | (0.64 | ) | (0.62 | ) | (0.57 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 18.02 | $ | 18.80 | $ | 20.52 | $ | 19.84 | $ | 17.46 | $ | 15.93 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 0.73 | %(c) | (0.97 | %) | 9.83 | % | 17.62 | % | 13.72 | % | 5.92 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.30 | %†† | 3.34 | % | 3.89 | % | 3.46 | % | 3.73 | % | 3.73 | % | ||||||||||||
Net expenses | 1.17 | %†† | 1.18 | % | 1.23 | % | 1.32 | % | 1.37 | % | 1.40 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 30 | % | 15 | % | 31 | % | 25 | % | 33 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 156,930 | $ | 159,798 | $ | 165,088 | $ | 168,097 | $ | 160,758 | $ | 163,168 |
* | Unaudited. |
†† | 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. | 31 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 18.89 | $ | 20.61 | $ | 19.93 | $ | 17.54 | $ | 15.99 | $ | 15.64 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.23 | 0.51 | 0.63 | 0.51 | 0.50 | 0.49 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.16 | ) | (0.99 | ) | 0.96 | 2.44 | 1.40 | 0.35 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | 0.15 | 0.14 | (0.06 | ) | 0.14 | (0.05 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.05 | (0.33 | ) | 1.73 | 2.89 | 2.04 | 0.79 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.52 | ) | (0.53 | ) | (0.50 | ) | (0.49 | ) | (0.44 | ) | ||||||||||||
From net realized gain on investments | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.82 | ) | (1.39 | ) | (1.05 | ) | (0.50 | ) | (0.49 | ) | (0.44 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 18.12 | $ | 18.89 | $ | 20.61 | $ | 19.93 | $ | 17.54 | $ | 15.99 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 0.41 | %(c) | (1.70 | %) | 8.99 | % | 16.74 | % | 12.87 | % | 5.14 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 2.56 | %†† | 2.60 | % | 3.14 | % | 2.73 | % | 2.99 | % | 2.98 | % | ||||||||||||
Net expenses | 1.92 | %†† | 1.93 | % | 1.98 | % | 2.07 | % | 2.12 | % | 2.15 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 30 | % | 15 | % | 31 | % | 25 | % | 33 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 41,283 | $ | 44,441 | $ | 49,283 | $ | 51,138 | $ | 51,233 | $ | 59,225 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 18.86 | $ | 20.58 | $ | 19.90 | $ | 17.52 | $ | 15.97 | $ | 15.62 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.22 | 0.50 | 0.60 | 0.49 | 0.49 | 0.48 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.98 | ) | 0.98 | 2.45 | 1.41 | 0.36 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | 0.15 | 0.15 | (0.06 | ) | 0.14 | (0.05 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.05 | (0.33 | ) | 1.73 | 2.88 | 2.04 | 0.79 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.52 | ) | (0.53 | ) | (0.50 | ) | (0.49 | ) | (0.44 | ) | ||||||||||||
From net realized gain on investments | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.82 | ) | (1.39 | ) | (1.05 | ) | (0.50 | ) | (0.49 | ) | (0.44 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 18.09 | $ | 18.86 | $ | 20.58 | $ | 19.90 | $ | 17.52 | $ | 15.97 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 0.41 | %(c) | (1.70 | %) | 9.01 | % | 16.70 | % | 12.96 | % | 5.08 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 2.54 | %†† | 2.58 | % | 3.00 | % | 2.61 | % | 2.88 | % | 2.98 | % | ||||||||||||
Net expenses | 1.92 | %†† | 1.93 | % | 1.98 | % | 2.07 | % | 2.12 | % | 2.15 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 30 | % | 15 | % | 31 | % | 25 | % | 33 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 232,894 | $ | 235,811 | $ | 131,023 | $ | 55,889 | $ | 22,444 | $ | 10,899 |
* | Unaudited. |
†† | 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. |
32 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 18.95 | $ | 20.66 | $ | 19.97 | $ | 17.57 | $ | 16.02 | $ | 15.67 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.33 | 0.73 | 0.87 | 0.74 | 0.72 | 0.70 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.16 | ) | (0.98 | ) | 0.96 | 2.46 | 1.40 | 0.36 | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | 0.15 | 0.15 | (0.06 | ) | 0.14 | (0.05 | ) | |||||||||||||||
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| |||||||||||||
Total from investment operations | 0.15 | (0.10 | ) | 1.98 | 3.14 | 2.26 | 1.01 | |||||||||||||||||
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| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.34 | ) | (0.74 | ) | (0.77 | ) | (0.74 | ) | (0.71 | ) | (0.66 | ) | ||||||||||||
From net realized gain on investments | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | — | — | |||||||||||||||
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| |||||||||||||
Total dividends and distributions | (0.93 | ) | (1.61 | ) | (1.29 | ) | (0.74 | ) | (0.71 | ) | (0.66 | ) | ||||||||||||
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| |||||||||||||
Net asset value at end of period | $ | 18.17 | $ | 18.95 | $ | 20.66 | $ | 19.97 | $ | 17.57 | $ | 16.02 | ||||||||||||
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| |||||||||||||
Total investment return (b) | 0.93 | %(c) | (0.51 | %) | 10.33 | % | 18.25 | % | 14.41 | % | 6.50 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.70 | %†† | 3.75 | % | 4.29 | % | 3.97 | % | 4.28 | % | 4.30 | % | ||||||||||||
Net expenses | 0.77 | %†† | 0.77 | % | 0.76 | % | 0.79 | % | 0.81 | % | 0.83 | % | ||||||||||||
Portfolio turnover rate | 13 | % | 30 | % | 15 | % | 31 | % | 25 | % | 33 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 506,089 | $ | 513,629 | $ | 430,408 | $ | 286,425 | $ | 204,611 | $ | 164,317 |
* | Unaudited. |
†† | 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. |
Class R2 | Six months ended April 30, 2016* | Frbruary 27, 2015** through October 31, 2015 | ||||||
Net asset value at beginning of period | $ | 18.78 | $ | 20.08 | ||||
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| |||||
Net investment income (loss) (a) | 0.29 | 0.36 | ||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (1.35 | ) | ||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.02 | ) | 0.20 | |||||
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| |||||
Total from investment operations | 0.13 | (0.79 | ) | |||||
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| |||||
Less dividends and distributions: | ||||||||
From net investment income | (0.31 | ) | (0.51 | ) | ||||
From net realized gain on investments | (0.59 | ) | — | |||||
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| |||||
Total dividends and distributions | (0.90 | ) | (0.51 | ) | ||||
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|
| |||||
Net asset value at end of period | $ | 18.01 | $ | 18.78 | ||||
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| |||||
Total investment return (b)(c) | 0.82 | % | (3.92 | %) | ||||
Ratios (to average net assets)/Supplemental Data: | ||||||||
Net investment income (loss) | 3.35 | %†† | 2.90 | %†† | ||||
Net expenses | 1.12 | %†† | 1.12 | %†† | ||||
Portfolio turnover rate | 13 | % | 30 | % | ||||
Net assets at end of period (in 000’s) | $ | 290 | $ | 190 |
* | Unaudited. |
** | Inception date. |
†† | 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. | 33 |
Financial Highlights selected per share data and ratios
Class R3 | February 29, 2016** through April 30, 2016* | |||
Net asset value at beginning of period | $ | 17.10 | ||
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| |||
Net investment income (loss) (a) | 0.10 | |||
Net realized and unrealized gain (loss) on investments | 0.85 | |||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.10 | |||
|
| |||
Total from investment operations | 1.05 | |||
|
| |||
Less dividends: | ||||
From net investment income | (0.14 | ) | ||
|
| |||
Net asset value at end of period | $ | 18.01 | ||
|
| |||
Total investment return (b)(c) | 6.21 | % | ||
Ratios (to average net assets)/Supplemental Data: | ||||
Net investment income (loss) | 3.37 | %†† | ||
Net expenses | 1.37 | %†† | ||
Portfolio turnover rate | 13 | % | ||
Net assets at end of period (in 000’s) | $ | 27 |
* | Unaudited. |
** | Inception date. |
†† | 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. |
34 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Income Builder Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers seven classes of shares. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on December 29, 1987. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Class R2 shares commenced operations on February 27, 2015. Class R3 shares commenced operations on February 29, 2016. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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, Class R2 and Class R3 shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A shares. The seven 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 Class A, Investor Class, Class R2 and Class R3 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. 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 Fund’s investment objective is to seek current income consistent with reasonable opportunity for future growth of capital and income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisors (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisors or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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
35 |
Notes to Financial Statements (Unaudited) (continued)
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 based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Equity and credit default swap curves | • Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination there under would, in fact, approximate the
amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisors reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close 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 Subadvisors conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Sub-Committee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated 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, certain 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 valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of April 30, 2016, no foreign equity securities held by the Fund were fair valued in such a manner.
Equity securities and shares of Exchange-Traded Funds (“ETFs”) are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally 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. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager in consultation with the Subadvisors. Those values reflect broker/dealer supplied prices and electronic data
36 | MainStay Income Builder Fund |
processing techniques, if the evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisors to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. 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. These securities are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured 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.
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 utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, the Fund held a Level 3 security with a value of $1,965,000 that was valued by utilizing significant unobservable inputs.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A Fund security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or Subadvisors might wish to sell, and these securities could have the effect of decreasing the overall level of the 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 measuring 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 Subadvisors measure the liquidity of the Fund’s investments; in doing so, the
Manager or Subadvisors 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 by methods deemed reasonable in good faith in such a manner as the Board deems appropriate to reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was measured as of April 30, 2016 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2016, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability on the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized appreciation (depreciation). Taxes related to capital gains realized during the six-month period ended April 30, 2016, if any, are reflected as part of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations.
37 |
Notes to Financial Statements (Unaudited) (continued)
Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least quarterly and distributions from net realized capital and currency gains, if any, at least 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. Dividend income is recognized on the ex-dividend date, net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method and includes realized gains and losses from repayments of principal on mortgage-backed securities. 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. The straight-line method approximates the effective interest method for short-term investments. 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.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(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/or 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 or Subadvisors to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or Subadvisors will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(I) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) 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 may invest 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. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. 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. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of April 30, 2016, the Fund did not hold any unfunded commitments.
(J) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a
38 | MainStay Income Builder Fund |
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 market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. Government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation 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 or futures commission merchant 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. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures, and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. 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 futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. 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.
(K) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies 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 appreciation or depreciation 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 may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be
used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk, and illiquidity risk. Counterparty risk is heightened for these investments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also 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 also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations.
(L) Foreign Currency Transactions. The Fund’s books and records are maintained 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 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
39 |
Notes to Financial Statements (Unaudited) (continued)
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) 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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(N) Restricted Securities. Restricted securities, as disclosed in Note 5, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
(O) Concentration of Risk. The Fund may invest in high-yield debt securities (sometimes called “junk bonds”), which are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility.
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 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. 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 may invest in loans which 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 investments pay investors a higher interest rate than investment
grade debt securities because of the increased risk of loss. Although certain 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 value of these investments could decline significantly. As a result, the Fund’s NAV could go down and you could lose money.
In addition, loan assignments generally are subject to extended settlement periods that may be longer than seven days. As a result, the Fund may be adversely affected by selling other investments at an unfavorable time and/or under unfavorable conditions or engaging in borrowing transactions, such as borrowing against its credit facility, to raise cash to meet redemption obligations or pursue other investment opportunities.
(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 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.
(Q) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to 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. The Fund invested in Treasury futures contracts in order to hedge against anticipated changes in interest rates that might otherwise have an adverse effect upon the value of the Fund’s securities. The Fund also invested in domestic and foreign equity index futures contracts to increase the equity sensitivity to the Fund. Foreign currency forward contracts were used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
40 | MainStay Income Builder Fund |
Fair value of derivative instruments as of April 30, 2016:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets-Net unrealized appreciation (depreciation) on investments and futures contracts (a) | $ | — | $ | 6,806,381 | $ | — | $ | 6,806,381 | |||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | 1,096,839 | — | — | 1,096,839 | |||||||||||||
|
|
|
| |||||||||||||||
Total Fair Value | $ | 1,096,839 | $ | 6,806,381 | $ | — | $ | 7,903,220 | ||||||||||
|
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|
|
|
|
|
Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets-Net unrealized appreciation (depreciation) on investments and futures contracts (a) | $ | — | $ | (2,631,998 | ) | $ | (388,702 | ) | $ | (3,020,700 | ) | ||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | (3,968,972 | ) | — | — | (3,968,972 | ) | |||||||||||
|
|
|
| |||||||||||||||
Total Fair Value | $ | (3,968,972 | ) | $ | (2,631,998 | ) | $ | (388,702 | ) | $ | (6,989,672 | ) | ||||||
|
|
|
|
|
|
|
|
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the 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 period ended April 30, 2016:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | (495,965 | ) | $ | 3,759,772 | $ | 3,263,807 | ||||||||
Forward Contracts | Net realized gain (loss) on foreign currency transactions | 3,572,703 | — | — | 3,572,703 | |||||||||||||
|
|
|
| |||||||||||||||
Total Realized Gain (Loss) | $ | 3,572,703 | $ | (495,965 | ) | $ | 3,759,772 | $ | 6,836,510 | |||||||||
|
|
|
|
|
|
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | — | $ | (14,716,696 | ) | $ | (519,290 | ) | $ | (15,235,986 | ) | ||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | (4,428,680 | ) | — | — | (4,428,680 | ) | |||||||||||
|
|
|
| |||||||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | (4,428,680 | ) | $ | (14,716,696 | ) | $ | (519,290 | ) | $ | (19,664,666 | ) | ||||||
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|
|
|
|
41 |
Notes to Financial Statements (Unaudited) (continued)
Average Notional Amount
Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate | Total | |||||||||||||
Futures Contracts Long | $ | — | $ | 286,532,642 | $ | 30,523,427 | $ | 317,056,069 | ||||||||
Futures Contracts Short (a) | $ | — | $ | — | $ | (331,976,533 | ) | $ | (331,976,533 | ) | ||||||
Forward Contracts Long (b) | $ | 75,248,274 | $ | — | $ | — | $ | 75,248,274 | ||||||||
Forward Contracts Short | $ | (168,764,431 | ) | $ | — | $ | — | $ | (168,764,431 | ) | ||||||
|
|
(a) | Positions were open one month during the reporting period. |
(b) | Positions were open two months during the reporting period. |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisors. 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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer of the Fund. MacKay Shields LLC (“MacKay Shields” or “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as a Subadvisor, pursuant to the terms of the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, is responsible for the overall asset allocation decisions of the Fund and is responsible for the day-to-day portfolio management of the fixed-income portion of the Fund. Epoch Investment Partners, Inc. (“Epoch” or “Subadvisor” and, together with MacKay Shields, the “Subadvisors”), a registered investment advisor, also serves as a Subadvisor pursuant to the terms of the Amended and Restated Subadvisory Agreement between New York Life Investments and Epoch and is responsible for the day-to-day portfolio management of the equity portion of the Fund. New York Life Investments pays for the services of the Subadvisors.
Under the Management Agreement, 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: 0.64% up to $500 million; 0.60% from $500 million to $1 billion; and 0.575% in excess of $1 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the six-month period ended April 30, 2016, the effective management fee rate was 0.62% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $4,472,607.
State Street 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 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, Service and Shareholder 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 Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class 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 shares are not subject to a distribution and/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.
In accordance with the Shareholder Services Plan for the 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 R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third party service providers are 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 R2 and Class R3 shares. This is in addition to any fees paid under a distribution plan, where applicable.
42 | MainStay Income Builder Fund |
During the six-month period ended April 30, 2016, shareholder service fees incurred by the Fund were as follows:
Class R2 | $ | 116 | ||
Class R3 | 4 |
(C) Sales Charges. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $78,331 and $17,667, respectively.
During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $5,126, $3, $26,092 and $39,539, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 282,406 | ||
Investor Class | 192,886 | |||
Class B | 52,097 | |||
Class C | 285,355 | |||
Class I | 248,177 | |||
Class R2 | 119 | |||
Class R3 | 4 |
(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. As of April 30, 2016, New York Life and its affiliates beneficially held shares of the Fund with values and percentages of net assets as follows:
Class I | $ | 96,409,980 | 19.1 | % | ||||
Class R2 | 24,218 | 8.4 | ||||||
Class R3 | 26,552 | 99.8 |
Note 4–Federal Income Tax
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 62,132,602 | ||
Long-Term Capital Gain | 44,756,393 | |||
Total | $ | 106,888,995 |
Note 5–Restricted Securities
As of April 30, 2016, the Fund held the following restricted security:
Security | Date of Acquisition | Shares | Cost | 4/30/16 Value | Percent of Net Assets | |||||||||||||||
ION Media Networks, Inc. | ||||||||||||||||||||
Common Stock | 3/11/14 | 12 | $ | 21 | $ | 6,425 | 0.0 | %‡ |
‡ | Less than one-tenth of a percent. |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the
43 |
Notes to Financial Statements (Unaudited) (continued)
Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of U.S. government securities were $0 and $31, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $185,797 and $167,683, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 4,636,749 | $ | 83,070,607 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,507,667 | 26,409,436 | ||||||
Shares redeemed | (6,581,380 | ) | (114,621,031 | ) | ||||
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| |||||||
Net increase (decrease) in shares outstanding before conversion | (436,964 | ) | (5,140,988 | ) | ||||
Shares converted into Class A (See Note 1) | 235,517 | 4,075,376 | ||||||
Shares converted from Class A (See Note 1) | (73,565 | ) | (1,313,140 | ) | ||||
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| |||||||
Net increase (decrease) | (275,012 | ) | $ | (2,378,752 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 11,978,815 | $ | 232,564,766 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,021,817 | 38,907,148 | ||||||
Shares redeemed | (7,481,252 | ) | (142,177,899 | ) | ||||
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| |||||||
Net increase (decrease) in shares outstanding before conversion | 6,519,380 | 129,294,015 | ||||||
Shares converted into Class A (See Note 1) | 449,992 | 8,798,801 | ||||||
Shares converted from Class A (See Note 1) | (270,070 | ) | (4,969,208 | ) | ||||
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| |||||||
Net increase (decrease) | 6,699,302 | $ | 133,123,608 | |||||
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| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 256,159 | $ | 4,521,506 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 428,273 | 7,506,888 | ||||||
Shares redeemed | (475,496 | ) | (8,388,763 | ) | ||||
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| |||||||
Net increase (decrease) in shares outstanding before conversion | 208,936 | 3,639,631 | ||||||
Shares converted into Investor Class (See Note 1) | 178,438 | 3,184,274 | ||||||
Shares converted from Investor Class (See Note 1) | (179,222 | ) | (3,181,967 | ) | ||||
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| |||||||
Net increase (decrease) | 208,152 | $ | 3,641,938 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 597,695 | $ | 11,699,385 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 641,610 | 12,377,490 | ||||||
Shares redeemed | (928,125 | ) | (17,999,879 | ) | ||||
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| |||||||
Net increase (decrease) in shares outstanding before conversion | 311,180 | 6,076,996 | ||||||
Shares converted into Investor Class (See Note 1) | 482,009 | 9,039,006 | ||||||
Shares converted from Investor Class (See Note 1) | (340,710 | ) | (6,701,508 | ) | ||||
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| |||||||
Net increase (decrease) | 452,479 | $ | 8,414,494 | |||||
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| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 182,961 | $ | 3,246,743 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 97,017 | 1,709,866 | ||||||
Shares redeemed | (198,637 | ) | (3,530,581 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 81,341 | 1,426,028 | ||||||
Shares converted from Class B (See Note 1) | (154,959 | ) | (2,764,543 | ) | ||||
|
| |||||||
Net increase (decrease) | (73,618 | ) | $ | (1,338,515 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 502,947 | $ | 9,852,271 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 160,035 | 3,114,276 | ||||||
Shares redeemed | (382,243 | ) | (7,404,379 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 280,739 | 5,562,168 | ||||||
Shares converted from Class B (See Note 1) | (319,725 | ) | (6,167,091 | ) | ||||
|
| |||||||
Net increase (decrease) | (38,986 | ) | $ | (604,923 | ) | |||
|
| |||||||
44 | MainStay Income Builder Fund |
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 2,438,265 | $ | 43,079,656 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 485,012 | 8,533,269 | ||||||
Shares redeemed | (2,547,088 | ) | (44,925,637 | ) | ||||
|
| |||||||
Net increase (decrease) | 376,189 | $ | 6,687,288 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 8,160,384 | $ | 160,686,108 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 495,350 | 9,573,666 | ||||||
Shares redeemed | (2,521,438 | ) | (48,605,712 | ) | ||||
|
| |||||||
Net increase (decrease) | 6,134,296 | $ | 121,654,062 | |||||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 5,331,096 | $ | 95,462,702 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,264,686 | 22,338,846 | ||||||
Shares redeemed | (5,850,949 | ) | (103,342,666 | ) | ||||
|
| |||||||
Net increase (decrease) | 744,833 | $ | 14,458,882 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 12,690,081 | $ | 250,178,297 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,709,758 | 33,131,319 | ||||||
Shares redeemed | (8,122,322 | ) | (157,391,171 | ) | ||||
|
| |||||||
Net increase (decrease) | 6,277,517 | $ | 125,918,445 | |||||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 5,853 | $ | 102,320 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 149 | 2,609 | ||||||
|
| |||||||
Net increase (decrease) | 6,002 | $ | 104,929 | |||||
|
| |||||||
Period ended October 31, 2015 (a): | ||||||||
Shares sold | 10,070 | $ | 193,289 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 34 | 639 | ||||||
|
| |||||||
Net increase (decrease) | 10,104 | $ | 193,928 | |||||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Period ended April 30, 2016 (b): | ||||||||
Shares sold | 1,466 | $ | 25,070 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 11 | 206 | ||||||
|
| |||||||
Net increase (decrease) | 1,477 | $ | 25,276 | |||||
|
|
(a) | Inception date was February 27, 2015. |
(b) | Inception date was February 29, 2016. |
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
45 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Income Builder Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreements between New York Life Investments and Epoch Investment Partners, Inc. (“Epoch”) and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments, Epoch and MacKay Shields in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments, Epoch and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, and Epoch and responses from New York Life Investments, Epoch and MacKay Shields to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Fund’s distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments, Epoch and MacKay Shields; (ii) the investment performance of the Fund, New York Life Investments, Epoch and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments, Epoch and MacKay Shields from their relationships with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments, Epoch and MacKay Shields. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments, Epoch and MacKay Shields
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance Department, including oversight and
46 | MainStay Income Builder Fund |
implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that Epoch and MacKay Shields provide to the Fund. The Board evaluated Epoch’s and MacKay Shields’ experience in serving as subadvisors to the Fund and managing other portfolios. It examined Epoch’s and MacKay Shields’ track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at Epoch and MacKay Shields, and Epoch’s and MacKay Shields’ overall legal and compliance environments. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by Epoch and MacKay Shields. The Board also reviewed Epoch’s and MacKay Shields’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the methods for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’, Epoch’s and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis In addition, the Board considered any specific actions that New York Life Investments, Epoch or MacKay Shields had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments, Epoch and MacKay Shields to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments, Epoch and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments, Epoch and MacKay Shields under the Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, and Epoch due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate. Because Epoch’s subadvisory fees are negotiated at arm’s-length by New York Life Investments and are paid by New York Life Investments, not the Fund, the Board primarily considered the profits realized by New York Life Investments and its affiliates with respect to the Fund.
In evaluating the costs of the services provided by New York Life Investments, MacKay Shields, and Epoch and profits realized by New York Life Investments and its affiliates, including MacKay Shields, and Epoch, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments, Epoch and MacKay Shields must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments, Epoch and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital
47 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements (Unaudited) (continued)
structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund. The Board recognized, for example, the benefits to Epoch from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to Epoch in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities. In this regard, the Board also requested and received information from New York Life Investments and Epoch concerning other business relationships between Epoch and its affiliates and New York Life Investments and its affiliates.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund supported the Board’s decision to approve the Agreements. With respect to Epoch, the Board concluded that any profits realized by Epoch due to its relationship with the Fund are the result of arm’s-length negotiations between New York Life Investments and Epoch and
are based on fees paid to Epoch by New York Life Investments, not the Fund.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to MacKay Shields and Epoch are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments, Epoch and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other
48 | MainStay Income Builder Fund |
investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund
account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
49 |
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 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).
50 | MainStay Income Builder Fund |
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1696258 MS164-16 | MSIB10-06/16 (NYLIM) NL014 |
MainStay Global High Income Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| 1.73 6.53 | %
|
| –1.17 3.49 | %
|
| 2.48 3.42 | %
|
| 5.46 5.95 | %
|
| 1.23 1.23 | %
| |||||||
Investor Class Shares3 | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges |
| 1.68 6.47 |
| | –1.29 3.36 | | | 2.32 3.26 | | | 5.33 5.82 | | | 1.41 1.41 | | |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges |
| 1.13 6.13 |
| | –2.21 2.67 | | | 2.20 2.50 | | | 5.04 5.04 | | | 2.16 2.16 | | |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges |
| 5.13 6.13 |
| | 1.59 2.56 | | | 2.50 2.50 | | | 5.05 5.05 | | | 2.16 2.16 | | |||||||
Class I Shares4 | No Sales Charge | 6.76 | 3.84 | 3.70 | 6.23 | 0.98 |
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, changes 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 may reflect certain fee waivers and/or expense limitations (if any), 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 would likely have been different. |
4. | Performance figures for Class I shares, first offered on August 31, 2007, include the historical performance of Class A shares through August 30, 2007 adjusted for certain fees and expenses. Unadjusted, the performance shown for Class I shares would likely have been different. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
JPMorgan EMBI Global Diversified Index5 | 5.35 | % | 4.33 | % | 6.30 | % | 7.39 | % | ||||||||
Average Lipper Emerging Markets Hard Currency Debt Fund6 | 4.39 | 0.45 | 3.16 | 6.17 |
5. | The JPMorgan EMBI Global Diversified Index is a market-capitalization weighted, total return index tracking the traded market for U.S. dollar-denominated Brady Bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities. The JPMorgan EMBI Global Diversified 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 Emerging Markets Hard Currency Debt Fund is representative of funds that seek either current income or total return by investing at least 65% of total assets in emerging market debt securities, where “emerging market” is defined by a country’s GNP per capita or other economic measures. 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 Global High Income Fund |
Cost in Dollars of a $1,000 Investment in MainStay Global High Income Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,065.30 | $ | 6.42 | $ | 1,018.60 | $ | 6.27 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,064.70 | $ | 7.49 | $ | 1,017.60 | $ | 7.32 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,061.30 | $ | 11.33 | $ | 1,013.90 | $ | 11.07 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,061.30 | $ | 11.33 | $ | 1,013.90 | $ | 11.07 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,067.60 | $ | 5.14 | $ | 1,019.90 | $ | 5.02 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.25% for Class A, 1.46% for Investor Class, 2.21% for Class B and Class C and 1.00% for Class I) multiplied by the average account value over the period, divided by 366 and multiplied by 182 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7 |
Country Composition as of April 30, 2016 (Unaudited)
Russia | 8.1 | % | ||
Turkey | 7.6 | |||
Brazil | 7.5 | |||
Indonesia | 6.4 | |||
Kazakhstan | 5.8 | |||
Mexico | 5.2 | |||
Peru | 4.9 | |||
Hungary | 4.1 | |||
Venezuela | 3.6 | |||
Sri Lanka | 3.5 | |||
Croatia | 3.1 | |||
China | 3.0 | |||
India | 2.8 | |||
Argentina | 2.5 | |||
Costa Rica | 2.2 | |||
El Salvador | 2.2 | |||
Paraguay | 2.2 | |||
Dominican Republic | 2.1 | |||
Panama | 2.1 | |||
Uruguay | 1.9 |
United Arab Emirates | 1.4 | % | ||
Gabon | 1.2 | |||
Georgia | 1.2 | |||
Vietnam | 1.2 | |||
Belarus | 1.1 | |||
Ghana | 1.1 | |||
Ivory Coast | 1.0 | |||
Nigeria | 1.0 | |||
South Africa | 1.0 | |||
Ukraine | 1.0 | |||
United States | 0.9 | |||
Hong Kong | 0.8 | |||
Pakistan | 0.8 | |||
Senegal | 0.7 | |||
Cameroon, United Republic of | 0.5 | |||
Kenya | 0.5 | |||
France | 0.4 | |||
Jamaica | 0.4 | |||
Other Assets, Less Liabilities | 3.0 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Issuers Held as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | Turkey Government International Bond, 6.00%–7.375%, due 2/5/25–2/17/45 |
2. | KazMunayGas National Co. JSC, 4.40%–5.75%, due 4/30/23–4/30/43 |
3. | Peruvian Government International Bond, 7.35%, due 7/21/25 |
4. | Hungary Government International Bond, 6.25%–7.625%, due 1/29/20–3/29/41 |
5. | Sri Lanka Government International Bond, 6.25%, due 10/4/20 |
6. | Pertamina Persero PT, 5.625%, due 5/20/43 |
7. | Croatia Government International Bond, 6.00%–6.375%, due 3/24/21–1/26/24 |
8. | Brazil Notas do Tesouro Nacional, 10.00%, due 1/1/23–1/1/27 |
9. | Venezuela Government International Bond, 9.25%, due 5/7/28 |
10. | Paraguay Government International Bond, 6.10%, due 8/11/44 |
8 | MainStay Global High Income Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Michael Kimble, CFA, and Jakob Bak, PhD, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay Global High Income Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay Global High Income Fund returned 6.53% for Class A shares, 6.47% for Investor Class shares and 6.13% for Class B and Class C shares for the six months ended April 30, 2016. Over the same period, the Fund’s Class I shares returned 6.76%. For the six months ended April 30, 2016, all share classes outperformed the 5.35% return of the JPMorgan EMBI Global Diversified Index,1 which is the Fund’s broad-based securities-market index, and the 4.39% return of the Average Lipper2 Emerging Markets Hard Currency Debt Fund. See page 5 for Fund returns with applicable sales charges.
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s outperformance relative to the JPMorgan EMBI Global Diversified Index resulted primarily from the Fund’s long local-currency positions, implemented through local bonds and currency forwards. The Fund’s exposure to Brazil largely accounted for the remainder of the Fund’s outperformance.
What was the Fund’s duration3 strategy during the reporting period?
Throughout the reporting period, our goal was to maintain the Fund’s duration in line with that of the JPMorgan EMBI Global Diversified Index. As of April 30, 2016, the Fund’s effective duration was 6.95 years, compared to 6.84 years for the JPMorgan EMBI Global Diversified Index.
What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?
Throughout the reporting period, there were many events that had to be considered in positioning the Fund. Among these were inconsistent economic data, global central bank monetary policy, volatility in energy prices, China’s slowing economy and a flattening yield curve.4 While volatility remained elevated during the reporting period, we believed that emerging-market debt continued to look attractive because of solid fundamentals in many areas of the market and because of the low interest-rate environment.
During the reporting period, which market segments were the strongest positive contributors to the Fund’s performance and which market segments were particularly weak?
The strongest positive contributors to the Fund’s absolute performance during the reporting period were Brazilian sovereign bonds denominated in local currency and U.S. dollar denominated bonds issued by Brazilian companies, especially national oil company PetroBras. (Contributions take weightings and total returns into account.) Although impeachment proceedings against a country’s President are not usually considered good economic news, Brazil has been so battered by political infighting over the last two years—and serious economic mismanagement over the last six years—that the likely removal of President Dilma Rousseff was seen as a possible source of relief. The large depreciation of the Brazilian real over the past two years has also had the desired effect of removing most of Brazil’s large current account deficit, making further depreciation unlikely.
Generally speaking, given the continued flattening of the U.S. yield curve during the reporting period, the Fund’s longer-dated bonds mostly outperformed its shorter-dated bonds. The Fund’s longer-dated Indonesian bonds performed particularly well during the reporting period.
Although some U.S. dollar denominated sovereign bonds, such as those of Croatia, Argentina, Cameroon, Ghana, Kenya, Turkey and Vietnam slightly underperformed the Index, the Fund did not hold any sovereign bonds that were significant detractors from the Fund’s performance relative to the JPMorgan EMBI Global Diversified Index during the reporting period. One corporate bond was particularly weak. CCG, a French oil and gas service provider with extensive exposure to emerging markets, was hurt by the continuing weakness in the price of oil.
Did the Fund make any significant purchases or sales during the reporting period?
During the reporting period the Fund initiated new positions in South African quasi-sovereign electricity company Eskom, Chinese software maker Tencent, Peruvian copper miner Southern Copper, Russian natural gas provider Gazprom and the government of Ivory Coast.
We also exited the Fund’s position in Czech utility company CE Energy, when the company called its bonds at a large premium. We also sold the Fund’s positions in Ukrainian quasi-sovereign rail operator Short Rail and Peruvian bank BBVA because we no
1. | See footnote on page 6 for more information on the JPMorgan EMBI Global Diversified Index. |
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 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. |
9 |
longer believed that the bonds were attractively valued. We also sold the Fund’s entire position in Colombia Telecomm as we sought to limit exposure to the country as a whole, as it struggled with collapsing oil prices.
During the reporting period, the Fund closed its currency forward position in the Argentine peso. We later reopened the position when the currency didn’t depreciate as much as we felt the market priced in and we believed that the position still provided an attractive yield opportunity.
How did the Fund’s sector and country weightings change during the reporting period?
In addition to reopening the long Argentine peso currency forward position, the Fund purchased a locally denominated Mexican government bond, while closing its exposure to the Brazilian real by hedging the currency component of the Fund’s local-bond holdings. We also closed the Fund’s short position in the euro. The Fund’s bond exposures increased significantly in Croatia, Argentina and China, while they decreased in Mexico, Paraguay, Colombia and Guatemala. During the reporting
period, we significantly added to the Fund’s emerging-market corporate exposure.
How was the Fund positioned at the end of the reporting period?
In spite of market volatility, our baseline view on Federal Reserve policy, economic fundamentals and valuations within the credit markets has not changed. We believe that economic growth will continue to be moderate while the Federal Reserve remains highly accommodative (though we believe that there is potential for the Federal Reserve to raise the federal funds target range again during the next reporting period). Our central belief is that monetary policy plays a critical role in the creation of credit and that the Federal Reserve has the ability to control monetary policy through its influence on short-term interest rates.
As of April 30, 2016, the Fund held an overweight position relative to the JPMorgan EMBI Global Diversified Index in corporate bonds and had a close-to-neutral duration in relation to the 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 will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay Global High Income Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 96.1%† Corporate Bonds 38.2% | ||||||||
Brazil 4.8% |
| |||||||
Banco Bradesco S.A. | $ | 1,500,000 | $ | 1,552,500 | ||||
Minerva Luxembourg S.A. | 2,250,000 | 2,286,563 | ||||||
Petrobras Global Finance B.V. | ||||||||
5.375%, due 1/27/21 | 3,000,000 | 2,666,250 | ||||||
6.85%, due 6/5/15 | 1,000,000 | 740,000 | ||||||
Vale Overseas, Ltd. | 1,800,000 | 1,615,500 | ||||||
|
| |||||||
8,860,813 | ||||||||
|
| |||||||
China 3.0% |
| |||||||
Alibaba Group Holding, Ltd. | 2,000,000 | 2,049,006 | ||||||
Country Garden Holdings Co., Ltd. | 1,000,000 | 1,024,428 | ||||||
Proven Honour Capital, Ltd. | 1,000,000 | 1,011,040 | ||||||
Tencent Holdings, Ltd. | 1,500,000 | 1,549,813 | ||||||
|
| |||||||
5,634,287 | ||||||||
|
| |||||||
France 0.4% |
| |||||||
CGG S.A. | 2,000,000 | 800,000 | ||||||
|
| |||||||
Hong Kong 0.8% |
| |||||||
MCE Finance, Ltd. | 1,500,000 | 1,447,211 | ||||||
|
| |||||||
India 2.8% |
| |||||||
Bharti Airtel International Netherlands B.V. | 2,000,000 | 2,152,848 | ||||||
Reliance Holding USA, Inc. | 2,000,000 | 2,215,866 | ||||||
Vedanta Resources PLC | 1,005,000 | 798,975 | ||||||
|
| |||||||
5,167,689 | ||||||||
|
| |||||||
Indonesia 4.8% |
| |||||||
¨Pertamina Persero PT | 6,700,000 | 6,183,470 |
Principal Amount | Value | |||||||
Indonesia (continued) |
| |||||||
Perusahaan Listrik Negara PT | $ | 3,000,000 | $ | 2,767,500 | ||||
|
| |||||||
8,950,970 | ||||||||
|
| |||||||
Kazakhstan 5.8% |
| |||||||
Kazakhstan Temir Zholy Finance B.V. | 1,000,000 | 1,013,300 | ||||||
¨KazMunayGas National Co. | ||||||||
4.40%, due 4/30/23 (a) | 6,000,000 | 5,595,000 | ||||||
5.75%, due 4/30/43 (a) | 5,000,000 | 4,287,500 | ||||||
|
| |||||||
10,895,800 | ||||||||
|
| |||||||
Mexico 4.2% |
| |||||||
Cemex Finance LLC | 2,000,000 | 1,992,500 | ||||||
Comision Federal de Electricidad | 2,000,000 | 2,080,000 | ||||||
Grupo Bimbo S.A.B. de C.V. | 1,000,000 | 1,067,492 | ||||||
Petroleos Mexicanos | 3,000,000 | 2,670,930 | ||||||
|
| |||||||
7,810,922 | ||||||||
|
| |||||||
Peru 0.7% |
| |||||||
Southern Copper Corp. | 1,500,000 | 1,375,119 | ||||||
|
| |||||||
Russia 6.4% |
| |||||||
ALROSA Finance S.A. | 1,500,000 | 1,665,990 | ||||||
Gazprom OAO via Gaz Capital S.A. | 1,500,000 | 1,819,269 | ||||||
Lukoil International Finance B.V. | 1,000,000 | 1,080,000 | ||||||
Metalloinvest Finance, Ltd. | 2,000,000 | 2,024,256 | ||||||
MMC Norilsk Nickel OJSC via MMC Finance, Ltd. | 1,500,000 | 1,619,625 | ||||||
Novatek OAO via Novatek Finance, Ltd. | 2,000,000 | 2,107,500 | ||||||
VimpelCom Holdings B.V. | 1,500,000 | 1,601,250 | ||||||
|
| |||||||
11,917,890 | ||||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest issuers held, as of April 30, 2016, 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
South Africa 1.0% |
| |||||||
Eskom Holdings SOC, Ltd. | $ | 2,000,000 | $ | 1,884,180 | ||||
|
| |||||||
Turkey 0.8% |
| |||||||
Arcelik A.S. | 1,500,000 | 1,462,998 | ||||||
|
| |||||||
United Arab Emirates 1.4% |
| |||||||
Abu Dhabi National Energy Co. PJSC | 2,750,000 | 2,692,982 | ||||||
|
| |||||||
Venezuela 1.3% |
| |||||||
Petroleos de Venezuela S.A. | 5,000,000 | 2,325,000 | ||||||
|
| |||||||
Total Corporate Bonds | 71,225,861 | |||||||
|
| |||||||
Government & Federal Agencies 57.9% | ||||||||
Argentina 2.5% |
| |||||||
Argentine Republic Government International Bond | 2,000,000 | 1,967,000 | ||||||
City of Buenos Aires Argentina | 1,000,000 | 1,077,500 | ||||||
Provincia de Buenos Aires | 1,500,000 | 1,597,500 | ||||||
|
| |||||||
4,642,000 | ||||||||
|
| |||||||
Belarus 1.1% |
| |||||||
Belarus International Bond | 2,000,000 | 2,095,000 | ||||||
|
| |||||||
Brazil 2.7% |
| |||||||
¨Brazil Notas do Tesouro Nacional | ||||||||
Series F | BRL 11,000,000 | 2,787,800 | ||||||
Series F | 9,000,000 | 2,336,671 | ||||||
|
| |||||||
5,124,471 | ||||||||
|
| |||||||
Cameroon, United Republic Of 0.5% |
| |||||||
Republic of Cameroon International Bond | $ | 1,000,000 | 978,800 | |||||
|
|
Principal Amount | Value | |||||||
Costa Rica 2.2% |
| |||||||
Costa Rica Government International Bond | $ | 2,000,000 | $ | 1,865,000 | ||||
Instituto Costarricense de Electricidad | 3,000,000 | 2,250,000 | ||||||
|
| |||||||
4,115,000 | ||||||||
|
| |||||||
Croatia 3.1% |
| |||||||
¨Croatia Government International Bond | 3,250,000 | 3,554,687 | ||||||
6.375%, due 3/24/21 (a) | 2,000,000 | 2,189,060 | ||||||
|
| |||||||
5,743,747 | ||||||||
|
| |||||||
Dominican Republic 2.1% |
| |||||||
Dominican Republic International Bond | 3,500,000 | 3,832,500 | ||||||
|
| |||||||
El Salvador 2.2% |
| |||||||
El Salvador Government International Bond | 4,000,000 | 4,020,000 | ||||||
|
| |||||||
Gabon 1.2% |
| |||||||
Gabon Government International Bond | 2,596,000 | 2,267,918 | ||||||
|
| |||||||
Georgia 1.2% |
| |||||||
Georgia Government International Bond | 2,000,000 | 2,202,500 | ||||||
|
| |||||||
Ghana 1.1% |
| |||||||
Ghana Government International Bond | 2,000,000 | 1,967,600 | ||||||
|
| |||||||
Hungary 4.1% |
| |||||||
¨Hungary Government International Bond | ||||||||
6.25%, due 1/29/20 | 4,250,000 | 4,733,437 | ||||||
7.625%, due 3/29/41 | 2,000,000 | 2,824,700 | ||||||
|
| |||||||
7,558,137 | ||||||||
|
| |||||||
Indonesia 1.6% |
| |||||||
Indonesia Government International Bond | 3,000,000 | 3,043,623 | ||||||
|
|
12 | MainStay Global High Income Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Government & Federal Agencies (continued) | ||||||||
Ivory Coast 1.0% |
| |||||||
Ivory Coast Government International Bond | $ | 2,000,000 | $ | 1,820,200 | ||||
|
| |||||||
Jamaica 0.4% |
| |||||||
Jamaica Government International Bond | 650,000 | 707,688 | ||||||
|
| |||||||
Kenya 0.5% |
| |||||||
Kenya Government International Bond | 1,000,000 | 940,100 | ||||||
|
| |||||||
Mexico 1.0% |
| |||||||
Mexican Bonos | MXN 27,500,000 | 1,850,641 | ||||||
|
| |||||||
Nigeria 1.0% |
| |||||||
Nigeria Government International Bond | $ | 2,000,000 | 1,950,400 | |||||
|
| |||||||
Pakistan 0.8% |
| |||||||
Pakistan Government International Bond | 1,500,000 | 1,580,120 | ||||||
|
| |||||||
Panama 2.1% |
| |||||||
Panama Government International Bond | 3,058,000 | 3,914,240 | ||||||
|
| |||||||
Paraguay 2.2% |
| |||||||
¨Paraguay Government International Bond | 4,000,000 | 4,080,000 | ||||||
|
| |||||||
Peru 4.2% |
| |||||||
¨Peruvian Government International Bond | 5,800,000 | 7,763,300 | ||||||
|
| |||||||
Russia 1.7% |
| |||||||
Russian Federal Bond-OFZ | RUB 230,000,000 | 3,241,966 | ||||||
|
|
Principal Amount | Value | |||||||
Senegal 0.7% |
| |||||||
Senegal Government International Bond | $ | 1,250,000 | $ | 1,356,500 | ||||
|
| |||||||
Sri Lanka 3.5% |
| |||||||
¨Sri Lanka Government International Bond | 6,500,000 | 6,623,597 | ||||||
|
| |||||||
Turkey 6.8% |
| |||||||
Turkey Government Bond | TRY 6,750,000 | 2,176,019 | ||||||
¨Turkey Government International Bond | ||||||||
6.00%, due 1/14/41 | $ | 5,000,000 | 5,434,200 | |||||
6.625%, due 2/17/45 | 2,000,000 | 2,362,800 | ||||||
7.375%, due 2/5/25 | 2,225,000 | 2,697,812 | ||||||
|
| |||||||
12,670,831 | ||||||||
|
| |||||||
Ukraine 1.0% |
| |||||||
Ukraine Government International Bond | 2,000,000 | 1,860,400 | ||||||
|
| |||||||
Uruguay 1.9% |
| |||||||
Uruguay Government International Bond | UYU 124,560,789 | 3,638,414 | ||||||
|
| |||||||
Venezuela 2.3% |
| |||||||
¨Venezuela Government International Bond | $ | 11,095,000 | 4,271,575 | |||||
|
| |||||||
Vietnam 1.2% |
| |||||||
Vietnam Government International Bond | 2,000,000 | 2,225,562 | ||||||
|
| |||||||
Total Government & Federal Agencies | 108,086,830 | |||||||
|
| |||||||
Total Long-Term Bonds | 179,312,691 | |||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Principal Amount | Value | |||||||
Short-Term Investment 0.9% | ||||||||
Repurchase Agreement 0.9% |
| |||||||
Fixed Income Clearing Corp. | $ | 1,731,910 | $ | 1,731,910 | ||||
|
| |||||||
Total Short-Term Investment | 1,731,910 | |||||||
|
| |||||||
Total Investments | 97.0 | % | 181,044,601 | |||||
Other Assets, Less Liabilities | 3.0 | 5,563,016 | ||||||
Net Assets | 100.0 | % | $ | 186,607,617 |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(b) | Step coupon—Rate shown was the rate in effect as of April 30, 2016. |
(c) | As of April 30, 2016, cost was $192,466,300 for federal income tax purposes and net unrealized depreciation was as follows: |
Gross unrealized appreciation | $ | 7,384,325 | ||
Gross unrealized depreciation | (18,806,024 | ) | ||
|
| |||
Net unrealized depreciation | $ | (11,421,699 | ) | |
|
|
As of April 30, 2016, the Fund held the following foreign currency forward contracts:
Foreign Currency Buy Contracts | Expiration Date | Counterparty | Contract Amount Purchased | Contract Sold | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Argentine Peso vs. U.S. Dollar | 1/12/17 | Barclays Bank PLC | ARS | 33,100,000 | $ | 2,000,000 | $ | (9,684 | ) | |||||||||||||||
Sterling vs. U.S. Dollar | 5/4/16 | HSBC Bank USA | GBP | 2,000,000 | 2,893,650 | 28,652 | ||||||||||||||||||
Euro vs. U.S. Dollar | 5/4/16 | HSBC Bank USA | EUR | 3,000,000 | 3,234,150 | 201,100 | ||||||||||||||||||
Euro vs. U.S. Dollar | 10/5/16 | HSBC Bank USA | 2,630,000 | 2,984,015 | 42,690 | |||||||||||||||||||
Indonesian Rupiah vs. U.S. Dollar | 5/4/16 | HSBC Bank USA | IDR | 26,600,000,000 | 1,873,899 | 142,824 | ||||||||||||||||||
Indonesian Rupiah vs. U.S. Dollar | 10/5/16 | HSBC Bank USA | 26,600,000,000 | 1,963,824 | 3,254 | |||||||||||||||||||
Polish Zloty vs. Euro | 5/4/16 | HSBC Bank USA | PLN | 11,200,000 | EUR 2,610,601 | (55,075 | ) | |||||||||||||||||
Polish Zloty vs. Euro | 10/5/16 | HSBC Bank USA | 11,200,000 | 2,519,458 | 29,050 | |||||||||||||||||||
Turkish Lira vs. U.S. Dollar | 10/5/16 | HSBC Bank USA | TRY | 5,811,000 | $ | 2,000,000 | (1,597 | ) | ||||||||||||||||
Foreign Currency Sales Contracts | Contract Amount Sold | Contract Amount Purchased | ||||||||||||||||||||||
Brazilian Real vs. U.S. Dollar | 10/5/16 | HSBC Bank USA | BRL | 20,000,000 | 5,230,126 | (315,519 | ) | |||||||||||||||||
Euro vs. U.S. Dollar | 5/4/16 | HSBC Bank USA | EUR | 3,000,000 | 3,206,100 | (229,150 | ) | |||||||||||||||||
Indonesian Rupiah vs. U.S. Dollar | 5/4/16 | HSBC Bank USA | IDR | 26,600,000,000 | 2,015,152 | (1,571 | ) | |||||||||||||||||
Polish Zloty vs. Euro | 5/4/16 | HSBC Bank USA | PLN | 11,200,000 | EUR 2,535,773 | (30,610 | ) | |||||||||||||||||
Pound Sterling vs. U.S. Dollar | 5/4/16 | HSBC Bank USA | GBP | 2,000,000 | 3,017,060 | 94,758 | ||||||||||||||||||
Pound Sterling vs. U.S. Dollar | 10/5/16 | HSBC Bank USA | 2,000,000 | 2,895,640 | (28,634 | ) | ||||||||||||||||||
Net unrealized appreciation (depreciation) on foreign currency forward contracts |
| $ | (129,512 | ) |
14 | MainStay Global High Income Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following abbreviations are used in the preceding pages:
ARS—Argentine Peso
BRL—Brazilian Real
EUR—Euro
GBP—British Pound Sterling
IDR—Indonesian Rupiah
MXN—Mexican Peso
PLN—Polish Zloty
RUB—New Russian Ruble
TRY—Turkish Lira
UYU—Uruguayam Peso
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Corporate Bonds | $ | — | $ | 71,225,861 | $ | — | $ | 71,225,861 | ||||||||
Government & Federal Agencies | — | 108,086,830 | — | 108,086,830 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 179,312,691 | — | 179,312,691 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 1,731,910 | — | 1,731,910 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | — | 181,044,601 | — | 181,044,601 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (b) | — | 542,328 | — | 542,328 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | — | $ | 181,586,929 | $ | — | $ | 181,586,929 | ||||||||
|
|
|
|
|
|
|
|
Liability Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (b) | $ | — | $ | (671,840 | ) | $ | — | $ | (671,840 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | $ | — | $ | (671,840 | ) | $ | — | $ | (671,840 | ) | ||||||
|
|
|
|
|
|
|
|
(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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, 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. | 15 |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 181,044,601 | ||
Cash denominated in foreign currencies | 86,511 | |||
Receivables: | ||||
Investment securities sold | 5,849,962 | |||
Interest | 3,553,760 | |||
Fund shares sold | 236,914 | |||
Other assets | 38,011 | |||
Unrealized appreciation on foreign currency forward contracts | 542,328 | |||
|
| |||
Total assets | 191,352,087 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 3,213,148 | |||
Fund shares redeemed | 432,048 | |||
Manager (See Note 3) | 109,341 | |||
Transfer agent (See Note 3) | 67,523 | |||
NYLIFE Distributors (See Note 3) | 61,213 | |||
Professional fees | 39,935 | |||
Custodian | 10,849 | |||
Shareholder communication | 9,464 | |||
Trustees | 204 | |||
Accrued expenses | 2,175 | |||
Dividend payable | 126,730 | |||
Unrealized depreciation on foreign currency forward contracts | 671,840 | |||
|
| |||
Total liabilities | 4,744,470 | |||
|
| |||
Net assets | $ | 186,607,617 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 188,311 | ||
Additional paid-in capital | 212,453,813 | |||
|
| |||
212,642,124 | ||||
Distributions in excess of net investment income | (175,377 | ) | ||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (14,330,021 | ) | ||
Net unrealized appreciation (depreciation) on investments | (11,421,699 | ) | ||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | (107,410 | ) | ||
|
| |||
Net assets | $ | 186,607,617 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 103,491,201 | ||
|
| |||
Shares of beneficial interest outstanding | 10,417,305 | |||
|
| |||
Net asset value per share outstanding | $ | 9.93 | ||
Maximum sales charge (4.50% of offering price) | 0.47 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.40 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 25,209,933 | ||
|
| |||
Shares of beneficial interest outstanding | 2,515,629 | |||
|
| |||
Net asset value per share outstanding | $ | 10.02 | ||
Maximum sales charge (4.50% of offering price) | 0.47 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.49 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 7,499,076 | ||
|
| |||
Shares of beneficial interest outstanding | 767,888 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.77 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 35,890,120 | ||
|
| |||
Shares of beneficial interest outstanding | 3,670,464 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.78 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 14,517,287 | ||
|
| |||
Shares of beneficial interest outstanding | 1,459,776 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.94 | ||
|
|
16 | MainStay Global High Income Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 6,758,938 | ||
|
| |||
Expenses | ||||
Manager (See Note 3) | 640,443 | |||
Distribution/Service—Class A (See Note 3) | 120,147 | |||
Distribution/Service—Investor Class (See Note 3) | 30,327 | |||
Distribution/Service—Class B (See Note 3) | 36,799 | |||
Distribution/Service—Class C (See Note 3) | 175,065 | |||
Transfer agent (See Note 3) | 188,248 | |||
Professional fees | 39,229 | |||
Registration | 36,871 | |||
Shareholder communication | 21,747 | |||
Custodian | 14,797 | |||
Trustees | 2,136 | |||
Miscellaneous | 6,275 | |||
|
| |||
Total expenses | 1,312,084 | |||
|
| |||
Net investment income (loss) | 5,446,854 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (4,089,843 | ) | ||
Foreign currency transactions | 353,633 | |||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | (3,736,210 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 10,027,468 | |||
Translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | (543,892 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 9,483,576 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 5,747,366 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 11,194,220 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 5,446,854 | $ | 12,881,395 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (3,736,210 | ) | (12,918,028 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 9,483,576 | (20,477,578 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 11,194,220 | (20,514,211 | ) | |||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (2,860,440 | ) | (6,877,345 | ) | ||||
Investor Class | (687,203 | ) | (1,500,044 | ) | ||||
Class B | (185,656 | ) | (518,158 | ) | ||||
Class C | (883,942 | ) | (2,408,638 | ) | ||||
Class I | (428,188 | ) | (1,867,520 | ) | ||||
|
| |||||||
(5,045,429 | ) | (13,171,705 | ) | |||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | — | (2,501,548 | ) | |||||
Investor Class | — | (521,541 | ) | |||||
Class B | — | (226,277 | ) | |||||
Class C | — | (1,063,929 | ) | |||||
Class I | — | (766,119 | ) | |||||
|
| |||||||
— | (5,079,414 | ) | ||||||
|
| |||||||
From return of capital: | ||||||||
Class A | — | (641,964 | ) | |||||
Investor Class | — | (149,976 | ) | |||||
Class B | — | (55,741 | ) | |||||
Class C | — | (257,923 | ) | |||||
Class I | — | (152,478 | ) | |||||
|
| |||||||
— | (1,258,082 | ) | ||||||
|
| |||||||
Total dividends and distributions to shareholders | (5,045,429 | ) | (19,509,201 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 17,918,876 | 31,891,380 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 4,251,987 | 15,588,807 | ||||||
Cost of shares redeemed | (28,158,961 | ) | (90,178,570 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (5,988,098 | ) | (42,698,383 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | 160,693 | (82,721,795 | ) |
2016 | 2015 | |||||||
Net Assets | ||||||||
Beginning of period | $ | 186,446,924 | $ | 269,168,719 | ||||
|
| |||||||
End of period | $ | 186,607,617 | $ | 186,446,924 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (175,377 | ) | $ | (576,802 | ) | ||
|
|
18 | MainStay Global High Income Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 9.60 | $ | 11.38 | $ | 11.52 | $ | 12.62 | $ | 11.83 | $ | 12.42 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.30 | 0.62 | 0.68 | 0.68 | 0.62 | 0.60 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.32 | (1.51 | ) | (0.14 | ) | (0.93 | ) | 1.11 | (0.41 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.02 | (0.00 | )‡ | 0.01 | 0.02 | 0.03 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.61 | (0.87 | ) | 0.54 | (0.24 | ) | 1.75 | 0.22 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.28 | ) | (0.63 | ) | (0.65 | ) | (0.86 | ) | (0.64 | ) | (0.65 | ) | ||||||||||||||
From net realized gain on investments | — | (0.22 | ) | (0.03 | ) | — | (0.32 | ) | (0.16 | ) | ||||||||||||||||
Return of capital | — | (0.06 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.28 | ) | (0.91 | ) | (0.68 | ) | (0.86 | ) | (0.96 | ) | (0.81 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 9.93 | $ | 9.60 | $ | 11.38 | $ | 11.52 | $ | 12.62 | $ | 11.83 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 6.53 | %(c) | (7.54 | %) | 4.85 | % | (1.98 | %) | 15.68 | % | 1.96 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 6.41 | %†† | 6.18 | % | 5.88 | % | 5.58 | % | 5.22 | % | 5.03 | % | ||||||||||||||
Net expenses | 1.25 | %†† | 1.23 | % | 1.17 | % | 1.16 | % | 1.17 | % | 1.22 | % | ||||||||||||||
Portfolio turnover rate | 18 | % | 19 | % | 20 | % | 36 | % | 31 | % | 65 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 103,491 | $ | 98,573 | $ | 132,654 | $ | 152,832 | $ | 179,430 | $ | 144,272 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 9.68 | $ | 11.46 | $ | 11.60 | $ | 12.71 | $ | 11.90 | $ | 12.49 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.29 | 0.61 | 0.66 | 0.67 | 0.61 | 0.59 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.33 | (1.52 | ) | (0.14 | ) | (0.94 | ) | 1.12 | (0.41 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.02 | (0.00 | )‡ | 0.01 | 0.02 | 0.03 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.61 | (0.89 | ) | 0.52 | (0.26 | ) | 1.75 | 0.21 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.27 | ) | (0.61 | ) | (0.63 | ) | (0.85 | ) | (0.62 | ) | (0.64 | ) | ||||||||||||||
From net realized gain on investments | — | (0.22 | ) | (0.03 | ) | — | (0.32 | ) | (0.16 | ) | ||||||||||||||||
Return of capital | — | (0.06 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.27 | ) | (0.89 | ) | (0.66 | ) | (0.85 | ) | (0.94 | ) | (0.80 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 10.02 | $ | 9.68 | $ | 11.46 | $ | 11.60 | $ | 12.71 | $ | 11.90 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 6.47 | %(c) | (7.66 | %) | 4.64 | % | (2.18 | %) | 15.52 | % | 1.94 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 6.20 | %†† | 6.01 | % | 5.71 | % | 5.49 | % | 5.10 | % | 4.93 | % | ||||||||||||||
Net expenses | 1.46 | %†† | 1.41 | % | 1.34 | % | 1.30 | % | 1.29 | % | 1.32 | % | ||||||||||||||
Portfolio turnover rate | 18 | % | 19 | % | 20 | % | 36 | % | 31 | % | 65 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 25,210 | $ | 25,130 | $ | 27,033 | $ | 27,918 | $ | 27,165 | $ | 23,439 |
* | Unaudited. |
†† | 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. | 19 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 9.44 | $ | 11.20 | $ | 11.35 | $ | 12.45 | $ | 11.68 | $ | 12.28 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.25 | 0.52 | 0.56 | 0.56 | 0.51 | 0.49 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.33 | (1.48 | ) | (0.13 | ) | (0.91 | ) | 1.09 | (0.41 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.02 | (0.00 | )‡ | 0.01 | 0.02 | 0.03 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.57 | (0.94 | ) | 0.43 | (0.34 | ) | 1.62 | 0.11 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.24 | ) | (0.54 | ) | (0.55 | ) | (0.76 | ) | (0.53 | ) | (0.55 | ) | ||||||||||||||
From net realized gain on investments | — | (0.22 | ) | (0.03 | ) | — | (0.32 | ) | (0.16 | ) | ||||||||||||||||
Return of capital | — | (0.06 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.24 | ) | (0.82 | ) | (0.58 | ) | (0.76 | ) | (0.85 | ) | (0.71 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 9.77 | $ | 9.44 | $ | 11.20 | $ | 11.35 | $ | 12.45 | $ | 11.68 | ||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 6.13 | %(c) | (8.36 | %) | 3.87 | % | (2.89 | %) | 14.60 | % | 1.13 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 5.44 | %†† | 5.24 | % | 4.97 | % | 4.70 | % | 4.35 | % | 4.18 | % | ||||||||||||||
Net expenses | 2.21 | %†† | 2.16 | % | 2.09 | % | 2.05 | % | 2.04 | % | 2.07 | % | ||||||||||||||
Portfolio turnover rate | 18 | % | 19 | % | 20 | % | 36 | % | 31 | % | 65 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 7,499 | $ | 8,111 | $ | 12,109 | $ | 15,290 | $ | 20,101 | $ | 21,961 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 9.45 | $ | 11.22 | $ | 11.37 | $ | 12.46 | $ | 11.69 | $ | 12.29 | ||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.25 | 0.52 | 0.56 | 0.56 | 0.51 | 0.49 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.33 | (1.49 | ) | (0.13 | ) | (0.90 | ) | 1.09 | (0.41 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.02 | (0.00 | )‡ | 0.01 | 0.02 | 0.03 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.57 | (0.95 | ) | 0.43 | (0.33 | ) | 1.62 | 0.11 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.24 | ) | (0.54 | ) | (0.55 | ) | (0.76 | ) | (0.53 | ) | (0.55 | ) | ||||||||||||||
From net realized gain on investments | — | (0.22 | ) | (0.03 | ) | — | (0.32 | ) | (0.16 | ) | ||||||||||||||||
Return of capital | — | (0.06 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.24 | ) | (0.82 | ) | (0.58 | ) | (0.76 | ) | (0.85 | ) | (0.71 | )�� | ||||||||||||||
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|
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|
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|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 9.78 | $ | 9.45 | $ | 11.22 | $ | 11.37 | $ | 12.46 | $ | 11.69 | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 6.13 | %(c) | (8.43 | %) | 3.87 | % | (2.80 | %) | 14.59 | % | 1.13 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 5.44 | %†† | 5.24 | % | 4.97 | % | 4.69 | % | 4.35 | % | 4.18 | % | ||||||||||||||
Net expenses | 2.21 | %†† | 2.16 | % | 2.09 | % | 2.05 | % | 2.04 | % | 2.07 | % | ||||||||||||||
Portfolio turnover rate | 18 | % | 19 | % | 20 | % | 36 | % | 31 | % | 65 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 35,890 | $ | 37,808 | $ | 56,199 | $ | 68,629 | $ | 91,002 | $ | 80,351 |
* | Unaudited. |
†† | 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. |
20 | MainStay Global High Income Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 9.61 | $ | 11.39 | $ | 11.53 | $ | 12.63 | $ | 11.84 | $ | 12.43 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.31 | 0.65 | 0.71 | 0.71 | 0.66 | 0.63 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.32 | (1.52 | ) | (0.14 | ) | (0.93 | ) | 1.10 | (0.41 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.02 | (0.00 | )‡ | 0.01 | 0.02 | 0.03 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | 0.62 | (0.85 | ) | 0.57 | (0.21 | ) | 1.78 | 0.25 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||
From net investment income | (0.29 | ) | (0.65 | ) | (0.68 | ) | (0.89 | ) | (0.67 | ) | (0.68 | ) | ||||||||||||||
From net realized gain on investments | — | (0.22 | ) | (0.03 | ) | — | (0.32 | ) | (0.16 | ) | ||||||||||||||||
Return of capital | — | (0.06 | ) | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total dividends and distributions | (0.29 | ) | (0.93 | ) | (0.71 | ) | (0.89 | ) | (0.99 | ) | (0.84 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 9.94 | $ | 9.61 | $ | 11.39 | $ | 11.53 | $ | 12.63 | $ | 11.84 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | 6.76 | %(c) | (7.30 | %) | 5.11 | % | (1.73 | %) | 15.95 | % | 2.22 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 6.63 | %†† | 6.38 | % | 6.13 | % | 5.86 | % | 5.47 | % | 5.31 | % | ||||||||||||||
Net expenses | 1.00 | %†† | 0.98 | % | 0.92 | % | 0.91 | % | 0.92 | % | 0.97 | % | ||||||||||||||
Portfolio turnover rate | 18 | % | 19 | % | 20 | % | 36 | % | 31 | % | 65 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 14,517 | $ | 16,825 | $ | 41,174 | $ | 43,678 | $ | 48,852 | $ | 36,027 |
* | Unaudited. |
†† | 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. 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. | 21 |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Global High Income Fund (the “Fund”), a non-diversified fund.
The Fund currently offers five classes of shares. Class A and Class B shares commenced operations on June 1, 1998. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on August 31, 2007. Investor Class shares commenced operations on February 28, 2008. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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 Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A 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 Class A and Investor Class 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 maximum current income by investing in high-yield debt securities of non-U.S. issuers. Capital appreciation is a secondary objective.
The Fund is “non-diversified,” which means that it may invest a greater percentage of its assets than diversified funds in a particular issuer. This may make it more susceptible than diversified funds to risks associated with an individual issuer, and to single economic, political or regulatory occurrences.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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
22 | MainStay Global High Income Fund |
participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Equity and credit default swap curves | • Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended
April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, there were no securities held by the Fund that were fair valued in such a manner.
Options contracts are valued at the last posted settlement price on the market where such options are primarily traded. Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded. Investments in mutual funds, including money market funds, are valued at their respective 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 (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. Those values reflect broker/dealer supplied prices and electronic data processing techniques, if the evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. 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. These securities are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured 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.
23 |
Notes to Financial Statements (Unaudited) (continued)
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A Fund security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security 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 the 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 measuring 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 measures 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 by methods deemed reasonable in good faith in such a manner as the Board deems appropriate to reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was measured as of April 30, 2016 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2016, the Fund did not hold any securities deemed to be illiquid under procedures approved by the Board.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least 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 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. The straight-line method approximates the effective interest method for short-term investments. 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.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(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/or 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.
24 | MainStay Global High Income Fund |
(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 or Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(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 market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. Government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation 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 or futures commission merchant 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. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures, and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. 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 futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. 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) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies 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 appreciation or depreciation 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 may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk, and illiquidity risk. Counterparty risk is heightened for these investments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also 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 also reflects the Fund’s exposure at
25 |
Notes to Financial Statements (Unaudited) (continued)
the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations.
(K) Foreign Currency Transactions. The Fund’s books and records are maintained 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 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.
(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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(M) Concentration of Risk. The Fund’s principal investments include high yield debt securities (sometimes called “junk bonds”), which are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities.
These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility.
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 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. 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 related to 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. The Fund entered into 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 also entered into foreign currency forward contracts to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
Fair value of derivatives instruments as of April 30, 2016:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Risk | Total | ||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | $542,328 | $ | 542,328 | ||||
| ||||||||
Total Fair Value | $542,328 | $ | 542,328 | |||||
|
26 | MainStay Global High Income Fund |
Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Risk | Total | ||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | $(671,840) | $ | (671,840 | ) | |||
| ||||||||
Total Fair Value | $(671,840) | $ | (671,840 | ) | ||||
|
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2016:
Realized Gain (Loss)
Statement of Operations Location | Foreign Risk | Total | ||||||
Forward Contracts | Net realized gain (loss) on foreign currency transactions | $730,977 | $ | 730,977 | ||||
| ||||||||
Total Realized Gain (Loss) | $730,977 | $ | 730,977 | |||||
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Risk | Total | ||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | $ | (569,170 | ) | $ | (569,170 | ) | |||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | (569,170 | ) | $ | (569,170 | ) | ||||
|
|
Average Notional Amount
Foreign Risk | Total | |||||
Forward Contracts Long | $ 14,404,171 | $ | 14,404,171 | |||
Forward Contracts Short | $(16,697,874) | $ | (16,697,874 | ) | ||
|
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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer 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 the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, 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% to $500 million and 0.65% in excess of $500 million, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the six-month period ended April 30, 2016, the effective management fee rate was 0.73% inclusive of a fee for fund accounting services of 0.03% of the Fund’s average daily net assets.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $640,443.
State Street 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 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 Class A and Investor Class Plans, the Distributor receives a monthly distribution fee from the Class A and Investor Class shares at an annual rate of 0.25% of the average daily net assets of the Class A and Investor Class 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%. Class I shares are not subject to a distribution and/or service fee.
27 |
Notes to Financial Statements (Unaudited) (continued)
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. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $10,809 and $3,016, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $742, $14, $13,543 and $3,340, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 64,500 | ||
Investor Class | 41,651 | |||
Class B | 12,636 | |||
Class C | 60,097 | |||
Class I | 9,364 |
(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. As of April 30, 2016, New York Life and its affiliates beneficially held shares of the Fund with values and percentages of net assets as follows:
Class A | $ | 5,922,391 | 5.7 | % |
Note 4–Federal Income Tax
As of October 31, 2015, for federal income tax purposes, capital loss carryforwards of $10,567,325 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 realized 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 Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
Unlimited | $ | 1,345 | $ | 9,222 |
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 13,171,711 | ||
Long-Term Capital Gain | 5,079,408 | |||
Return of Capital | 1,258,082 | |||
Total | $ | 19,509,201 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $31,305 and $34,067, respectively.
28 | MainStay Global High Income Fund |
Note 8–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 1,183,056 | $ | 11,120,534 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 259,505 | 2,468,056 | ||||||
Shares redeemed | (1,338,914 | ) | (12,655,345 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 103,647 | 933,245 | ||||||
Shares converted into Class A (See Note 1) | 81,842 | 777,159 | ||||||
Shares converted from Class A (See Note 1) | (36,023 | ) | (349,064 | ) | ||||
|
| |||||||
Net increase (decrease) | 149,466 | $ | 1,361,340 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 1,799,031 | $ | 17,961,990 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 893,305 | 8,785,725 | ||||||
Shares redeemed | (3,940,974 | ) | (39,369,178 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,248,638 | ) | (12,621,463 | ) | ||||
Shares converted into Class A (See Note 1) | 67,815 | 673,223 | ||||||
Shares converted from Class A (See Note 1) | (211,447 | ) | (2,045,040 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,392,270 | ) | $ | (13,993,280 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 82,288 | $ | 788,504 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 70,181 | 672,845 | ||||||
Shares redeemed | (227,144 | ) | (2,172,459 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (74,675 | ) | (711,110 | ) | ||||
Shares converted into Investor Class (See Note 1) | 70,643 | 684,381 | ||||||
Shares converted from Investor Class (See Note 1) | (75,878 | ) | (741,375 | ) | ||||
|
| |||||||
Net increase (decrease) | (79,910 | ) | $ | (768,104 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 232,196 | $ | 2,336,797 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 215,625 | 2,135,643 | ||||||
Shares redeemed | (453,712 | ) | (4,564,154 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (5,891 | ) | (91,714 | ) | ||||
Shares converted into Investor Class (See Note 1) | 297,117 | 2,924,492 | ||||||
Shares converted from Investor Class (See Note 1) | (53,620 | ) | (537,370 | ) | ||||
|
| |||||||
Net increase (decrease) | 237,606 | $ | 2,295,408 | |||||
|
|
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 45,324 | $ | 426,949 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 17,904 | 167,345 | ||||||
Shares redeemed | (114,730 | ) | (1,062,964 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (51,502 | ) | (468,670 | ) | ||||
Shares converted from Class B (See Note 1) | (39,635 | ) | (371,101 | ) | ||||
|
| |||||||
Net increase (decrease) | (91,137 | ) | $ | (839,771 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 108,157 | $ | 1,065,045 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 70,065 | 677,601 | ||||||
Shares redeemed | (296,341 | ) | (2,928,296 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (118,119 | ) | (1,185,650 | ) | ||||
Shares converted from Class B (See Note 1) | (103,561 | ) | (1,015,305 | ) | ||||
|
| |||||||
Net increase (decrease) | (221,680 | ) | $ | (2,200,955 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 281,809 | $ | 2,636,618 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 77,288 | 723,448 | ||||||
Shares redeemed | (687,897 | ) | (6,395,106 | ) | ||||
|
| |||||||
Net increase (decrease) | (328,800 | ) | $ | (3,035,040 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 480,190 | $ | 4,783,294 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 302,893 | 2,932,707 | ||||||
Shares redeemed | (1,794,067 | ) | (17,761,085 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,010,984 | ) | $ | (10,045,084 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 305,494 | $ | 2,946,271 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 23,101 | 220,293 | ||||||
Shares redeemed | (619,698 | ) | (5,873,087 | ) | ||||
|
| |||||||
Net increase (decrease) | (291,103 | ) | $ | (2,706,523 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 575,348 | $ | 5,744,254 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 107,215 | 1,057,131 | ||||||
Shares redeemed | (2,547,102 | ) | (25,555,857 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,864,539 | ) | $ | (18,754,472 | ) | |||
|
|
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Global High Income Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and MacKay Shields in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, and responses from New York Life Investments and MacKay Shields to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Funds’ distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and MacKay Shields; (ii) the investment performance of the Fund, New York Life Investments and MacKay Shields; (iii) the costs of the services provided, and profits realized, by New York Life Investments and MacKay Shields from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and MacKay Shields. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and MacKay Shields
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
30 | MainStay Global High Income Fund |
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that MacKay Shields provides to the Fund. The Board evaluated MacKay Shields’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined MacKay Shields’ track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at MacKay Shields, and MacKay Shields’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by MacKay Shields. The Board also reviewed MacKay Shields’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and MacKay Shields’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or MacKay Shields had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions. The Board considered its discussions with representatives from New York Life Investments regarding the Fund’s recent underperformance relative to peers and considered New York Life Investments’ representation that it would continue to monitor the Fund’s performance over the upcoming year.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and MacKay Shields
The Board considered the costs of the services provided by New York Life Investments and MacKay Shields under the Agreements and the profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund. Because MacKay Shields is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and MacKay Shields and profits realized by New York Life Investments and its affiliates, including MacKay Shields, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and MacKay Shields must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and MacKay Shields to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including MacKay Shields, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay
Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to MacKay Shields are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and MacKay Shields on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry
32 | MainStay Global High Income Fund |
data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
33 |
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 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).
34 | MainStay Global High Income Fund |
MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1697069 MS164-16 | MSGH10-06/16 (NYLIM) NL020 |
MainStay International Equity Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –6.65 –1.21 | %
|
| –9.33 –4.05 | %
|
| –0.05 1.08 | %
|
| 1.77 2.35 | %
|
| 1.33 1.33 | %
| |||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –6.83 –1.41 |
|
| –9.65 –4.39 |
|
| –0.39 0.74 |
|
| 1.51 2.09 |
|
| 1.68 1.68 |
| |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges |
| –6.71 –1.80 |
|
| –9.88 –5.13 |
|
| –0.42 –0.02 |
|
| 1.31 1.31 |
|
| 2.43 2.43 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges |
| –2.70 –1.72 |
|
| –6.08 –5.13 |
|
| –0.01 –0.01 |
|
| 1.33 1.33 |
|
| 2.43 2.43 |
| |||||||
Class I Shares | No Sales Charge | –1.11 | –3.87 | 1.32 | 2.68 | 1.08 | ||||||||||||||||||
Class R1 Shares | No Sales Charge | –1.16 | –3.93 | 1.22 | 2.58 | 1.18 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | –1.33 | –4.23 | 0.97 | 2.32 | 1.43 | ||||||||||||||||||
Class R3 Shares4 | No Sales Charge | –1.41 | –4.46 | 0.71 | 2.07 | 1.68 |
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, changes 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 periods of investment. Performance figures may 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 (if any), 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 would likely have been different. |
4. | Performance figures for Class R3 shares, which were first offered on April 28, 2006, include the historical performance of Class B shares through April 27, 2006, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R3 shares would likely have been different. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
MSCI ACWI® Ex U.S.5 | –1.75 | % | –11.28 | % | –0.13 | % | 1.70 | % | ||||||||
MSCI EAFE® Index6 | –3.07 | –9.32 | 1.69 | 1.61 | ||||||||||||
Average Lipper International Multi-Cap Growth Fund7 | –2.57 | –8.23 | 1.46 | 1.64 |
5. | The MSCI ACWI® Ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the U.S. The Fund has selected the MSCI ACWI® Ex U.S. as its primary benchmark. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The 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. |
7. | The Average Lipper International Multi-Cap Growth 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. International multi-cap growth funds typically have above-average characteristics compared to the MSCI EAFE® 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 International Equity Fund |
Cost in Dollars of a $1,000 Investment in MainStay International Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 987.90 | $ | 6.52 | $ | 1,018.30 | $ | 6.62 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 985.90 | $ | 8.39 | $ | 1,016.40 | $ | 8.52 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 982.00 | $ | 12.07 | $ | 1,012.70 | $ | 12.26 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 982.80 | $ | 12.08 | $ | 1,012.70 | $ | 12.26 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 988.90 | $ | 5.29 | $ | 1,019.50 | $ | 5.37 | ||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 988.40 | $ | 5.78 | $ | 1,019.00 | $ | 5.87 | ||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 986.70 | $ | 7.01 | $ | 1,017.80 | $ | 7.12 | ||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 985.90 | $ | 8.25 | $ | 1,016.60 | $ | 8.37 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.32% for Class A, 1.70% for Investor Class, 2.45% for Class B and Class C, 1.07% for Class I, 1.17% for Class R1, 1.42% for Class R2 and 1.67% for Class R3) multiplied by the average account value over the period, divided by 366 and multiplied by 182 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7 |
Country Composition as of April 30, 2016 (Unaudited)
Japan | 14.4 | % | ||
United Kingdom | 13.9 | |||
United States | 13.2 | |||
Germany | 8.2 | |||
Switzerland | 6.7 | |||
China | 5.1 | |||
Ireland | 5.0 | |||
India | 4.8 | |||
Israel | 4.6 | |||
Sweden | 3.9 | |||
Denmark | 3.4 |
Jordan | 3.4 | % | ||
Spain | 2.5 | |||
Belgium | 2.0 | |||
Italy | 1.9 | |||
Brazil | 1.3 | |||
Thailand | 1.3 | |||
South Africa | 1.2 | |||
Netherlands | 0.9 | |||
Australia | 0.6 | |||
Other Assets, Less Liabilities | 1.7 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | Fresenius Medical Care A.G. & Co. KGaA |
2. | Check Point Software Technologies, Ltd. |
3. | TE Connectivity, Ltd. |
4. | Start Today Co., Ltd. |
5. | Whitbread PLC |
6. | Tsuruha Holdings, Inc. |
7. | United Internet A.G. Registered |
8. | Novo Nordisk A/S Class B |
9. | Hikma Pharmaceuticals PLC |
10. | CyberAgent, Inc. |
8 | MainStay International Equity Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Edward Ramos, CFA, Carlos Garcia-Tunon, CFA, and Eve Glatt of Cornerstone Capital Management Holdings LLC, the Fund’s Subadvisor.
How did MainStay International Equity Fund perform relative to its benchmarks and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay International Equity Fund returned –1.21% for Class A shares, –1.41% for Investor Class shares, –1.80% for Class B shares and –1.72% for Class C shares for the six months ended April 30, 2016. Over the same period, the Fund’s Class I shares returned –1.11%, Class R1 shares returned –1.16%, Class R2 shares returned –1.33% and Class R3 shares returned –1.41%. For the six months ended April 30, 2016, Class B shares underperformed—and all other share classes outperformed—the –1.75% return of the MSCI ACWI® Ex U.S.1 which is the Fund’s primary benchmark. Over the same period, all share classes outperformed the –3.07% return of the MSCI EAFE® Index,1 which is the Fund’s secondary benchmark. For the six months ended April 30, 2016, all share classes outperformed the –2.57% return of the Average Lipper2 International Multi-Cap Growth Fund. See page 5 for Fund returns with sales charges.
Were there any changes to the Fund during the reporting period?
Effective March 24, 2016, the investment process for the Fund was changed to raise the limit on investment in companies located in emerging markets from 25% of the Fund’s assets measured at the time of investment. For more information on this change, see the Supplement dated March 24, 2016.
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s performance relative to the MSCI ACWI® Ex U.S. benefited from positive stock selection, which was partially offset by negative contributions from sector and country allocation. (Contributions take weightings and total returns into account.) The positive effect of stock selection on a country basis was driven by notable strength in Japan, China and Sweden. Stock selection on a sector basis was also positive, with the consumer discretionary, financials and industrials sectors making the largest contributions to relative performance. The negative effect from sector allocation was driven by an overweight allocation relative to the MSCI ACWI® Ex U.S. in the health care sector and underweight positions in the energy and materials sectors. The negative effect from country allocation was driven by an overweight position relative to the Index in Ireland and underweight positions in Canada and Australia.
During the reporting period, which sectors were the strongest 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 ACWI® Ex U.S. were consumer discretionary, financials and industrials. The consumer discretionary and industrials sectors benefited from favorable stock selection, which was partially offset by a negative contribution from sector allocation. The Fund’s position in the financials sector benefited from positive stock selection and a favorable allocation effect.
The sectors that detracted the most from the Fund’s performance relative to the MSCI ACWI® Ex U.S. were health care, energy and information technology. The Fund’s positions in health care and energy suffered mainly from unfavorable allocation effects, with stock selection also hindering performance in health care. Information technology had a negative contribution from stock selection. The Fund held overweight positions in the health care and information technology sectors, both of which underperformed the MSCI ACWI® Ex U.S. Index. The Fund had no exposure to the energy sector.
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 online apparel shopping site operator Start Today, Japanese drug store chain manager Tsuruha Holdings and Japanese Internet-based service provider CyberAgent. All three companies outperformed relative to market expectations on continued strong growth and strategy execution.
The most significant detractors from the Fund’s absolute performance were Irish private-label over-the-counter pharmaceutical company Perrigo, U.K. hospitality group Whitbread and German Internet payment and processing services company Wirecard. Perrigo suffered from weak earnings guidance and the surprise departure of its chief executive officer. Whitbread’s underperformance resulted from concern over the group’s organic growth potential. Wirecard suffered following the publication of a short-seller’s report.
1. | See footnote on page 6 for more information on this index. |
2. | See footnote on page 6 for more information on Lipper Inc. |
9 |
Did the Fund make any significant purchases or sales during the reporting period?
Notable purchases during the reporting period included U.K.-listed Jordanian pharmaceutical company Hikma Pharmaceuticals and medical device company LivaNova. Notable sales during the reporting period included Wirecard and French testing and inspection company Bureau Veritas.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund increased its exposure to the health care and financials sectors. Over the same period,
the Fund reduced its exposure to the information technology and industrials sectors.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2016, the Fund held overweight positions relative to the MSCI ACWI® Ex U.S. in the health care, information technology and consumer discretionary sectors. As of the same date, the Fund held underweight positions in the financials, energy and industrials 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 forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay International Equity Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Shares | Value | |||||||
Common Stocks 97.8%† | ||||||||
Australia 0.6% |
| |||||||
Gateway Lifestyle (Real Estate Management & Development) | 857,875 | $ | 1,832,921 | |||||
|
| |||||||
Belgium 2.0% | ||||||||
Ontex Group N.V. (Personal Products) | 94,836 | 2,905,379 | ||||||
UCB S.A. (Pharmaceuticals) | 46,077 | 3,447,898 | ||||||
|
| |||||||
6,353,277 | ||||||||
|
| |||||||
Brazil 1.3% | ||||||||
Qualicorp S.A. (Health Care Providers & Services) | 966,605 | 4,187,661 | ||||||
|
| |||||||
China 5.1% | ||||||||
Baidu, Inc., Sponsored ADR (Internet Software & Services) (a) | 31,803 | 6,179,323 | ||||||
CT Environmental Group, Ltd. (Water Utilities) | 4,256,000 | 1,245,487 | ||||||
NetEase, Inc., ADR (Internet Software & Services) | 63,143 | 8,884,220 | ||||||
|
| |||||||
16,309,030 | ||||||||
|
| |||||||
Denmark 3.4% | ||||||||
¨Novo Nordisk A/S Class B (Pharmaceuticals) | 196,966 | 10,997,271 | ||||||
|
| |||||||
Germany 8.2% | ||||||||
¨Fresenius Medical Care A.G. & Co. KGaA (Health Care Providers & Services) | 173,475 | 15,046,800 | ||||||
¨United Internet A.G. Registered (Internet Software & Services) | 230,799 | 11,267,428 | ||||||
|
| |||||||
26,314,228 | ||||||||
|
| |||||||
India 4.8% | ||||||||
Housing Development Finance Corp., Ltd. (Thrifts & Mortgage Finance) | 263,249 | 4,325,967 | ||||||
Lupin, Ltd. (Pharmaceuticals) | 181,804 | 4,397,502 | ||||||
Yes Bank, Ltd. (Banks) | 476,278 | 6,756,786 | ||||||
|
| |||||||
15,480,255 | ||||||||
|
| |||||||
Ireland 5.0% | ||||||||
Experian PLC (Professional Services) | 485,638 | 8,876,976 | ||||||
Paddy Power Betfair PLC (Hotels, Restaurants & Leisure) | 26,419 | 3,540,890 | ||||||
Shire PLC (Pharmaceuticals) | 56,992 | 3,548,301 | ||||||
|
| |||||||
15,966,167 | ||||||||
|
| |||||||
Israel 4.6% | ||||||||
¨Check Point Software Technologies, Ltd. (Software) (a) | 177,710 | 14,726,828 | ||||||
|
|
Shares | Value | |||||||
Italy 1.9% | ||||||||
De’Longhi S.p.A. (Household Durables) | 80,375 | $ | 1,850,792 | |||||
DiaSorin S.p.A. (Health Care Equipment & Supplies) | 72,651 | 4,242,642 | ||||||
|
| |||||||
6,093,434 | ||||||||
|
| |||||||
Japan 14.4% | ||||||||
¨CyberAgent, Inc. (Media) | 211,500 | 10,336,466 | ||||||
¨Start Today Co., Ltd. (Internet & Catalog Retail) | 281,732 | 12,286,057 | ||||||
Suruga Bank, Ltd. (Banks) | 183,200 | 3,719,098 | ||||||
Sysmex Corp. (Health Care Equipment & Supplies) | 122,374 | 8,050,921 | ||||||
¨Tsuruha Holdings, Inc. (Food & Staples Retailing) | 118,988 | 11,809,335 | ||||||
|
| |||||||
46,201,877 | ||||||||
|
| |||||||
Jordan 3.4% | ||||||||
¨Hikma Pharmaceuticals PLC (Pharmaceuticals) | 339,687 | 10,939,201 | ||||||
|
| |||||||
Netherlands 0.9% | ||||||||
GrandVision N.V. (Specialty Retail) (b) | 82,072 | 2,255,438 | ||||||
IMCD Group N.V. (Trading Companies & Distributors) | 17,411 | 702,960 | ||||||
|
| |||||||
2,958,398 | ||||||||
|
| |||||||
South Africa 1.2% | ||||||||
Mediclinic International PLC (Health Care Providers & Services) | 292,130 | 3,862,956 | ||||||
|
| |||||||
Spain 2.5% | ||||||||
Almirall S.A. (Pharmaceuticals) | 168,828 | 2,774,093 | ||||||
Applus Services S.A. (Professional Services) | 210,964 | 1,947,009 | ||||||
Grifols S.A. (Biotechnology) | 148,691 | 3,234,064 | ||||||
|
| |||||||
7,955,166 | ||||||||
|
| |||||||
Sweden 3.9% | ||||||||
Hexagon AB Class B (Electronic Equipment, Instruments & Components) | 239,556 | 9,551,872 | ||||||
Svenska Handelsbanken AB Class A (Banks) | 238,852 | 3,179,558 | ||||||
|
| |||||||
12,731,430 | ||||||||
|
| |||||||
Switzerland 6.7% | ||||||||
DKSH Holding A.G. (Professional Services) | 55,384 | 3,619,907 | ||||||
Syngenta A.G. Registered (Chemicals) | 6,949 | 2,781,628 | ||||||
¨TE Connectivity, Ltd. (Electronic Equipment, Instruments & Components) | 218,695 | 13,007,979 | ||||||
Tecan Group A.G. Registered (Life Sciences Tools & Services) | 15,588 | 2,164,413 | ||||||
|
| |||||||
21,573,927 | ||||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings, as of April 30, 2016, 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Thailand 1.3% | ||||||||
Kasikornbank PCL (Banks) | 854,344 | $ | 4,084,611 | |||||
|
| |||||||
United Kingdom 13.9% | ||||||||
Abcam PLC (Biotechnology) | 349,046 | 3,014,152 | ||||||
ARM Holdings PLC (Semiconductors & Semiconductor Equipment) | 458,012 | 6,273,981 | ||||||
HomeServe PLC (Commercial Services & Supplies) | 289,180 | 1,750,143 | ||||||
Jardine Lloyd Thompson Group PLC (Insurance) | 23,550 | 298,336 | ||||||
Johnson Matthey PLC (Chemicals) | 162,135 | 6,839,410 | ||||||
Prudential PLC (Insurance) | 332,817 | 6,552,837 | ||||||
SABMiller PLC (Beverages) | 130,285 | 7,966,819 | ||||||
¨Whitbread PLC (Hotels, Restaurants & Leisure) | 209,301 | 11,841,364 | ||||||
|
| |||||||
44,537,042 | ||||||||
|
| |||||||
United States 12.7% | ||||||||
Accenture PLC Class A (IT Services) | 90,127 | 10,177,141 | ||||||
ICON PLC (Life Sciences Tools & Services) (a) | 120,577 | 8,148,594 | ||||||
LivaNova PLC (Health Care Equipment & Supplies) (a) | 156,162 | 8,234,422 | ||||||
Perrigo Co. PLC (Pharmaceuticals) | 91,551 | 8,850,235 | ||||||
Samsonite International S.A. (Textiles, Apparel & Luxury Goods) | 1,694,400 | 5,460,944 | ||||||
|
| |||||||
40,871,336 | ||||||||
|
| |||||||
Total Common Stocks | 313,977,016 | |||||||
|
|
| Principal Amount | | Value | |||||
Short-Term Investment 0.5% | ||||||||
Repurchase Agreement 0.5% | ||||||||
United States 0.5% | ||||||||
Fixed Income Clearing Corp. | $ | 1,717,262 | $ | 1,717,262 | ||||
|
| |||||||
Total Short-Term Investment | 1,717,262 | |||||||
|
| |||||||
Total Investments | 98.3 | % | 315,694,278 | |||||
Other Assets, Less Liabilities | 1.7 | 5,305,497 | ||||||
Net Assets | 100.0 | % | $ | 320,999,775 |
(a) | Non-income producing security. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | As of April 30, 2016, cost was $285,805,748 for federal income tax purposes and net unrealized appreciation was as follows: |
Gross unrealized appreciation | $ | 47,422,164 | ||
Gross unrealized depreciation | (17,533,634 | ) | ||
|
| |||
Net unrealized appreciation | $ | 29,888,530 | ||
|
|
The following abbreviation is used in the preceding pages:
ADR—American Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 313,977,016 | $ | — | $ | — | $ | 313,977,016 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 1,717,262 | — | 1,717,262 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 313,977,016 | $ | 1,717,262 | $ | — | $ | 315,694,278 | ||||||||
|
|
|
|
|
|
|
|
(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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
12 | MainStay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The table below sets forth the diversification of MainStay International Equity Fund investments by industry.
Industry Diversification (Unaudited)
Value | Percent † | |||||||
Banks | $ | 17,740,053 | 5.5 | % | ||||
Beverages | 7,966,819 | 2.5 | ||||||
Biotechnology | 6,248,216 | 1.9 | ||||||
Capital Markets | 1,717,262 | 0.5 | ||||||
Chemicals | 9,621,038 | 3.0 | ||||||
Commercial Services & Supplies | 1,750,143 | 0.5 | ||||||
Electronic Equipment, Instruments & Components | 22,559,851 | 7.0 | ||||||
Food & Staples Retailing | 11,809,335 | 3.7 | ||||||
Health Care Equipment & Supplies | 20,527,985 | 6.4 | ||||||
Health Care Providers & Services | 23,097,417 | 7.2 | ||||||
Hotels, Restaurants & Leisure | 15,382,254 | 4.8 | ||||||
Household Durables | 1,850,792 | 0.6 | ||||||
Insurance | 6,851,173 | 2.1 | ||||||
Internet & Catalog Retail | 12,286,057 | 3.8 | ||||||
Internet Software & Services | 26,330,971 | 8.2 | ||||||
IT Services | 10,177,141 | 3.2 | ||||||
Life Sciences Tools & Services | 10,313,007 | 3.2 | ||||||
Media | 10,336,466 | 3.2 | ||||||
Personal Products | 2,905,379 | 0.9 | ||||||
Pharmaceuticals | 44,954,501 | 14.0 | ||||||
Professional Services | 14,443,892 | 4.5 | ||||||
Real Estate Management & Development | 1,832,921 | 0.6 | ||||||
Semiconductors & Semiconductor Equipment | 6,273,981 | 2.0 | ||||||
Software | 14,726,828 | 4.6 | ||||||
Specialty Retail | 2,255,438 | 0.7 | ||||||
Textiles, Apparel & Luxury Goods | 5,460,944 | 1.7 | ||||||
Thrifts & Mortgage Finance | 4,325,967 | 1.4 | ||||||
Trading Companies & Distributors | 702,960 | 0.2 | ||||||
Water Utilities | 1,245,487 | 0.4 | ||||||
|
|
|
| |||||
315,694,278 | 98.3 | |||||||
Other Assets, Less Liabilities | 5,305,497 | 1.7 | ||||||
|
|
|
| |||||
Net Assets | $ | 320,999,775 | 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. | 13 |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 315,694,278 | ||
Cash denominated in foreign currencies (identified cost $6,184,791) | 6,310,554 | |||
Receivables: | ||||
Dividends and interest | 808,963 | |||
Investment securities sold | 597,085 | |||
Fund shares sold | 211,685 | |||
Other assets | 65,326 | |||
|
| |||
Total assets | 323,687,891 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 2,015,722 | |||
Manager (See Note 3) | 238,621 | |||
Foreign capital gains tax (See Note 2(C)) | 137,004 | |||
Fund shares redeemed | 111,540 | |||
Transfer agent (See Note 3) | 73,556 | |||
Professional fees | 36,503 | |||
NYLIFE Distributors (See Note 3) | 30,659 | |||
Custodian | 21,489 | |||
Shareholder communication | 21,085 | |||
Trustees | 297 | |||
Accrued expenses | 1,640 | |||
|
| |||
Total liabilities | 2,688,116 | |||
|
| |||
Net assets | $ | 320,999,775 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 241,353 | ||
Additional paid-in capital | 368,529,397 | |||
|
| |||
368,770,750 | ||||
Distributions in excess of net investment income | (788,117 | ) | ||
Accumulated net realized gain (loss) on investments and foreign currency transactions (a) | (78,318,968 | ) | ||
Net unrealized appreciation (depreciation) on investments (b) | 31,257,859 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | 78,251 | |||
|
| |||
Net assets | $ | 320,999,775 | ||
|
|
(a) | Realized gain (loss) on security transactions recorded net of foreign capital gains tax. |
(b) | Unrealized appreciation (depreciation) on investments recorded net of foreign capital gains tax in the amount of $137,004. |
Class A | ||||
Net assets applicable to outstanding shares | $ | 45,561,570 | ||
|
| |||
Shares of beneficial interest outstanding | 3,415,949 | |||
|
| |||
Net asset value per share outstanding | $ | 13.34 | ||
Maximum sales charge (5.50% of offering price) | 0.78 | |||
|
| |||
Maximum offering price per share outstanding | $ | 14.12 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 33,051,790 | ||
|
| |||
Shares of beneficial interest outstanding | 2,489,212 | |||
|
| |||
Net asset value per share outstanding | $ | 13.28 | ||
Maximum sales charge (5.50% of offering price) | 0.77 | |||
|
| |||
Maximum offering price per share outstanding | $ | 14.05 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 7,729,643 | ||
|
| |||
Shares of beneficial interest outstanding | 643,344 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 12.01 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 8,711,857 | ||
|
| |||
Shares of beneficial interest outstanding | 725,006 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 12.02 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 221,321,319 | ||
|
| |||
Shares of beneficial interest outstanding | 16,514,882 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 13.40 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 2,682,844 | ||
|
| |||
Shares of beneficial interest outstanding | 201,285 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 13.33 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 870,214 | ||
|
| |||
Shares of beneficial interest outstanding | 65,064 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 13.37 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 1,070,538 | ||
|
| |||
Shares of beneficial interest outstanding | 80,545 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 13.29 | ||
|
|
14 | MainStay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 2,500,141 | ||
Interest | 459 | |||
|
| |||
Total income | 2,500,600 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 1,423,980 | |||
Transfer agent (See Note 3) | 205,434 | |||
Distribution/Service—Class A (See Note 3) | 56,443 | |||
Distribution/Service—Investor Class (See Note 3) | 41,016 | |||
Distribution/Service—Class B (See Note 3) | 40,708 | |||
Distribution/Service—Class C (See Note 3) | 41,672 | |||
Distribution/Service—Class R2 (See Note 3) | 1,935 | |||
Distribution/Service—Class R3 (See Note 3) | 2,596 | |||
Custodian | 48,974 | |||
Registration | 46,129 | |||
Professional fees | 41,655 | |||
Shareholder communication | 23,815 | |||
Trustees | 3,807 | |||
Shareholder service (See Note 3) | 2,724 | |||
Miscellaneous | 13,712 | |||
|
| |||
Total expenses | 1,994,600 | |||
|
| |||
Net investment income (loss) | 506,000 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions (b) | 6,336,075 | |||
Foreign currency transactions | (59,457 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | 6,276,618 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (c) | (10,712,252 | ) | ||
Translation of other assets and liabilities in foreign currencies | 349,035 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (10,363,217 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (4,086,599 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (3,580,599 | ) | |
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $130,762. |
(b) | Realized gain (loss) on security transactions recorded net of foreign capital gains tax in the amount of $22,129. |
(c) | Net change in unrealized appreciation (depreciation) on investments recorded net of foreign capital gains tax in the amount of $(78,212). |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 506,000 | $ | 890,489 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 6,276,618 | 11,006,954 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (10,363,217 | ) | 1,162,090 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (3,580,599 | ) | 13,059,533 | |||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (21,107 | ) | (317,497 | ) | ||||
Investor Class | — | (121,482 | ) | |||||
Class I | (653,743 | ) | (2,065,815 | ) | ||||
Class R1 | (5,305 | ) | (30,669 | ) | ||||
Class R2 | — | (20,968 | ) | |||||
Class R3 | — | (3,390 | ) | |||||
|
| |||||||
Total dividends to shareholders | (680,155 | ) | (2,559,821 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 27,225,531 | 64,841,375 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 677,341 | 2,539,275 | ||||||
Cost of shares redeemed | (28,506,044 | ) | (83,909,814 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (603,172 | ) | (16,529,164 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (4,863,926 | ) | (6,029,452 | ) | ||||
Net Assets | ||||||||
Beginning of period | 325,863,701 | 331,893,153 | ||||||
|
| |||||||
End of period | $ | 320,999,775 | $ | 325,863,701 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (788,117 | ) | $ | (613,962 | ) | ||
|
|
16 | MainStay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 13.51 | $ | 13.11 | $ | 13.37 | $ | 11.68 | $ | 10.82 | $ | 12.66 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.02 | 0.03 | 0.07 | 0.05 | 0.10 | 0.26 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.19 | ) | 0.49 | (0.26 | ) | 1.75 | 1.07 | (1.63 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.00 | ‡ | (0.09 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.16 | ) | 0.49 | (0.23 | ) | 1.79 | 1.17 | (1.46 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.09 | ) | (0.03 | ) | (0.10 | ) | (0.31 | ) | (0.38 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 13.34 | $ | 13.51 | $ | 13.11 | $ | 13.37 | $ | 11.68 | $ | 10.82 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment | (1.21 | %)(c) | 3.78 | % | (1.76 | %) | 15.43 | % | 11.27 | % | (11.96 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.25 | % †† | 0.20 | % | 0.51 | % | 0.38 | % | 0.87 | % | 2.11 | % | ||||||||||||||
Net expenses | 1.32 | % †† | 1.33 | % | 1.34 | % | 1.40 | % | 1.43 | % | 1.46 | % | ||||||||||||||
Portfolio turnover rate | 22 | % | 42 | % | 37 | % | 29 | % | 43 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 45,562 | $ | 43,405 | $ | 45,882 | $ | 57,948 | $ | 60,303 | $ | 72,699 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 13.47 | $ | 13.07 | $ | 13.35 | $ | 11.66 | $ | 10.81 | $ | 12.66 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.02 | ) | 0.03 | 0.01 | 0.06 | 0.21 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.19 | ) | 0.50 | (0.27 | ) | 1.75 | 1.07 | (1.62 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.00 | ‡ | (0.09 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.19 | ) | 0.45 | (0.28 | ) | 1.75 | 1.13 | (1.50 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | — | (0.05 | ) | — | (0.06 | ) | (0.28 | ) | (0.35 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 13.28 | $ | 13.47 | $ | 13.07 | $ | 13.35 | $ | 11.66 | $ | 10.81 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment | (1.41 | %)(c) | 3.43 | % | (2.10 | %) | 15.07 | % | 10.81 | % | (12.19 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | (0.15 | %)†† | (0.14 | %) | 0.19 | % | 0.05 | % | 0.54 | % | 1.77 | % | ||||||||||||||
Net expenses | 1.70 | % †† | 1.68 | % | 1.67 | % | 1.72 | % | 1.77 | % | 1.71 | % | ||||||||||||||
Portfolio turnover rate | 22 | % | 42 | % | 37 | % | 29 | % | 43 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 33,052 | $ | 34,329 | $ | 34,377 | $ | 37,457 | $ | 34,822 | $ | 34,895 |
* | Unaudited. |
†† | 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. | 17 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 12.23 | $ | 11.91 | $ | 12.26 | $ | 10.73 | $ | 9.95 | $ | 11.67 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | (0.05 | ) | (0.11 | ) | (0.07 | ) | (0.08 | ) | (0.02 | ) | 0.11 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.18 | ) | 0.46 | (0.24 | ) | 1.62 | 0.99 | (1.49 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.00 | ‡ | (0.08 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.22 | ) | 0.32 | (0.35 | ) | 1.53 | 0.97 | (1.46 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | — | — | — | — | (0.19 | ) | (0.26 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 12.01 | $ | 12.23 | $ | 11.91 | $ | 12.26 | $ | 10.73 | $ | 9.95 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment | (1.80 | %)(c) | 2.69 | % | (2.85 | %) | 14.26 | % (d) | 10.05 | % | (12.81 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | (0.92 | %)†† | (0.91 | %) | (0.57 | %) | (0.73 | %) | (0.22 | %) | 1.02 | % | ||||||||||||||
Net expenses | 2.45 | % †† | 2.43 | % | 2.42 | % | 2.47 | % | 2.52 | % | 2.46 | % | ||||||||||||||
Portfolio turnover rate | 22 | % | 42 | % | 37 | % | 29 | % | 43 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 7,730 | $ | 8,982 | $ | 11,058 | $ | 13,981 | $ | 16,186 | $ | 20,509 |
* | Unaudited. |
†† | 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 return may reflect adjustments to conform to generally accepted accounting principles. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 12.23 | $ | 11.92 | $ | 12.26 | $ | 10.74 | $ | 9.96 | $ | 11.68 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | (0.05 | ) | (0.11 | ) | (0.07 | ) | (0.08 | ) | (0.02 | ) | 0.12 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.17 | ) | 0.45 | (0.24 | ) | 1.61 | 0.99 | (1.50 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.03 | ) | (0.03 | ) | (0.01 | ) | 0.00 | ‡ | (0.08 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.21 | ) | 0.31 | (0.34 | ) | 1.52 | 0.97 | (1.46 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | — | — | — | — | (0.19 | ) | (0.26 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 12.02 | $ | 12.23 | $ | 11.92 | $ | 12.26 | $ | 10.74 | $ | 9.96 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment | (1.72 | %)(c) | 2.60 | % | (2.77 | %) | 14.15 | % | 10.05 | % | (12.88 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | (0.87 | %)†† | (0.90 | %) | (0.57 | %) | (0.71 | %) | (0.21 | %) | 1.07 | % | ||||||||||||||
Net expenses | 2.45 | % †† | 2.43 | % | 2.42 | % | 2.47 | % | 2.52 | % | 2.46 | % | ||||||||||||||
Portfolio turnover rate | 22 | % | 42 | % | 37 | % | 29 | % | 43 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 8,712 | $ | 8,292 | $ | 8,383 | $ | 10,088 | $ | 11,111 | $ | 12,960 |
* | Unaudited. |
†† | 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. |
18 | MainStay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 13.59 | $ | 13.19 | $ | 13.45 | $ | 11.75 | $ | 10.89 | $ | 12.75 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.03 | 0.06 | 0.11 | 0.08 | 0.13 | 0.26 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.19 | ) | 0.50 | (0.27 | ) | 1.76 | 1.07 | (1.62 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.00 | ‡ | (0.09 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.15 | ) | 0.53 | (0.20 | ) | 1.83 | 1.20 | (1.45 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.04 | ) | (0.13 | ) | (0.06 | ) | (0.13 | ) | (0.34 | ) | (0.41 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 13.40 | $ | 13.59 | $ | 13.19 | $ | 13.45 | $ | 11.75 | $ | 10.89 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment | (1.11 | %)(c) | 4.04 | % | (1.49 | %) | 15.72 | % | 11.45 | % | (11.73 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.49 | % †† | 0.46 | % | 0.79 | % | 0.62 | % | 1.15 | % | 2.16 | % | ||||||||||||||
Net expenses | 1.07 | % †† | 1.08 | % | 1.09 | % | 1.14 | % | 1.18 | % | 1.21 | % | ||||||||||||||
Portfolio turnover rate | 22 | % | 42 | % | 37 | % | 29 | % | 43 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 221,321 | $ | 224,307 | $ | 223,797 | $ | 202,289 | $ | 177,726 | $ | 184,373 |
* | Unaudited. |
†† | 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. Class I shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class R1 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 13.51 | $ | 13.11 | $ | 13.37 | $ | 11.67 | $ | 10.82 | $ | 12.67 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.02 | 0.04 | 0.09 | 0.06 | 0.11 | 0.26 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.19 | ) | 0.50 | (0.27 | ) | 1.76 | 1.07 | (1.62 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.00 | ‡ | (0.09 | ) | |||||||||||||||
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Total from investment operations | (0.16 | ) | 0.51 | (0.22 | ) | 1.81 | 1.18 | (1.45 | ) | |||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.02 | ) | (0.11 | ) | (0.04 | ) | (0.11 | ) | (0.33 | ) | (0.40 | ) | ||||||||||||||
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Net asset value at end of period | $ | 13.33 | $ | 13.51 | $ | 13.11 | $ | 13.37 | $ | 11.67 | $ | 10.82 | ||||||||||||||
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Total investment | (1.16 | %)(c) | 3.95 | % | (1.63 | %) | 15.68 | % | 11.41 | % | (11.89 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.38 | % †† | 0.33 | % | 0.66 | % | 0.49 | % | 1.04 | % | 2.12 | % | ||||||||||||||
Net expenses | 1.17 | % †† | 1.18 | % | 1.19 | % | 1.25 | % | 1.28 | % | 1.31 | % | ||||||||||||||
Portfolio turnover rate | 22 | % | 42 | % | 37 | % | 29 | % | 43 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,683 | $ | 3,032 | $ | 3,597 | $ | 4,003 | $ | 4,677 | $ | 4,760 |
* | Unaudited. |
†† | 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. 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. | 19 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class R2 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 13.54 | $ | 13.14 | $ | 13.40 | $ | 11.70 | $ | 10.84 | $ | 12.69 | ||||||||||||||
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Net investment income (loss) (a) | 0.00 | ‡ | 0.01 | 0.05 | 0.03 | 0.09 | 0.24 | |||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.18 | ) | 0.50 | (0.26 | ) | 1.76 | 1.06 | (1.63 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.00 | ‡ | (0.09 | ) | |||||||||||||||
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Total from investment operations | (0.17 | ) | 0.48 | (0.25 | ) | 1.78 | 1.15 | (1.48 | ) | |||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||||
From net investment income | — | (0.08 | ) | (0.01 | ) | (0.08 | ) | (0.29 | ) | (0.37 | ) | |||||||||||||||
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Net asset value at end of period | $ | 13.37 | $ | 13.54 | $ | 13.14 | $ | 13.40 | $ | 11.70 | $ | 10.84 | ||||||||||||||
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Total investment | (1.26 | %)(c)(d) | 3.73 | % | (1.88 | %) | 15.34 | % | 11.12 | % | (12.09 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.01 | % †† | 0.11 | % | 0.36 | % | 0.26 | % | 0.82 | % | 2.02 | % | ||||||||||||||
Net expenses | 1.42 | % †† | 1.43 | % | 1.44 | % | 1.49 | % | 1.53 | % | 1.55 | % | ||||||||||||||
Portfolio turnover rate | 22 | % | 42 | % | 37 | % | 29 | % | 43 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 870 | $ | 2,313 | $ | 3,509 | $ | 8,487 | $ | 10,545 | $ | 12,176 |
* | Unaudited. |
†† | 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. Class R2 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class R3 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 13.48 | $ | 13.07 | $ | 13.35 | $ | 11.64 | $ | 10.79 | $ | 12.64 | ||||||||||||||
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Net investment income (loss) (a) | (0.01 | ) | (0.02 | ) | 0.02 | (0.01 | ) | 0.06 | 0.24 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.19 | ) | 0.50 | (0.26 | ) | 1.76 | 1.06 | (1.65 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.00 | ‡ | (0.09 | ) | |||||||||||||||
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Total from investment operations | (0.19 | ) | 0.45 | (0.28 | ) | 1.74 | 1.12 | (1.50 | ) | |||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||||
From net investment income | — | (0.04 | ) | — | (0.03 | ) | (0.27 | ) | (0.35 | ) | ||||||||||||||||
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Net asset value at end of period | $ | 13.29 | $ | 13.48 | $ | 13.07 | $ | 13.35 | $ | 11.64 | $ | 10.79 | ||||||||||||||
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Total investment | (1.41 | %)(c) | 3.44 | % | (2.10 | %) | 15.02 | % | 10.82 | % | (12.28 | %) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | (0.13 | %)†† | (0.15 | %) | 0.17 | % | (0.05 | %) | 0.56 | % | 1.98 | % | ||||||||||||||
Net expenses | 1.67 | % †† | 1.68 | % | 1.69 | % | 1.74 | % | 1.78 | % | 1.80 | % | ||||||||||||||
Portfolio turnover rate | 22 | % | 42 | % | 37 | % | 29 | % | 43 | % | 80 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 1,071 | $ | 1,204 | $ | 1,291 | $ | 1,365 | $ | 2,218 | $ | 1,592 |
* | Unaudited. |
†† | 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. Class R3 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
20 | MainStay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay International Equity Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers eight classes of shares. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on September 13, 1994. Class C shares commenced operations on September 1, 1998. Class I, Class R1 and Class R2 shares commenced operations on January 2, 2004. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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, Class R1, Class R2 and Class R3 shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A shares. The eight 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 Class A, Investor Class, Class R2 and Class R3 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 Fund’s investment objective is to seek long-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services – Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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
21 |
Notes to Financial Statements (Unaudited) (continued)
reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Monthly payment information | |
• Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended
April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, there were no securities held by the Fund that were fair valued in such a manner.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close 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 of such securities reported on the local foreign market, the Sub-Committee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated 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, certain 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 valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of April 30, 2016, no foreign equity securities held by the Fund were fair valued in such a manner.
Equity securities and shares of Exchange-Traded Funds (“ETFs”) are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Investments in mutual funds, including money market funds, are valued at their respective 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 in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized
22 | MainStay International Equity Fund |
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. These securities are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured 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.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability on the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized appreciation (depreciation). Taxes related to capital gains realized during the six-month period ended April 30, 2016, if any, are reflected as part
of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations. Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least 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. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, 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. The straight-line method approximates the effective interest method for short-term investments. 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.
(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/or 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 or Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness
23 |
Notes to Financial Statements (Unaudited) (continued)
of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(I) Foreign Currency Transactions. The Fund’s books and records are maintained 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 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.
(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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on invest-
ment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(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 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. The ability of issuers of securities held by the Fund to meet their obligations may be affected by economic and 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 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 Investments, 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer of the Fund. Cornerstone Capital Management Holdings LLC (“Cornerstone Holdings” 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 Cornerstone Holdings, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual
24 | MainStay International Equity Fund |
rate of the Fund’s average daily net assets as follows: 0.89% up to $500 million and 0.85% in excess of $500 million.
During the six-month period ended April 30, 2016, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.89%.
New York Life Investments has voluntarily 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: Investor Class, 1.85%; Class B, 2.60%; and Class C, 2.60%. These voluntary waivers or reimbursements may be discontinued at any time. 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.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $1,423,980.
State Street 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 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, Service and Shareholder 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 Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class 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 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.
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, its affili-
ates, or independent third party service providers are 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. This is in addition to any fees paid under a distribution plan, where applicable.
During the six-month period ended April 30, 2016, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 1,431 | ||
Class R2 | 774 | |||
Class R3 | 519 |
(C) Sales Charges. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $1,389 and $4,250, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $77, $5,428 and $170, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 15,875 | ||
Investor Class | 73,442 | |||
Class B | 18,215 | |||
Class C | 18,668 | |||
Class I | 77,323 | |||
Class R1 | 1,005 | |||
Class R2 | 541 | |||
Class R3 | 365 |
(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. As of April 30, 2016, New York Life and its affiliates beneficially held shares of the Fund with values and percentages of net assets as follows:
Class I | $ | 75,125,963 | 33.9 | % |
25 |
Notes to Financial Statements (Unaudited) (continued)
Note 4–Federal Income Tax
Under the Regulated Investment Company Modernization Act of 2010, the Fund is 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.
As of October 31, 2015, for federal income tax purposes, capital loss carryforwards of $84,367,024 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 Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
2017 2019 | $
| 48,774 35,593 |
| $
| — — |
| ||
Total | $ | 84,367 | $ | — |
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 2,559,821 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the
Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $74,859 and $69,417, respectively.
Note 8–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 552,676 | $ | 7,357,894 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,533 | 20,613 | ||||||
Shares redeemed | (377,826 | ) | (4,986,359 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 176,383 | 2,392,148 | ||||||
Shares converted into Class A (See Note 1) | 41,187 | 542,252 | ||||||
Shares converted from Class A (See Note 1) | (14,793 | ) | (193,636 | ) | ||||
|
| |||||||
Net increase (decrease) | 202,777 | $ | 2,740,764 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 302,518 | $ | 4,092,444 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 23,755 | 309,772 | ||||||
Shares redeemed | (624,933 | ) | (8,392,693 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (298,660 | ) | (3,990,477 | ) | ||||
Shares converted into Class A (See Note 1) | 74,760 | 1,029,344 | ||||||
Shares converted from Class A (See Note 1) | (63,497 | ) | (819,811 | ) | ||||
|
| |||||||
Net increase (decrease) | (287,397 | ) | $ | (3,780,944 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 68,740 | $ | 897,108 | |||||
Shares redeemed | (157,543 | ) | (2,068,263 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (88,803 | ) | (1,171,155 | ) | ||||
Shares converted into Investor Class (See Note 1) | 62,089 | 816,488 | ||||||
Shares converted from Investor Class (See Note 1) | (33,523 | ) | (446,940 | ) | ||||
|
| |||||||
Net increase (decrease) | (60,237 | ) | $ | (801,607 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 195,518 | $ | 2,668,808 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 9,279 | 120,881 | ||||||
Shares redeemed | (400,764 | ) | (5,396,160 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (195,967 | ) | (2,606,471 | ) | ||||
Shares converted into Investor Class (See Note 1) | 176,655 | 2,322,611 | ||||||
Shares converted from Investor Class (See Note 1) | (62,066 | ) | (856,812 | ) | ||||
|
| |||||||
Net increase (decrease) | (81,378 | ) | $ | (1,140,672 | ) | |||
|
|
26 | MainStay International Equity Fund |
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 37,035 | $ | 438,176 | |||||
Shares redeemed | (68,072 | ) | (809,258 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (31,037 | ) | (371,082 | ) | ||||
Shares converted from Class B (See Note 1) | (60,093 | ) | (718,164 | ) | ||||
|
| |||||||
Net increase (decrease) | (91,130 | ) | $ | (1,089,246 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 108,404 | $ | 1,336,817 | |||||
Shares redeemed | (164,147 | ) | (2,014,384 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (55,743 | ) | (677,567 | ) | ||||
Shares converted from Class B (See Note 1) | (138,057 | ) | (1,675,332 | ) | ||||
|
| |||||||
Net increase (decrease) | (193,800 | ) | $ | (2,352,899 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 136,787 | $ | 1,594,192 | |||||
Shares redeemed | (89,670 | ) | (1,071,395 | ) | ||||
|
| |||||||
Net increase (decrease) | 47,117 | $ | 522,797 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 135,870 | $ | 1,677,175 | |||||
Shares redeemed | (161,511 | ) | (1,962,676 | ) | ||||
|
| |||||||
Net increase (decrease) | (25,641 | ) | $ | (285,501 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 1,266,622 | $ | 16,652,374 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 48,254 | 651,423 | ||||||
Shares redeemed | (1,307,346 | ) | (17,425,861 | ) | ||||
|
| |||||||
Net increase (decrease) | 7,530 | $ | (122,064 | ) | ||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 4,094,035 | $ | 54,177,807 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 157,158 | 2,057,192 | ||||||
Shares redeemed | (4,713,469 | ) | (63,115,495 | ) | ||||
|
| |||||||
Net increase (decrease) | (462,276 | ) | $ | (6,880,496 | ) | |||
|
| |||||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 2,548 | $ | 34,238 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 395 | 5,305 | ||||||
Shares redeemed | (26,182 | ) | (349,966 | ) | ||||
|
| |||||||
Net increase (decrease) | (23,239 | ) | $ | (310,423 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 5,528 | $ | 73,763 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,356 | 30,669 | ||||||
Shares redeemed | (57,830 | ) | (764,078 | ) | ||||
|
| |||||||
Net increase (decrease) | (49,946 | ) | $ | (659,646 | ) | |||
|
|
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 8,418 | $ | 110,931 | |||||
Shares redeemed | (114,128 | ) | (1,526,584 | ) | ||||
|
| |||||||
Net increase (decrease) | (105,710 | ) | $ | (1,415,653 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 42,772 | $ | 579,450 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,329 | 17,371 | ||||||
Shares redeemed | (140,321 | ) | (1,905,460 | ) | ||||
|
| |||||||
Net increase (decrease) | (96,220 | ) | $ | (1,308,639 | ) | |||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 10,943 | $ | 140,618 | |||||
Shares redeemed | (19,717 | ) | (268,358 | ) | ||||
|
| |||||||
Net increase (decrease) | (8,774 | )�� | $ | (127,740 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 17,470 | $ | 235,111 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 260 | 3,390 | ||||||
Shares redeemed | (27,157 | ) | (358,868 | ) | ||||
|
| |||||||
Net increase (decrease) | (9,427 | ) | $ | (120,367 | ) | |||
|
|
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
27 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay International Equity Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and Cornerstone Capital Management Holdings LLC (“Cornerstone Holdings”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and Cornerstone Holdings in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and Cornerstone Holdings (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including Cornerstone Holdings as subadvisor to the Fund, and responses from New York Life Investments and Cornerstone Holdings to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Fund’s distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and Cornerstone Holdings; (ii) the investment performance of the Fund, New York Life Investments and Cornerstone Holdings; (iii) the costs of the services provided, and profits realized, by New York Life Investments and Cornerstone Holdings from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and Cornerstone Holdings. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and Cornerstone Holdings
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
28 | MainStay International Equity Fund |
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that Cornerstone Holdings provides to the Fund. The Board evaluated Cornerstone Holdings’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined Cornerstone Holdings’ track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at Cornerstone Holdings, and Cornerstone Holdings’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by Cornerstone Holdings. The Board also reviewed Cornerstone Holdings’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and Cornerstone Holdings’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or Cornerstone Holdings had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and Cornerstone Holdings to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and Cornerstone Holdings
The Board considered the costs of the services provided by New York Life Investments and Cornerstone Holdings under the Agreements and the profits realized by New York Life Investments and its affiliates, including Cornerstone Holdings, due to their relationships with the Fund. Because Cornerstone Holdings is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and Cornerstone Holdings in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and Cornerstone Holdings and profits realized by New York Life Investments and its affiliates, including Cornerstone Holdings, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and Cornerstone Holdings must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and Cornerstone Holdings to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund. The Board recognized, for example, the benefits to Cornerstone Holdings from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to Cornerstone Holdings in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including Cornerstone Holdings, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay
Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to Cornerstone Holdings are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and Cornerstone Holdings on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the
30 | MainStay International Equity Fund |
Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
31 |
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 or proxy voting record 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 International Equity Fund |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1694704 MS164-16 | MSIE10-06/16 (NYLIM) NL010 |
MainStay Common Stock Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 B 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –8.22 –2.88 | %
|
| –7.54 –2.15 | %
|
| 9.47 10.72 | %
|
| 4.98 5.58 | %
|
| 0.99 0.99 | %
| |||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –8.32 –2.99 |
|
| –7.73 –2.36 |
|
| 9.07 10.32 |
|
| 4.62 5.22 |
|
| 1.20 1.20 |
| |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges |
| –8.21 –3.39 |
|
| –7.96 –3.13 |
|
| 9.21 9.49 |
|
| 4.42 4.42 |
|
| 1.95 1.95 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges |
| –4.30 –3.34 |
|
| –4.05 –3.08 |
|
| 9.49 9.49 |
|
| 4.43 4.43 |
|
| 1.95 1.95 |
| |||||||
Class I Shares | No Sales Charge | –2.78 | –1.91 | 10.99 | 5.93 | 0.74 | ||||||||||||||||||
Class R2 Shares4 | No Sales Charge | –2.93 | –2.25 | 10.60 | 5.47 | 1.09 | ||||||||||||||||||
Class R3 Shares5 | No Sales Charge | –3.04 | –2.49 | 10.33 | 5.21 | 1.34 |
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, changes 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 may 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 (if any), 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 would likely have been different. |
4. | Performance figures for Class R2 shares, first offered on December 14, 2007, include the historical performance of Class A shares through April 30, 2016, adjusted for differences in certain fees and expenses. Unadjusted, the performance shown for Class R2 shares would likely have been different. As of April 30, 2016, Class R2 shares had yet to commence investment operations. |
5. | Performance figures for Class R3 shares, first offered on February 29, 2016, include the historical performance of Class A shares through February 28, 2016. Performance for Class R3 shares would likely have been different because of differences in expenses attributable to each share class. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
S&P 500® Index6 | 0.43 | % | 1.21 | % | 11.02 | % | 6.91 | % | ||||||||
Russell 1000® Index7 | 0.22 | 0.34 | 10.81 | 6.99 | ||||||||||||
Average Lipper Multi-Cap Core Fund8 | –1.31 | –3.51 | 8.53 | 5.69 |
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 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 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 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. These funds typically have average characteristics compared to the S&P Super Composite 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 Common Stock Fund |
Cost in Dollars of a $1,000 Investment in MainStay Common Stock Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 971.20 | $ | 4.66 | $ | 1,020.10 | $ | 4.77 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 970.10 | $ | 5.83 | $ | 1,018.90 | $ | 5.97 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 966.10 | $ | 9.48 | $ | 1,015.20 | $ | 9.72 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 966.60 | $ | 9.49 | $ | 1,015.20 | $ | 9.72 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 972.20 | $ | 3.43 | $ | 1,021.40 | $ | 3.52 | ||||||||||
Class R3 Shares2,3 | $ | 1,000.00 | $ | 1,051.50 | $ | 2.22 | $ | 1,006.20 | $ | 2.17 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (0.95% for Class A, 1.19% for Investor Class, 1.94% for Class B and Class C, 0.70% for Class I and 1.30% for Class R3) multiplied by the average account value over the period, divided by 366 and multiplied by 182 days for Class A, Investor Class, Class B, Class C and Class I (to reflect the six-month period) and 61 days for Class R3 to (to reflect the since-inception period). The table above represents the actual expenses incurred during the six-month period. See page 5 for more information on Class R2 shares. |
2. | Expenses paid during the period reflect ongoing costs for the period from inception through April 30, 2016. Had these shares been offered for the full six-month period ended April 30, 2016, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $6.52 for Class R3 and the ending account value would have been $1,018.40 for Class R3. |
3. | The inception date for Class R3 shares was February 29, 2016. |
7 |
Industry Composition as of April 30, 2016 (Unaudited)
Oil, Gas & Consumable Fuels | 6.7 | % | ||
Health Care Providers & Services | 4.6 | |||
Diversified Telecommunication Services | 4.3 | |||
Internet Software & Services | 4.3 | |||
Pharmaceuticals | 4.2 | |||
Banks | 4.1 | |||
Software | 4.1 | |||
Insurance | 3.9 | |||
IT Services | 3.6 | |||
Technology Hardware, Storage & Peripherals | 3.6 | |||
Specialty Retail | 3.3 | |||
Semiconductors & Semiconductor Equipment | 3.2 | |||
Airlines | 2.8 | |||
Aerospace & Defense | 2.6 | |||
Internet & Catalog Retail | 2.6 | |||
Tobacco | 2.6 | |||
Industrial Conglomerates | 2.3 | |||
Media | 2.3 | |||
Real Estate Investment Trusts | 2.3 | |||
Communications Equipment | 2.2 | |||
Food Products | 2.2 | |||
Diversified Financial Services | 2.1 | |||
Textiles, Apparel & Luxury Goods | 2.1 | |||
Hotels, Restaurants & Leisure | 1.9 | |||
Beverages | 1.8 | |||
Household Products | 1.6 | |||
Biotechnology | 1.5 | |||
Chemicals | 1.5 |
Metals & Mining | 1.5 | % | ||
Electronic Equipment, Instruments & Components | 1.3 | |||
Electric Utilities | 1.1 | |||
Exchange-Traded Fund | 1.1 | |||
Food & Staples Retailing | 1.1 | |||
Commercial Services & Supplies | 1.0 | |||
Health Care Equipment & Supplies | 1.0 | |||
Air Freight & Logistics | 0.9 | |||
Household Durables | 0.7 | |||
Leisure Products | 0.7 | |||
Multiline Retail | 0.7 | |||
Auto Components | 0.6 | |||
Life Sciences Tools & Services | 0.6 | |||
Trading Companies & Distributors | 0.6 | |||
Construction & Engineering | 0.5 | |||
Energy Equipment & Services | 0.4 | |||
Multi-Utilities | 0.4 | |||
Capital Markets | 0.3 | |||
Distributors | 0.3 | |||
Machinery | 0.3 | |||
Gas Utilities | 0.2 | |||
Independent Power & Renewable Electricity Producers | 0.2 | |||
Consumer Finance | 0.1 | |||
Containers & Packaging | 0.1 | |||
Professional Services | 0.1 | |||
Other Assets, Less Liabilities | –0.1 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings or issuers held as of April 30, 2016 (Unaudited)
1. | Apple, Inc. |
2. | Microsoft Corp. |
3. | Alphabet, Inc. |
4. | Exxon Mobil Corp. |
5. | Amazon.com, Inc. |
6. | AT&T, Inc. |
7. | JPMorgan Chase & Co. |
8. | Verizon Communications, Inc. |
9. | Berkshire Hathaway, Inc. Class B |
10. | Johnson & Johnson |
8 | MainStay Common Stock Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by Migene Kim, CFA, Andrew Ver Planck, CFA, and Mona Patni of Cornerstone Capital Management Holdings LLC, the Fund’s Subadvisor.
How did MainStay Common Stock Fund perform relative to its benchmarks and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay Common Stock Fund returned –2.88% for Class A shares, –2.99% for Investor Class shares, –3.39% for Class B shares and –3.34% for Class C shares for the six months ended April 30, 2016. Over the same period, the Fund’s Class I shares returned –2.78%, Class R2 shares returned –2.93% and Class R3 shares1 returned –3.04%. For the six months ended April 30, 2016, all share classes underperformed the 0.43% return of the S&P 500® Index,2 which is the Fund’s primary benchmark. Over the same period, all share classes underperformed the 0.22% return of the Russell 1000® Index,2 which is the Fund’s secondary benchmark. For the six months ended April 30, 2016, all share classes underperformed the –1.31% return of the Average Lipper3 Multi-Cap Core Fund. See page 5 for Fund returns with applicable sales charges.
What factors affected the Fund’s relative performance during the reporting period?
Stock selection was the largest driver of the Fund’s underperformance relative to the S&P 500® Index. Allocation effects—being overweight or underweight relative to the benchmark in specific sectors as a result of the Fund’s bottom-up stock-selection process—detracted slightly from relative performance.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
The strongest positive sector contributions to the Fund’s performance relative to the S&P 500® Index came from materials, telecommunication services and health care. (Contributions take weightings and total returns into account.) In each case, stock selection was a positive contributor to performance. The Fund’s performance relative to the S&P 500® Index also benefited from an overweight position in the telecommunication services sector and a slightly underweight position in the health care sector.
The weakest sector contributions to the Fund’s relative performance came from consumer discretionary, industrials and information technology. In each case, stock selection detracted from the Fund’s relative performance. An overweight position relative to the S&P 500® Index in information technology also hurt 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?
During the reporting period, the strongest positive contributor to absolute performance was meat and food producer Tyson Foods, which benefited from strong earnings prompted by growing demand and lower feed prices. This was followed by diversified health care company Johnson & Johnson, which saw strong performance in its pharmaceutical and medical device businesses. Gold and copper producer Newmont Mining was also a positive contributor to the Fund’s absolute performance. The company benefited from recovering commodity prices and effective cost-cutting measures.
On an absolute basis, the Fund’s weakest performer was personal computing and mobile device maker Apple, which faced slowing growth trends in its handsets. Pharmaceutical company Gilead Sciences reported disappointing sales because of increasing competition and was another weak performer. Diversified financial services company Citigroup also detracted from the Fund’s performance during the reporting period, as banking and trading revenues remained under pressure.
Did the Fund make any significant purchases or sales during the reporting period?
The Fund established new positions in air carrier Southwest Airlines and global provider of air and ground shipping services FedEx. The Fund’s investment process viewed both companies as attractive because of improving investor sentiment and attractive cash flows.
The Fund exited positions in defense contractor General Dynamics and tobacco producer Reynolds American. The Fund’s investment process viewed both companies as unattractive because of weak valuations and deteriorating earnings trends.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund modestly increased its weightings relative to the S&P 500® Index in the telecommunication services and energy sectors. Over the same period, the Fund modestly reduced its weightings relative to the benchmark in financials and health care.
1. | See footnote on page 5 for more information on Class R2 and Class R3 shares. |
2. | See footnote on page 6 for more information on this index. |
3. | See footnote on page 6 for more information on Lipper Inc. |
9 |
How was the Fund positioned at the end of the reporting period?
As of April 30, 2016, the Fund’s most substantially overweight sectors relative to the S&P 500® Index were information technology and consumer discretionary. As of the same date, the Fund held modestly underweight positions relative to the Index in the financials and health care 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 forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay Common Stock Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Shares | Value | |||||||
Common Stocks 99.0%† | ||||||||
Aerospace & Defense 2.6% | ||||||||
Boeing Co. (The) | 11,017 | $ | 1,485,091 | |||||
Huntington Ingalls Industries, Inc. | 8,774 | 1,270,212 | ||||||
L-3 Communications Holdings, Inc. | 11,094 | 1,459,194 | ||||||
Orbital ATK, Inc. | 8,768 | 762,816 | ||||||
|
| |||||||
4,977,313 | ||||||||
|
| |||||||
Air Freight & Logistics 0.9% | ||||||||
C.H. Robinson Worldwide, Inc. | 3,608 | 256,060 | ||||||
FedEx Corp. | 9,135 | 1,508,280 | ||||||
|
| |||||||
1,764,340 | ||||||||
|
| |||||||
Airlines 2.8% | ||||||||
Alaska Air Group, Inc. | 1,935 | 136,282 | ||||||
American Airlines Group, Inc. | 2,104 | 72,988 | ||||||
Delta Air Lines, Inc. | 32,873 | 1,369,818 | ||||||
JetBlue Airways Corp. (a) | 60,476 | 1,196,820 | ||||||
Southwest Airlines Co. | 34,029 | 1,518,034 | ||||||
United Continental Holdings, Inc. (a) | 21,197 | 971,034 | ||||||
|
| |||||||
5,264,976 | ||||||||
|
| |||||||
Auto Components 0.6% | ||||||||
Goodyear Tire & Rubber Co. (The) | 40,490 | 1,172,995 | ||||||
|
| |||||||
Banks 4.1% | ||||||||
Bank of America Corp. | 136,500 | 1,987,440 | ||||||
Citigroup, Inc. | 20,048 | 927,822 | ||||||
¨JPMorgan Chase & Co. | 59,054 | 3,732,213 | ||||||
Wells Fargo & Co. | 23,630 | 1,181,027 | ||||||
|
| |||||||
7,828,502 | ||||||||
|
| |||||||
Beverages 1.8% | ||||||||
Coca-Cola Co. (The) | 14,185 | 635,488 | ||||||
Dr. Pepper Snapple Group, Inc. | 944 | 85,819 | ||||||
PepsiCo., Inc. | 27,263 | 2,806,999 | ||||||
|
| |||||||
3,528,306 | ||||||||
|
| |||||||
Biotechnology 1.5% | ||||||||
Amgen, Inc. | 2,520 | 398,916 | ||||||
Baxalta, Inc. | 6,651 | 279,009 | ||||||
Gilead Sciences, Inc. | 24,580 | 2,168,202 | ||||||
|
| |||||||
2,846,127 | ||||||||
|
| |||||||
Capital Markets 0.3% | ||||||||
Bank of New York Mellon Corp. (The) | 9,973 | 401,314 | ||||||
T. Rowe Price Group, Inc. | 1,125 | 84,701 | ||||||
|
| |||||||
486,015 | ||||||||
|
| |||||||
Chemicals 1.5% | ||||||||
Dow Chemical Co. (The) | 11,772 | 619,325 | ||||||
E.I. du Pont de Nemours & Co. | 9,182 | 605,186 | ||||||
Eastman Chemical Co. | 2,956 | 225,779 |
Shares | Value | |||||||
Chemicals (continued) | ||||||||
LyondellBasell Industries N.V. Class A | 17,650 | $ | 1,459,125 | |||||
|
| |||||||
2,909,415 | ||||||||
|
| |||||||
Commercial Services & Supplies 1.0% | ||||||||
Pitney Bowes, Inc. | 56,531 | 1,185,455 | ||||||
R.R. Donnelley & Sons Co. | 40,286 | 700,977 | ||||||
Waste Management, Inc. | 385 | 22,634 | ||||||
|
| |||||||
1,909,066 | ||||||||
|
| |||||||
Communications Equipment 2.2% | ||||||||
Cisco Systems, Inc. | 83,528 | 2,296,185 | ||||||
F5 Networks, Inc. (a) | 271 | 28,387 | ||||||
Juniper Networks, Inc. | 23,235 | 543,699 | ||||||
Motorola Solutions, Inc. | 18,309 | 1,376,654 | ||||||
|
| |||||||
4,244,925 | ||||||||
|
| |||||||
Construction & Engineering 0.5% | ||||||||
Quanta Services, Inc. (a) | 42,929 | 1,018,276 | ||||||
|
| |||||||
Consumer Finance 0.1% | ||||||||
Synchrony Financial (a) | 8,792 | 268,771 | ||||||
|
| |||||||
Containers & Packaging 0.1% | ||||||||
Avery Dennison Corp. | 561 | 40,734 | ||||||
Sealed Air Corp. | 1,800 | 85,248 | ||||||
|
| |||||||
125,982 | ||||||||
|
| |||||||
Distributors 0.3% | ||||||||
Genuine Parts Co. | 5,868 | 563,152 | ||||||
|
| |||||||
Diversified Financial Services 2.1% | ||||||||
¨Berkshire Hathaway, Inc. Class B (a) | 21,950 | 3,193,286 | ||||||
Nasdaq, Inc. | 13,371 | 825,124 | ||||||
|
| |||||||
4,018,410 | ||||||||
|
| |||||||
Diversified Telecommunication Services 4.3% |
| |||||||
¨AT&T, Inc. | 96,432 | 3,743,490 | ||||||
CenturyLink, Inc. | 34,944 | 1,081,517 | ||||||
Frontier Communications Corp. | 12,373 | 68,794 | ||||||
¨Verizon Communications, Inc. | 66,265 | 3,375,539 | ||||||
|
| |||||||
8,269,340 | ||||||||
|
| |||||||
Electric Utilities 1.1% | ||||||||
Duke Energy Corp. | 125 | 9,847 | ||||||
Edison International | 11,436 | 808,640 | ||||||
Entergy Corp. | 5,701 | 428,601 | ||||||
Exelon Corp. | 26,113 | 916,305 | ||||||
NextEra Energy, Inc. | 38 | 4,468 | ||||||
|
| |||||||
2,167,861 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components 1.3% |
| |||||||
Arrow Electronics, Inc. (a) | 19,194 | 1,191,947 | ||||||
Corning, Inc. | 72,009 | 1,344,408 | ||||||
|
| |||||||
2,536,355 | ||||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2016. 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Energy Equipment & Services 0.4% | ||||||||
FMC Technologies, Inc. (a) | 8,055 | $ | 245,597 | |||||
Schlumberger, Ltd. | 6,002 | 482,201 | ||||||
|
| |||||||
727,798 | ||||||||
|
| |||||||
Food & Staples Retailing 1.1% | ||||||||
Kroger Co. (The) | 43,302 | 1,532,458 | ||||||
Wal-Mart Stores, Inc. | 9,343 | 624,766 | ||||||
|
| |||||||
2,157,224 | ||||||||
|
| |||||||
Food Products 2.2% | ||||||||
Campbell Soup Co. | 3,019 | 186,303 | ||||||
Hormel Foods Corp. | 19,312 | 744,478 | ||||||
J.M. Smucker Co. (The) | 4,947 | 628,170 | ||||||
Post Holdings, Inc. (a) | 17,285 | 1,241,754 | ||||||
Tyson Foods, Inc. Class A | 21,664 | 1,425,924 | ||||||
|
| |||||||
4,226,629 | ||||||||
|
| |||||||
Gas Utilities 0.2% | ||||||||
UGI Corp. | 9,633 | 387,632 | ||||||
|
| |||||||
Health Care Equipment & Supplies 1.0% | ||||||||
Baxter International, Inc. | 5,774 | 255,326 | ||||||
C.R. Bard, Inc. | 3,190 | 676,823 | ||||||
Hologic, Inc. (a) | 27,902 | 937,228 | ||||||
|
| |||||||
1,869,377 | ||||||||
|
| |||||||
Health Care Providers & Services 4.6% | ||||||||
Aetna, Inc. | 1,635 | 183,561 | ||||||
AmerisourceBergen Corp. | 6,306 | 536,641 | ||||||
Anthem, Inc. | 10,499 | 1,477,944 | ||||||
Cardinal Health, Inc. | 9,327 | 731,796 | ||||||
Centene Corp. (a) | 11,480 | 711,301 | ||||||
Express Scripts Holding Co. (a) | 6,812 | 502,249 | ||||||
HCA Holdings, Inc. (a) | 19,247 | 1,551,693 | ||||||
UnitedHealth Group, Inc. | 14,614 | 1,924,372 | ||||||
WellCare Health Plans, Inc. (a) | 13,633 | 1,226,834 | ||||||
|
| |||||||
8,846,391 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure 1.9% | ||||||||
Carnival Corp. | 7,943 | 389,604 | ||||||
Cracker Barrel Old Country Store, Inc. | 579 | 84,772 | ||||||
McDonald’s Corp. | 17,229 | 2,179,296 | ||||||
Starbucks Corp. | 15,571 | 875,557 | ||||||
|
| |||||||
3,529,229 | ||||||||
|
| |||||||
Household Durables 0.7% | ||||||||
D.R. Horton, Inc. | 14,706 | 442,062 | ||||||
Leggett & Platt, Inc. | 833 | 41,059 | ||||||
Whirlpool Corp. | 4,508 | 785,023 | ||||||
|
| |||||||
1,268,144 | ||||||||
|
| |||||||
Household Products 1.6% | ||||||||
Procter & Gamble Co. (The) | 37,704 | 3,020,845 | ||||||
|
|
Shares | Value | |||||||
Independent Power & Renewable Electricity Producers 0.2% |
| |||||||
AES Corp. | 31,464 | $ | 351,138 | |||||
|
| |||||||
Industrial Conglomerates 2.3% | ||||||||
3M Co. | 6,163 | 1,031,563 | ||||||
Carlisle Cos., Inc. | 2,800 | 285,320 | ||||||
General Electric Co. | 98,635 | 3,033,026 | ||||||
|
| |||||||
4,349,909 | ||||||||
|
| |||||||
Insurance 3.9% | ||||||||
Aflac, Inc. | 20,410 | 1,407,678 | ||||||
Allstate Corp. (The) | 18,059 | 1,174,738 | ||||||
American International Group, Inc. | 22,253 | 1,242,163 | ||||||
Hartford Financial Services Group, Inc. (The) | 15,293 | 678,703 | ||||||
Lincoln National Corp. | 1,274 | 55,355 | ||||||
MetLife, Inc. | 7,724 | 348,352 | ||||||
Progressive Corp. (The) | 19,062 | 621,421 | ||||||
Prudential Financial, Inc. | 5,461 | 423,992 | ||||||
Travelers Cos., Inc. (The) | 13,800 | 1,516,620 | ||||||
|
| |||||||
7,469,022 | ||||||||
|
| |||||||
Internet & Catalog Retail 2.6% | ||||||||
¨Amazon.com, Inc. (a) | 6,122 | 4,038,010 | ||||||
Expedia, Inc. | 5,907 | 683,853 | ||||||
Netflix, Inc. (a) | 3,359 | 302,411 | ||||||
|
| |||||||
5,024,274 | ||||||||
|
| |||||||
Internet Software & Services 4.3% | ||||||||
¨Alphabet, Inc. | ||||||||
Class A (a) | 3,068 | 2,171,776 | ||||||
Class C (a) | 3,122 | 2,163,577 | ||||||
eBay, Inc. (a) | 11,504 | 281,043 | ||||||
Facebook, Inc. Class A (a) | 23,988 | 2,820,509 | ||||||
VeriSign, Inc. (a) | 8,024 | 693,273 | ||||||
|
| |||||||
8,130,178 | ||||||||
|
| |||||||
IT Services 3.6% | ||||||||
Alliance Data Systems Corp. (a) | 1,642 | 333,835 | ||||||
Fiserv, Inc. (a) | 585 | 57,166 | ||||||
International Business Machines Corp. | 13,458 | 1,964,061 | ||||||
Leidos Holdings, Inc. | 874 | 43,359 | ||||||
MasterCard, Inc. Class A | 10,353 | 1,004,138 | ||||||
PayPal Holdings, Inc. (a) | 11,674 | 457,387 | ||||||
Teradata Corp. (a) | 25,553 | 646,491 | ||||||
Visa, Inc. Class A | 20,321 | 1,569,594 | ||||||
Western Union Co. (The) | 5,809 | 116,180 | ||||||
Xerox Corp. | 66,327 | 636,739 | ||||||
|
| |||||||
6,828,950 | ||||||||
|
| |||||||
Leisure Products 0.7% | ||||||||
Mattel, Inc. | 40,573 | 1,261,415 | ||||||
|
| |||||||
Life Sciences Tools & Services 0.6% | ||||||||
Charles River Laboratories International, Inc. (a) | 14,486 | 1,148,305 | ||||||
|
|
12 | MainStay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Machinery 0.3% | ||||||||
AGCO Corp. | 9,677 | $ | 517,429 | |||||
|
| |||||||
Media 2.3% | ||||||||
Comcast Corp. Class A | 43,408 | 2,637,470 | ||||||
Omnicom Group, Inc. | 17,447 | 1,447,578 | ||||||
Walt Disney Co. (The) | 3,598 | 371,529 | ||||||
|
| |||||||
4,456,577 | ||||||||
|
| |||||||
Metals & Mining 1.5% | ||||||||
Newmont Mining Corp. | 27,256 | 953,142 | ||||||
Nucor Corp. | 10,130 | 504,271 | ||||||
Reliance Steel & Aluminum Co. | 4,616 | 341,446 | ||||||
Steel Dynamics, Inc. | 41,548 | 1,047,425 | ||||||
|
| |||||||
2,846,284 | ||||||||
|
| |||||||
Multi-Utilities 0.4% | ||||||||
Ameren Corp. | 4,442 | 213,216 | ||||||
CenterPoint Energy, Inc. | 150 | 3,218 | ||||||
CMS Energy Corp. | 18 | 732 | ||||||
Consolidated Edison, Inc. | 1,477 | 110,184 | ||||||
MDU Resources Group, Inc. | 5,884 | 118,033 | ||||||
Public Service Enterprise Group, Inc. | 5,781 | 266,678 | ||||||
|
| |||||||
712,061 | ||||||||
|
| |||||||
Multiline Retail 0.7% | ||||||||
J.C. Penney Co., Inc. (a) | 20,251 | 187,929 | ||||||
Kohl’s Corp. | 5,155 | 228,367 | ||||||
Target Corp. | 12,109 | 962,665 | ||||||
|
| |||||||
1,378,961 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels 6.7% | ||||||||
Anadarko Petroleum Corp. | 2,945 | 155,378 | ||||||
Apache Corp. | 11,453 | 623,043 | ||||||
Cabot Oil & Gas Corp. | 673 | 15,748 | ||||||
Chesapeake Energy Corp. (a) | 40,830 | 280,502 | ||||||
Chevron Corp. | 26,829 | 2,741,387 | ||||||
Cimarex Energy Co. | 155 | 16,877 | ||||||
Concho Resources, Inc. (a) | 149 | 17,309 | ||||||
ConocoPhillips | 21,599 | 1,032,216 | ||||||
Devon Energy Corp. | 7,960 | 276,053 | ||||||
Energen Corp. | 3,206 | 136,223 | ||||||
EOG Resources, Inc. | 1,623 | 134,092 | ||||||
EQT Corp. | 247 | 17,315 | ||||||
¨Exxon Mobil Corp. | 47,197 | 4,172,215 | ||||||
Hess Corp. | 303 | 18,065 | ||||||
Marathon Oil Corp. | 10,826 | 152,539 | ||||||
Murphy Oil Corp. | 4,753 | 169,872 | ||||||
Newfield Exploration Co. (a) | 12,551 | 454,974 | ||||||
Noble Energy, Inc. | 447 | 16,141 | ||||||
Pioneer Natural Resources Co. | 111 | 18,437 | ||||||
Range Resources Corp. | 3,921 | 172,955 |
Shares | Value | |||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||
Southwestern Energy Co. (a) | 14,417 | $ | 193,620 | |||||
Tesoro Corp. | 7,954 | 633,854 | ||||||
Valero Energy Corp. | 14,143 | 832,599 | ||||||
World Fuel Services Corp. | 11,636 | 543,750 | ||||||
|
| |||||||
12,825,164 | ||||||||
|
| |||||||
Pharmaceuticals 4.2% | ||||||||
Allergan PLC (a) | 2,127 | 460,623 | ||||||
Bristol-Myers Squibb Co. | 4,156 | 299,980 | ||||||
Eli Lilly & Co. | 1,041 | 78,627 | ||||||
¨Johnson & Johnson | 27,589 | 3,092,175 | ||||||
Mallinckrodt PLC (a) | 5,846 | 365,492 | ||||||
Merck & Co., Inc. | 29,351 | 1,609,609 | ||||||
Mylan N.V. (a) | 15,380 | 641,500 | ||||||
Pfizer, Inc. | 46,478 | 1,520,295 | ||||||
|
| |||||||
8,068,301 | ||||||||
|
| |||||||
Professional Services 0.1% | ||||||||
ManpowerGroup, Inc. | 2,652 | 204,284 | ||||||
|
| |||||||
Real Estate Investment Trusts 2.3% | ||||||||
American Tower Corp. | 290 | 30,415 | ||||||
Crown Castle International Corp. | 6,875 | 597,300 | ||||||
Equinix, Inc. | 1,716 | 566,881 | ||||||
Host Hotels & Resorts, Inc. | 44,273 | 700,399 | ||||||
Iron Mountain, Inc. | 13,451 | 491,365 | ||||||
Lamar Advertising Co. Class A | 13,384 | 830,343 | ||||||
Public Storage | 2,472 | 605,170 | ||||||
Simon Property Group, Inc. | 2,005 | 403,346 | ||||||
Ventas, Inc. | 3,514 | 218,290 | ||||||
Weyerhaeuser Co. | 1,075 | 34,529 | ||||||
|
| |||||||
4,478,038 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 3.2% |
| |||||||
Intel Corp. | 88,453 | 2,678,357 | ||||||
Lam Research Corp. | 10,421 | 796,165 | ||||||
Micron Technology, Inc. (a) | 33,568 | 360,856 | ||||||
NVIDIA Corp. | 40,853 | 1,451,507 | ||||||
Teradyne, Inc. | 43,741 | 827,142 | ||||||
Texas Instruments, Inc. | 657 | 37,475 | ||||||
|
| |||||||
6,151,502 | ||||||||
|
| |||||||
Software 4.1% | ||||||||
Activision Blizzard, Inc. | 41,652 | 1,435,744 | ||||||
Citrix Systems, Inc. (a) | 17,202 | 1,407,812 | ||||||
¨Microsoft Corp. | 95,710 | 4,773,058 | ||||||
Oracle Corp. | 3,206 | 127,791 | ||||||
|
| |||||||
7,744,405 | ||||||||
|
| |||||||
Specialty Retail 3.3% | ||||||||
AutoZone, Inc. (a) | 159 | 121,672 | ||||||
Best Buy Co., Inc. | 22,063 | 707,781 | ||||||
GameStop Corp. Class A | 20,534 | 673,515 | ||||||
Gap, Inc. (The) | 6,781 | 157,184 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Specialty Retail (continued) | ||||||||
Home Depot, Inc. (The) | 11,682 | $ | 1,564,103 | |||||
Lowe’s Cos., Inc. | 24,367 | 1,852,379 | ||||||
Signet Jewelers, Ltd. | 843 | 91,516 | ||||||
Staples, Inc. | 63,313 | 645,793 | ||||||
TJX Cos., Inc. (The) | 901 | 68,314 | ||||||
Urban Outfitters, Inc. (a) | 15,826 | 479,844 | ||||||
|
| |||||||
6,362,101 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals 3.6% |
| |||||||
¨Apple, Inc. | 68,008 | 6,375,070 | ||||||
Hewlett Packard Enterprise Co. | 18,502 | 308,243 | ||||||
HP, Inc. | 18,554 | 227,658 | ||||||
|
| |||||||
6,910,971 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 2.1% | ||||||||
Coach, Inc. | 9,245 | 372,296 | ||||||
Michael Kors Holdings, Ltd. (a) | 24,531 | 1,267,272 | ||||||
NIKE, Inc. Class B | 14,188 | 836,241 | ||||||
PVH Corp. | 14,251 | 1,362,396 | ||||||
Ralph Lauren Corp. | 311 | 28,988 | ||||||
Under Armour, Inc. | ||||||||
Class A (a) | 1,883 | 82,739 | ||||||
Class C (a) | 1,904 | 77,683 | ||||||
|
| |||||||
4,027,615 | ||||||||
|
| |||||||
Tobacco 2.6% | ||||||||
Altria Group, Inc. | 35,428 | 2,221,690 | ||||||
Philip Morris International, Inc. | 28,668 | 2,812,904 | ||||||
|
| |||||||
5,034,594 | ||||||||
|
|
Shares | Value | |||||||
Trading Companies & Distributors 0.6% | ||||||||
MSC Industrial Direct Co. Class A | 8,339 | $ | 646,273 | |||||
United Rentals, Inc. (a) | 6,079 | 406,867 | ||||||
|
| |||||||
1,053,140 | ||||||||
|
| |||||||
Total Common Stocks |
| 189,268,014 | ||||||
|
| |||||||
Exchange-Traded Fund 1.1% (b) | ||||||||
SPDR S&P 500 ETF Trust | 10,490 | 2,164,087 | ||||||
|
| |||||||
Total Exchange-Traded Fund |
| 2,164,087 | ||||||
|
| |||||||
Total Investments | 100.1 | % | 191,432,101 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (179,143 | ) | ||||
Net Assets | 100.0 | % | $ | 191,252,958 |
(a) | Non-income producing security. |
(b) | Exchange-Traded Fund—An investment vehicle that represents a basket of securities that is traded on an exchange. |
(c) | As of April 30, 2016, cost was $182,367,160 for federal income tax purposes and net unrealized appreciation was as follows: |
Gross unrealized appreciation | $ | 14,406,661 | ||
Gross unrealized depreciation | (5,341,720 | ) | ||
|
| |||
Net unrealized appreciation | $ | 9,064,941 | ||
|
|
The following abbreviations are used in the preceding pages:
ETF—Exchange-Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 189,268,014 | $ | — | $ | — | $ | 189,268,014 | ||||||||
Exchange-Traded Fund | 2,164,087 | — | — | 2,164,087 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 191,432,101 | $ | — | $ | — | $ | 191,432,101 | ||||||||
|
|
|
|
|
|
|
|
(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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
14 | MainStay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value (identified cost $181,332,732) | $ | 191,432,101 | ||
Receivables: | ||||
Investment securities sold | 1,546,098 | |||
Dividends | 177,058 | |||
Fund shares sold | 65,712 | |||
Other assets | 56,770 | |||
|
| |||
Total assets | 193,277,739 | |||
|
| |||
Liabilities | ||||
Due to custodian | 118,868 | |||
Payables: | ||||
Investment securities purchased | 1,406,477 | |||
Fund shares redeemed | 292,244 | |||
Manager (See Note 3) | 88,152 | |||
NYLIFE Distributors (See Note 3) | 39,172 | |||
Transfer agent (See Note 3) | 34,720 | |||
Professional fees | 26,920 | |||
Shareholder communication | 10,206 | |||
Custodian | 6,722 | |||
Trustees | 197 | |||
Accrued expenses | 1,103 | |||
|
| |||
Total liabilities | 2,024,781 | |||
|
| |||
Net assets | $ | 191,252,958 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 99,668 | ||
Additional paid-in capital | 216,280,916 | |||
|
| |||
216,380,584 | ||||
Undistributed net investment income | 826,462 | |||
Accumulated net realized gain (loss) on investments | (36,053,457 | ) | ||
Net unrealized appreciation (depreciation) on investments | 10,099,369 | |||
|
| |||
Net assets | $ | 191,252,958 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 52,814,396 | ||
|
| |||
Shares of beneficial interest outstanding | 2,722,163 | |||
|
| |||
Net asset value per share outstanding | $ | 19.40 | ||
Maximum sales charge (5.50% of offering price) | 1.13 | |||
|
| |||
Maximum offering price per share outstanding | $ | 20.53 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 22,192,584 | ||
|
| |||
Shares of beneficial interest outstanding | 1,143,623 | |||
|
| |||
Net asset value per share outstanding | $ | 19.41 | ||
Maximum sales charge (5.50% of offering price) | 1.13 | |||
|
| |||
Maximum offering price per share outstanding | $ | 20.54 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 6,566,868 | ||
|
| |||
Shares of beneficial interest outstanding | 368,211 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.83 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 20,760,838 | ||
|
| |||
Shares of beneficial interest outstanding | 1,164,656 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.83 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 88,891,855 | ||
|
| |||
Shares of beneficial interest outstanding | 4,566,766 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.46 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 26,417 | ||
|
| |||
Shares of beneficial interest outstanding | 1,363 | |||
|
| |||
Net asset value and offering price per share outstanding (a) | $ | 19.39 | ||
|
|
(a) | The difference between the recalculated and stated NAV was caused by rounding. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends | $ | 2,217,903 | ||
|
| |||
Expenses | ||||
Manager (See Note 3) | 518,520 | |||
Distribution/Service—Class A (See Note 3) | 61,465 | |||
Distribution/Service—Investor Class (See Note 3) | 27,282 | |||
Distribution/Service—Class B (See Note 3) | 32,477 | |||
Distribution/Service—Class C (See Note 3) | 116,032 | |||
Distribution/Service—Class R3 (See Note 3) | 22 | |||
Transfer agent (See Note 3) | 98,925 | |||
Registration | 45,159 | |||
Professional fees | 29,334 | |||
Shareholder communication | 12,445 | |||
Custodian | 9,577 | |||
Trustees | 2,231 | |||
Shareholder service (See Note 3) | 4 | |||
Miscellaneous | 6,661 | |||
|
| |||
Total expenses | 960,134 | |||
|
| |||
Net investment income (loss) | 1,257,769 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | (1,395,165 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (5,503,293 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | (6,898,458 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (5,640,689 | ) | |
|
|
16 | MainStay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,257,769 | $ | 1,887,006 | ||||
Net realized gain (loss) on investments | (1,395,165 | ) | 10,462,143 | |||||
Net change in unrealized appreciation (depreciation) on investments | (5,503,293 | ) | (2,884,385 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (5,640,689 | ) | 9,464,764 | |||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (546,900 | ) | (317,306 | ) | ||||
Investor Class | (202,195 | ) | (124,211 | ) | ||||
Class B | (12,079 | ) | (14,009 | ) | ||||
Class C | (44,949 | ) | (42,750 | ) | ||||
Class I | (1,194,013 | ) | (951,731 | ) | ||||
|
| |||||||
Total dividends to shareholders | (2,000,136 | ) | (1,450,007 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 34,899,890 | 67,834,602 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 1,936,763 | 1,415,184 | ||||||
Cost of shares redeemed | (38,019,188 | ) | (64,302,117 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (1,182,535 | ) | 4,947,669 | |||||
|
| |||||||
Net increase (decrease) in net assets | (8,823,360 | ) | 12,962,426 | |||||
Net Assets | ||||||||
Beginning of period | 200,076,318 | 187,113,892 | ||||||
|
| |||||||
End of period | $ | 191,252,958 | $ | 200,076,318 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 826,462 | $ | 1,568,829 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 20.20 | $ | 19.39 | $ | 16.59 | $ | 12.90 | $ | 11.34 | $ | 10.79 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.13 | 0.20 | 0.18 | 0.16 | 0.15 | 0.13 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.71 | ) | 0.76 | 2.83 | 3.71 | 1.60 | 0.53 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.58 | ) | 0.96 | 3.01 | 3.87 | 1.75 | 0.66 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.22 | ) | (0.15 | ) | (0.21 | ) | (0.18 | ) | (0.19 | ) | (0.11 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 19.40 | $ | 20.20 | $ | 19.39 | $ | 16.59 | $ | 12.90 | $ | 11.34 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | (2.88 | %)(c) | 4.95 | % | 18.30 | % | 30.35 | % | 15.64 | % | 6.10 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.35 | % †† | 1.01 | % | 0.98 | % | 1.11 | % | 1.22 | % | 1.12 | % | ||||||||||||||
Net expenses | 0.95 | % †† | 0.96 | % | 1.00 | % | 1.05 | % | 1.06 | % | 0.97 | % | ||||||||||||||
Portfolio turnover rate | 87 | % | 158 | % | 165 | % | 150 | % | 182 | % | 139 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 52,814 | $ | 52,985 | $ | 34,139 | $ | 19,011 | $ | 12,402 | $ | 10,662 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 20.19 | $ | 19.38 | $ | 16.58 | $ | 12.89 | $ | 11.32 | $ | 10.77 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.16 | 0.13 | 0.10 | 0.09 | 0.06 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.71 | ) | 0.76 | 2.82 | 3.70 | 1.61 | 0.53 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.60 | ) | 0.92 | 2.95 | 3.80 | 1.70 | 0.59 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.11 | ) | (0.15 | ) | (0.11 | ) | (0.13 | ) | (0.04 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 19.41 | $ | 20.19 | $ | 19.38 | $ | 16.58 | $ | 12.89 | $ | 11.32 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | (2.99 | %)(c) | 4.77 | % | 17.94 | % | 29.75 | % | 15.15 | % | 5.47 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.18 | % †† | 0.82 | % | 0.71 | % | 0.72 | % | 0.72 | % | 0.56 | % | ||||||||||||||
Net expenses | 1.19 | % †† | 1.17 | % | 1.28 | % | 1.46 | % | 1.56 | % | 1.52 | % | ||||||||||||||
Portfolio turnover rate | 87 | % | 158 | % | 165 | % | 150 | % | 182 | % | 139 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 22,193 | $ | 22,939 | $ | 20,856 | $ | 18,436 | $ | 15,093 | $ | 13,917 |
* | Unaudited. |
†† | 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. |
18 | MainStay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 18.49 | $ | 17.81 | $ | 15.27 | $ | 11.87 | $ | 10.43 | $ | 9.96 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.04 | 0.02 | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.02 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.67 | ) | 0.69 | 2.59 | 3.42 | 1.48 | 0.49 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.63 | ) | 0.71 | 2.59 | 3.42 | 1.48 | 0.47 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.04 | ) | (0.00 | )‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 17.83 | $ | 18.49 | $ | 17.81 | $ | 15.27 | $ | 11.87 | $ | 10.43 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | (3.39 | %)(c) | 4.01 | % | 17.00 | % | 28.87 | % | 14.23 | % | 4.75 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.44 | % †† | 0.09 | % | (0.03 | %) | (0.03 | %) | (0.02 | %) | (0.17 | %) | ||||||||||||||
Net expenses | 1.94 | % †† | 1.92 | % | 2.03 | % | 2.21 | % | 2.31 | % | 2.27 | % | ||||||||||||||
Portfolio turnover rate | 87 | % | 158 | % | 165 | % | 150 | % | 182 | % | 139 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 6,567 | $ | 6,816 | $ | 7,240 | $ | 6,760 | $ | 5,836 | $ | 6,762 |
* | Unaudited. |
†† | 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. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 18.48 | $ | 17.80 | $ | 15.26 | $ | 11.87 | $ | 10.43 | $ | 9.96 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net investment income (loss) (a) | 0.04 | 0.01 | (0.02 | ) | (0.01 | ) | (0.00 | )‡ | (0.02 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.66 | ) | 0.70 | 2.61 | 3.42 | 1.48 | 0.49 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total from investment operations | (0.62 | ) | 0.71 | 2.59 | 3.41 | 1.48 | 0.47 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.03 | ) | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.04 | ) | (0.00 | )‡ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net asset value at end of period | $ | 17.83 | $ | 18.48 | $ | 17.80 | $ | 15.26 | $ | 11.87 | $ | 10.43 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total investment return (b) | (3.34 | %)(c) | 4.01 | % | 17.01 | % | 28.78 | % | 14.23 | % | 4.75 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 0.45 | % †† | 0.06 | % | (0.10 | %) | (0.10 | %) | (0.02 | %) | (0.18 | %) | ||||||||||||||
Net expenses | 1.94 | % †† | 1.92 | % | 2.03 | % | 2.21 | % | 2.31 | % | 2.27 | % | ||||||||||||||
Portfolio turnover rate | 87 | % | 158 | % | 165 | % | 150 | % | 182 | % | 139 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 20,761 | $ | 25,775 | $ | 16,536 | $ | 3,441 | $ | 1,575 | $ | 1,221 |
* | Unaudited. |
†† | 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. | 19 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
Net asset value at beginning of period | $ | 20.29 | $ | 19.45 | $ | 16.64 | $ | 12.94 | $ | 11.38 | $ | 10.82 | ||||||||||||||
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Net investment income (loss) (a) | 0.16 | 0.26 | 0.22 | 0.20 | 0.18 | 0.16 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.72 | ) | 0.76 | 2.83 | 3.71 | 1.60 | 0.53 | |||||||||||||||||||
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Total from investment operations | (0.56 | ) | 1.02 | 3.05 | 3.91 | 1.78 | 0.69 | |||||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||||
From net investment income | (0.27 | ) | (0.18 | ) | (0.24 | ) | (0.21 | ) | (0.22 | ) | (0.13 | ) | ||||||||||||||
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Net asset value at end of period | $ | 19.46 | $ | 20.29 | $ | 19.45 | $ | 16.64 | $ | 12.94 | $ | 11.38 | ||||||||||||||
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Total investment return (b) | (2.78 | %)(c) | 5.26 | % | 18.55 | % | 30.65 | % | 15.89 | % | 6.43 | % | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||
Net investment income (loss) | 1.66 | % †† | 1.30 | % | 1.24 | % | 1.40 | % | 1.48 | % | 1.39 | % | ||||||||||||||
Net expenses | 0.70 | % †† | 0.71 | % | 0.75 | % | 0.80 | % | 0.81 | % | 0.72 | % | ||||||||||||||
Portfolio turnover rate | 87 | % | 158 | % | 165 | % | 150 | % | 182 | % | 139 | % | ||||||||||||||
Net assets at end of period (in 000’s) | $ | 88,892 | $ | 91,561 | $ | 108,343 | $ | 77,476 | $ | 75,985 | $ | 112,148 |
* | Unaudited. |
†† | 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. |
February 29, 2016** through April 30, | ||||||
Class R3 | 2016* | |||||
Net asset value at beginning of period | $ | 18.44 | ||||
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Net investment income (loss) (a) | 0.01 | |||||
Net realized and unrealized gain (loss) on investments | 0.94 | |||||
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Total from investment operations | 0.95 | |||||
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Net asset value at end of period | $ | 19.39 | ||||
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Total investment return (b) | 5.15 | %(c)(d) | ||||
Ratios (to average net assets)/Supplemental Data: | ||||||
Net investment income (loss) | 0.43 | %†† | ||||
Net expenses | 1.30 | %†† | ||||
Portfolio turnover rate | 87 | % | ||||
Net assets at end of period (in 000’s) | $ | 26 |
* | Unaudited. |
** | 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) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
20 | MainStay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Common Stock Fund (the “Fund”), a “diversified fund”, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers seven classes of shares. Class A and Class B shares commenced operations on June 1, 1998. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on December 28, 2004. Class R2 shares were first effective on December 14, 2007. There were no investment operations for Class R2 during the six-month period ended April 30, 2016 or in any period since class R2’s effectiveness. Investor Class shares commenced operations on February 28, 2008. Class R3 shares commenced operations on February 29, 2016. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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, Class R2 and Class R3 shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A shares. The seven 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 Class A, Investor Class, Class R2 and Class R3 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. 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 Fund’s investment objective is to seek long-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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
21 |
Notes to Financial Statements (Unaudited) (continued)
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 based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Monthly payment information | |
• Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the secu-
rity or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities and shares of Exchange-Traded Funds (“ETFs”) are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Investments in mutual funds, including money market funds, are valued at their respective 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 in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. 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. These securities are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(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
22 | MainStay Common Stock Fund |
within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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 from net investment income and distributions from net realized capital and currency gains, if any, at least 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; net of any foreign tax withheld at the source, 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. The straight-line method approximates the effective interest method for short-term investments. 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/or 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 Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty 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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(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
23 |
Notes to Financial Statements (Unaudited) (continued)
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 Investments, 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer of the Fund. Cornerstone Capital Management Holdings LLC (“Cornerstone Holdings” 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 Cornerstone Holdings, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, 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: 0.55% up to $500 million; 0.525% from $500 million to $1 billion; and 0.50% on assets in excess of $1 billion. During the six-month period ended April 30, 2016, the effective management fee rate was 0.55%.
New York Life Investments has voluntarily 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: Investor Class, 1.85%; Class B, 2.60%; and Class C, 2.60%. These voluntary waivers or reimbursements may be discontinued at any time. 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.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $518,520.
State Street 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 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, Service and Shareholder 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 Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class 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 shares are not subject to a distribution and/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.
In accordance with the Shareholder Services Plan for the 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 R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third party service providers are 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 R2 and Class R3 shares. This is in addition to any fees paid under a distribution plan, where applicable.
Class R3 | $ | 4 |
(C) Sales Charges. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $4,382 and $4,983, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $187, $23,969 and $1,387, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 9,734 | ||
Investor Class | 30,363 | |||
Class B | 9,039 | |||
Class C | 32,240 | |||
Class I | 17,547 | |||
Class R3 | 2 |
24 | MainStay Common Stock Fund |
(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. As of April 30, 2016, New York Life and its affiliates beneficially held shares of the Fund with values and percentages of net assets as follows:
Class R3 | $ | 26,288 | 99.5 | % |
Note 4–Federal Income Tax
Under the Regulated Investment Company Modernization Act of 2010, the Fund is 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.
As of October 31, 2015, for federal income tax purposes, capital loss carryforwards of $33,623,864 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 realized 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 Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
2017 | $ | 33,624 | $ | — |
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 1,450,007 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $165,809 and $167,425, respectively.
Note 8–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 1,139,961 | $ | 22,446,385 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 26,849 | 520,878 | ||||||
Shares redeemed | (1,086,587 | ) | (21,656,995 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 80,223 | 1,310,268 | ||||||
Shares converted into Class A (See Note 1) | 23,383 | 449,648 | ||||||
Shares converted from Class A (See Note 1) | (4,163 | ) | (80,796 | ) | ||||
|
| |||||||
Net increase (decrease) | 99,443 | $ | 1,679,120 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 1,548,299 | $ | 30,351,618 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 15,457 | 306,971 | ||||||
Shares redeemed | (713,232 | ) | (14,201,162 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 850,524 | 16,457,427 | ||||||
Shares converted into Class A (See Note 1) | 44,372 | 894,606 | ||||||
Shares converted from Class A (See Note 1) | (33,201 | ) | (635,327 | ) | ||||
|
| |||||||
Net increase (decrease) | 861,695 | $ | 16,716,706 | |||||
|
|
25 |
Notes to Financial Statements (Unaudited) (continued)
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 79,486 | $ | 1,523,391 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,373 | 201,445 | ||||||
Shares redeemed | (82,501 | ) | (1,591,818 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 7,358 | 133,018 | ||||||
Shares converted into Investor Class (See Note 1) | 21,054 | 407,695 | ||||||
Shares converted from Investor Class (See Note 1) | (21,069 | ) | (410,511 | ) | ||||
|
| |||||||
Net increase (decrease) | 7,343 | $ | 130,202 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 197,188 | $ | 3,922,117 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,158 | 122,419 | ||||||
Shares redeemed | (177,345 | ) | (3,531,519 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 26,001 | 513,017 | ||||||
Shares converted into Investor Class (See Note 1) | 73,603 | 1,428,217 | ||||||
Shares converted from Investor Class (See Note 1) | (39,541 | ) | (799,054 | ) | ||||
|
| |||||||
Net increase (decrease) | 60,063 | $ | 1,142,180 | |||||
|
| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 69,941 | $ | 1,219,568 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 637 | 11,415 | ||||||
Shares redeemed | (50,414 | ) | (878,611 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 20,164 | 352,372 | ||||||
Shares converted from Class B (See Note 1) | (20,588 | ) | (366,036 | ) | ||||
|
| |||||||
Net increase (decrease) | (424 | ) | $ | (13,664 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 107,365 | $ | 1,963,256 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 718 | 13,151 | ||||||
Shares redeemed | (96,625 | ) | (1,755,078 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 11,458 | 221,329 | ||||||
Shares converted from Class B (See Note 1) | (49,207 | ) | (888,442 | ) | ||||
|
| |||||||
Net increase (decrease) | (37,749 | ) | $ | (667,113 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 183,618 | $ | 3,307,238 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,795 | 32,117 | ||||||
Shares redeemed | (415,572 | ) | (7,285,839 | ) | ||||
|
| |||||||
Net increase (decrease) | (230,159 | ) | $ | (3,946,484 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 861,851 | $ | 15,727,727 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,704 | 31,194 | ||||||
Shares redeemed | (397,517 | ) | (7,188,101 | ) | ||||
|
| |||||||
Net increase (decrease) | 466,038 | $ | 8,570,820 | |||||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 334,186 | $ | 6,378,174 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 60,232 | 1,170,908 | ||||||
Shares redeemed | (339,878 | ) | (6,605,925 | ) | ||||
|
| |||||||
Net increase (decrease) | 54,540 | $ | 943,157 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 798,357 | $ | 15,869,884 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 47,309 | 941,449 | ||||||
Shares redeemed | (1,902,965 | ) | (37,626,257 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,057,299 | ) | $ | (20,814,924 | ) | |||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Period ended April 30, 2016 (a): | ||||||||
Shares sold | 1,363 | $ | 25,134 | |||||
|
| |||||||
Net increase (decrease) | 1,363 | $ | 25,134 | |||||
|
|
(a) | Inception date was February 29, 2016. |
Note 9–Litigation
The Fund has been named as a defendant in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (the “FitzSimons action”) as a result of its ownership of shares in the Tribune Company (“Tribune”) in 2007 when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In its complaint, the plaintiff asserts claims against certain insiders, shareholders, professional advisers, and others involved in the LBO. Separately, the complaint also seeks to obtain from former Tribune shareholders, including the Fund, any proceeds they received in connection with the LBO. The sole claim and cause of action brought against the Fund is for fraudulent conveyance pursuant to United States Bankruptcy Code Section 548(a)(1)(A).
In June 2011, certain Tribune creditors filed numerous additional actions asserting state law constructive fraudulent conveyance claims (the “SLCFC actions”) against specifically-named former Tribune shareholders and, in some cases, putative defendant classes comprised of former Tribune shareholders. One of the SLCFC actions, entitled Deutsche Bank Trust Co. Americas v. Blackrock Institutional Trust Co., No. 11-9319 (S.D.N.Y.) (the “Deutsche Bank action”), named The MainStay Funds as a defendant.
The FitzSimons action and Deutsche Bank action have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding entitled In re Tribune Co. Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”). On August 2, 2013, the plaintiff in the FitzSimons action filed a Fifth Amended Complaint.
On September 23, 2013, the District Court granted the defendants’ motion to dismiss the SLCFC actions, including the Deutsche Bank action, on the basis that the plaintiffs did not have standing to pursue their claims. On September 30, 2013, the plaintiffs in the SLCFC actions filed a notice of appeal to the United States Court of Appeals for the Second Circuit. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On November 5, 2014, the Second
26 | MainStay Common Stock Fund |
Circuit Court of Appeals held an oral argument on appeal. On March 24, 2016, the Second Circuit Court of Appeals affirmed the dismissal, holding that section 546(e) of the Bankruptcy Code barred the creditor state-law fraudulent constructive transfer claims. The Court found that the claims were preempted because they conflict with the purpose of section 546(e), which provides a safe harbor for “settlement payments.” On April 12, 2016 the Plaintiffs filed a motion seeking a rehearing en banc. We are awaiting a decision.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. The Court has not yet issued a decision on any of these motions.
The value of the proceeds received by the Fund in connection with the LBO and the Fund’s cost basis in shares of Tribune was as follows:
Fund | Proceeds | Cost Basis | ||||||
MainStay Common Stock Fund | $ | 751,774 | $ | 729,369 |
At this stage of the proceedings, it would be difficult to assess with any reasonable certainty the probable outcome of the pending litigation or the effect, if any, on the Fund’s net asset value.
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
27 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Common Stock Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and Cornerstone Capital Management Holdings LLC (“Cornerstone Holdings”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and Cornerstone Holdings in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and Cornerstone Holdings (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including Cornerstone Holdings as subadvisor to the Fund, and responses from New York Life Investments and Cornerstone Holdings to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Fund’s distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and Cornerstone Holdings; (ii) the investment performance of the Fund, New York Life Investments and Cornerstone Holdings; (iii) the costs of the services provided, and profits realized, by New York Life Investments and Cornerstone Holdings from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and Cornerstone Holdings. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and Cornerstone Holdings
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
28 | MainStay Common Stock Fund |
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that Cornerstone Holdings provides to the Fund. The Board evaluated Cornerstone Holdings’ experience in serving as subadvisor to the Fund and managing other portfolios. It examined Cornerstone Holdings’ track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at Cornerstone Holdings, and Cornerstone Holdings’ overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by Cornerstone Holdings. The Board also reviewed Cornerstone Holdings’ willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and Cornerstone Holdings’ experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or Cornerstone Holdings had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and Cornerstone Holdings to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and Cornerstone Holdings
The Board considered the costs of the services provided by New York Life Investments and Cornerstone Holdings under the Agreements and the profits realized by New York Life Investments and its affiliates, including Cornerstone Holdings, due to their relationships with the Fund. Because Cornerstone Holdings is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and Cornerstone Holdings in the aggregate.
In evaluating the costs of the services provided by New York Life Investments and Cornerstone Holdings and profits realized by New York Life Investments and its affiliates, including Cornerstone Holdings, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and Cornerstone Holdings must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and Cornerstone Holdings to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund. The Board recognized, for example, the benefits to Cornerstone Holdings from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to Cornerstone Holdings in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including Cornerstone Holdings, due to their relationships with the Fund supported the Board’s decision to approve the Agreements.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay
Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to Cornerstone Holdings are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and Cornerstone Holdings on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the
30 | MainStay Common Stock Fund |
Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
31 |
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 or proxy voting record 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 Common Stock Fund |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1695296 MS164-16 | MSCS10-06/16 (NYLIM) NL021 |
MainStay Large Cap Growth Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 A 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.
(With sales charges)
Average Annual Total Returns for the Period Ended April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | –11.13% –5.95 |
| –8.03 –2.67 | %
|
| 7.68 8.91 | %
|
| 6.99 7.60 | %
|
| 0.99 0.99 | %
| |||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | –11.27 –6.10 |
| –8.06 –2.71 |
|
| 7.61 8.84 |
|
| 6.91 7.52 |
|
| 1.04 1.04 |
| |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the | With sales charges Excluding sales charges | –10.48 –6.42 |
| –7.62 –3.43 |
|
| 7.72 8.01 |
|
| 6.71 6.71 |
|
| 1.79 1.79 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | –7.23 –6.42 |
| –4.25 –3.42 |
|
| 8.02 8.02 |
|
| 6.72 6.72 |
|
| 1.79 1.79 |
| |||||||
Class I Shares | No Sales Charge | –5.87 | –2.46 | 9.15 | 7.95 | 0.74 | ||||||||||||||||
Class R1 Shares | No Sales Charge | –5.97 | –2.51 | 9.06 | 7.84 | 0.84 | ||||||||||||||||
Class R2 Shares | No Sales Charge | –6.06 | –2.78 | 8.80 | 7.58 | 1.09 | ||||||||||||||||
Class R3 Shares4 | No Sales Charge | –6.24 | –3.07 | 8.52 | 7.31 | 1.34 | ||||||||||||||||
Class R6 Shares5 | No Sales Charge | –5.86 | –2.36 | 9.21 | 7.98 | 0.62 |
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, changes 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 may 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 (if any), 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 would likely have been different. |
4. | Performance figures for Class R3 shares, first offered on April 28, 2006, include the historical performance of Class A shares through April 27, 2006, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R3 shares would likely have been different. |
5. | Performance figures for Class R6 shares, first offered on June 17, 2013, include the historical performance of Class I shares through June 16, 2013. Performance for Class R6 shares would also likely have been different because of differences in expenses attributable to each share class. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||
Russell 1000® Growth Index6 | –1.37% | 1.07 | % | 11.44 | % | 8.20 | % | |||||||
S&P 500® Index7 | 0.43 | 1.21 | 11.02 | 6.91 | ||||||||||
Average Lipper Large-Cap Growth Fund8 | –4.05 | –1.87 | 9.70 | 6.82 |
6. | 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® Index 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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard for measuring large-cap U.S. stock-market performance. The S&P 500® 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 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 above-average characteristics 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 Large Cap Growth Fund |
Cost in Dollars of a $1,000 Investment in MainStay Large Cap Growth Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 940.50 | $ | 4.82 | $ | 1,019.90 | $ | 5.02 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 939.00 | $ | 5.06 | $ | 1,019.60 | $ | 5.27 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 935.80 | $ | 8.66 | $ | 1,015.90 | $ | 9.02 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 935.80 | $ | 8.66 | $ | 1,015.90 | $ | 9.02 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 941.30 | $ | 3.62 | $ | 1,021.10 | $ | 3.77 | ||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 940.30 | $ | 4.10 | $ | 1,020.60 | $ | 4.27 | ||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 939.40 | $ | 5.30 | $ | 1,019.40 | $ | 5.52 | ||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 937.60 | $ | 6.50 | $ | 1,018.20 | $ | 6.77 | ||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 941.40 | $ | 2.99 | $ | 1,021.80 | $ | 3.12 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.00% for Class A, 1.05% for Investor Class, 1.80% for Class B and Class C, 0.75% for Class I, 0.85% for Class R1, 1.10% for Class R2, 1.35% for Class R3 and 0.62% for Class R6) multiplied by the average account value over the period, divided by 366 and multiplied by 182 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7 |
Industry Composition as of April 30, 2016 (Unaudited)
Software | 11.1 | % | ||
Internet Software & Services | 8.9 | |||
IT Services | 8.6 | |||
Pharmaceuticals | 6.3 | |||
Internet & Catalog Retail | 6.2 | |||
Biotechnology | 6.1 | |||
Textiles, Apparel & Luxury Goods | 5.1 | |||
Aerospace & Defense | 4.2 | |||
Media | 4.2 | |||
Health Care Equipment & Supplies | 4.0 | |||
Health Care Providers & Services | 3.5 | |||
Chemicals | 3.4 | |||
Specialty Retail | 3.4 | |||
Semiconductors & Semiconductor Equipment | 3.0 | |||
Hotels, Restaurants & Leisure | 2.6 | |||
Food & Staples Retailing | 2.5 |
Industrial Conglomerates | 2.5 | % | ||
Technology Hardware, Storage & Peripherals | 2.2 | |||
Real Estate Investment Trusts | 1.9 | |||
Life Sciences Tools & Services | 1.5 | |||
Multiline Retail | 1.3 | |||
Oil, Gas & Consumable Fuels | 1.2 | |||
Communications Equipment | 1.1 | |||
Diversified Financial Services | 1.1 | |||
Auto Components | 0.9 | |||
Diversified Telecommunication Services | 0.9 | |||
Airlines | 0.7 | |||
Banks | 0.7 | |||
Road & Rail | 0.5 | |||
Short-Term Investment | 0.6 | |||
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 or Issuers as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | Alphabet, Inc. |
2. | Amazon.com, Inc. |
3. | Visa, Inc. Class A |
4. | UnitedHealth Group, Inc. |
5. | Facebook, Inc. Class A |
6. | NIKE, Inc. Class B |
7. | Danaher Corp. |
8. | Bristol-Myers Squibb Co. |
9. | MasterCard, Inc. Class A |
10. | Celgene Corp. |
8 | MainStay Large Cap Growth Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Clark J. Winslow, Justin H. Kelly, CFA, and Patrick M. Burton, CFA, of Winslow Capital Management, LLC, the Fund’s Subadvisor.
How did MainStay Large Cap Growth Fund perform relative to its benchmarks and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay Large Cap Growth Fund returned –5.95% for Class A shares, –6.10% for Investor Class shares and –6.42% for Class B and Class C shares for the six months ended April 30, 2016. Over the same period, the Fund returned –5.87% for Class I shares, –5.97% for Class R1 shares, –6.06% for Class R2 shares, –6.24% for Class R3 shares and –5.86% for Class R6 shares. For the six months ended April 30, 2016, all share classes underperformed the –1.37% return of the Russell 1000® Growth Index,1 which is the Fund’s primary benchmark. Over the same period, all share classes also underperformed the 0.43% return of the S&P 500® Index,1 which is the Fund’s secondary benchmark. For the six months ended April 30, 2016, all share classes underperformed the –4.05% return of the Average Lipper2 Large-Cap Growth Fund. See page 5 for Fund returns with applicable sales charges.
What factors affected the Fund’s relative performance during the reporting period?
During the reporting period, there appeared to be a substantial shift in investor preferences. The Russell 1000® Growth Index companies with the highest dividend yields outperformed those with the lowest dividend yields; companies with the lowest earnings growth rates outperformed those with the highest growth rates; and companies with the lowest valuations outperformed those with the highest valuations. Cheap, slow-growth companies with high yields typically fail to meet the requirements of our long-term investment discipline. As a result of the Fund’s lack of exposure to these companies, the Fund underperformed the Russell 1000® Growth Index during the reporting period.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Energy, utilities and materials made the strongest positive sector contributions to the Fund’s performance relative to the Russell 1000® Growth Index. (Contributions take weightings and total returns into account.) The best performing sector on a relative basis was energy, with stock selection driving relative performance. In the utilities sector, a slightly underweight position relative to the Index contributed positively to performance. In the materials sector, stock selection drove relative performance.
Information technology, consumer discretionary and consumer staples were the sectors that detracted the most from the Fund’s performance relative to the Russell 1000® Growth Index. The worst-performing sector on a relative basis was information technology, driven by stock selection. In the consumer discretionary sector, stock selection drove relative performance. In the consumer staples sector, an underweight position relative to the Index detracted from 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 strongest positive contributor to the Fund’s absolute performance during the reporting period was UnitedHealth Group. The company provides a diverse array of health and well-being services to people through all stages of life. We believed that the company’s scale and diversification could drive growth in the dynamic health care industry. Social networking company Facebook performed well during the reporting period. The company continued to grow rapidly. Its product portfolio included Facebook, Instagram, Messenger and WhatsApp. With over 1.6 billion monthly active users and over one billion daily active users, the company continued to attract advertisers. Medical device company Edwards Lifesciences also contributed positively to the Fund’s absolute performance. The company led the development of the transcatheter aortic valve replacement market, for which worldwide revenues topped $1.9 billion in 2015.
During the reporting period, the most significant detractor from the Fund’s absolute performance was online business networking company LinkedIn. The company reported a strong quarter, in line with our expectations. However, LinkedIn’s guidance of slowing growth in its Talent Solutions business, along with the discontinuation of the company’s once-promising off-network advertising business, led to slower forward growth rates for the company. We eliminated the position to focus on information technology companies that had seen stock price declines without weakening long-term fundamentals. Although technology hardware, storage & peripherals company Apple contributed positively to relative performance, the company was a drag on the Fund’s absolute performance during the reporting period. We had anticipated that Apple’s first-quarter 2016 results would be below Wall Street expectations, reflecting a disappointing iPhone 6S cycle. Apple reported a 15% year-over-year decline in revenue, and guidance for the June quarter was also weak. The Fund is about 3% underweight Apple relative to the Russell 1000® Growth Index. We maintained a modest weight in Apple, as the company has $210 billion of cash holdings, massive annual free cash flow, an upcoming new product
1. | See footnote on page 6 for more information on this index. |
2. | See footnote on page 6 for more information on Lipper Inc. |
9 |
cycle for the iPhone 7 in mid-September 2016 and a valuation of 11 times 2016 earnings. Pharmaceutical company Allergan detracted from performance. Pfizer’s attempt to acquire Allergan was derailed by regulatory issues. We continued, however, to view the stand-alone fundamentals of the company as compelling. Allergan plans to divest its generic business to Teva Pharmaceutical Industries, Ltd., and we believed that the company could be positioned for strong organic growth from its key franchises, including Botox.
Did the Fund make any significant purchases or sales during the reporting period?
We initiated a position in JPMorgan Chase because we viewed recent weakness in the banking company as an attractive initiation point. Challenges to the banking sector, including slow capital markets and declining interest rates, factored into current expectations. During the reporting period, JPMorgan Chase continued to gain market share in most of its businesses and generates solid returns on tangible equity.
We exited the Fund’s position in multinational mass-media and entertainment conglomerate Disney. Our research concluded that forward Wall Street consensus estimates were too high because of larger-than-projected losses at ESPN, higher costs related to the new NBA contract on ESPN and the delay in Star Wars 7. The Fund also sold its position in American fashion retailer L Brands. The company announced the exit of the swimwear category for Victoria Secret and related online apparel sales. These changes reduced our confidence in the company’s sales trends.
How did the Fund’s sector weightings change during the reporting period?
We reduced the Fund’s underweight positions relative to the Russell 1000® Growth Index in the industrials and financials sectors. We increased the Fund’s allocation to the health care sector, adding to an already overweight position. During the reporting period, we reduced the Fund’s overweight position relative to the Russell 1000® Growth Index in the consumer discretionary sector. We also increased the degree to which the Fund was underweight relative to the Index in the telecommunication services and consumer staples sectors.
How was the Fund positioned at the end of the reporting period?
Throughout the reporting period, we positioned the Fund for a growth equity environment. We anticipated strong secular growth in the information technology, health care and consumer discretionary sectors, and the Fund held overweight positions relative to the Russell 1000® Growth Index in all three sectors as of April 30, 2016.
As of the same date, the Fund held substantially underweight positions relative to the Russell 1000® Growth Index in the consumer staples and industrials sectors. We viewed these sectors as having weaker growth prospects in light of negative foreign interest rates, shifting oil prices and other secular trends. We continue to monitor potential opportunities 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 Large Cap Growth Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Shares | Value | |||||||
Common Stocks 99.6%† | ||||||||
Aerospace & Defense 4.2% |
| |||||||
Boeing Co. (The) | 1,170,300 | $ | 157,756,440 | |||||
Honeywell International, Inc. | 1,940,000 | 221,683,800 | ||||||
Lockheed Martin Corp. | 841,600 | 195,571,008 | ||||||
Raytheon Co. | 613,300 | 77,490,455 | ||||||
|
| |||||||
652,501,703 | ||||||||
|
| |||||||
Airlines 0.7% | ||||||||
Delta Air Lines, Inc. | 2,561,300 | 106,729,371 | ||||||
|
| |||||||
Auto Components 0.9% | ||||||||
Delphi Automotive PLC | 1,955,100 | 143,954,013 | ||||||
|
| |||||||
Banks 0.7% | ||||||||
JPMorgan Chase & Co. | 1,780,000 | 112,496,000 | ||||||
|
| |||||||
Biotechnology 6.1% | ||||||||
AbbVie, Inc. | 2,245,000 | 136,945,000 | ||||||
Alexion Pharmaceuticals, Inc. (a) | 1,590,050 | 221,462,164 | ||||||
Amgen, Inc. | 1,025,000 | 162,257,500 | ||||||
¨Celgene Corp. (a) | 3,395,970 | 351,177,258 | ||||||
Regeneron Pharmaceuticals, Inc. (a) | 182,000 | 68,561,220 | ||||||
|
| |||||||
940,403,142 | ||||||||
|
| |||||||
Chemicals 3.4% | ||||||||
Ecolab, Inc. | 1,435,000 | 164,996,300 | ||||||
PPG Industries, Inc. | 1,850,100 | 204,232,539 | ||||||
Sherwin-Williams Co. (The) | 553,625 | 159,061,999 | ||||||
|
| |||||||
528,290,838 | ||||||||
|
| |||||||
Communications Equipment 1.1% | ||||||||
Palo Alto Networks, Inc. (a) | 1,070,600 | 161,521,422 | ||||||
|
| |||||||
Diversified Financial Services 1.1% | ||||||||
Moody’s Corp. | 1,786,400 | 170,994,208 | ||||||
|
| |||||||
Diversified Telecommunication Services 0.9% |
| |||||||
SBA Communications Corp. Class A (a) | 1,404,900 | 144,760,896 | ||||||
|
| |||||||
Food & Staples Retailing 2.5% | ||||||||
Costco Wholesale Corp. | 1,145,000 | 169,608,850 | ||||||
CVS Health Corp. | 2,145,000 | 215,572,500 | ||||||
|
| |||||||
385,181,350 | ||||||||
|
| |||||||
Health Care Equipment & Supplies 4.0% |
| |||||||
Boston Scientific Corp. (a) | 13,250,100 | 290,442,192 | ||||||
Edwards Lifesciences Corp. (a) | 1,392,140 | 147,859,189 | ||||||
Intuitive Surgical, Inc. (a) | 277,050 | 173,533,038 | ||||||
|
| |||||||
611,834,419 | ||||||||
|
|
Shares | Value | |||||||
Health Care Providers & Services 3.5% |
| |||||||
¨UnitedHealth Group, Inc. | 4,115,100 | $ | 541,876,368 | |||||
|
| |||||||
Hotels, Restaurants & Leisure 2.6% | ||||||||
Starbucks Corp. | 5,595,100 | 314,612,473 | ||||||
Wynn Resorts, Ltd. | 940,000 | 83,002,000 | ||||||
|
| |||||||
397,614,473 | ||||||||
|
| |||||||
Industrial Conglomerates 2.5% | ||||||||
¨Danaher Corp. | 3,900,100 | 377,334,675 | ||||||
|
| |||||||
Internet & Catalog Retail 6.2% | ||||||||
¨Amazon.com, Inc. (a) | 1,008,540 | 665,222,899 | ||||||
Priceline Group, Inc. (The) (a) | 216,520 | 290,929,263 | ||||||
|
| |||||||
956,152,162 | ||||||||
|
| |||||||
Internet Software & Services 8.9% | ||||||||
¨Alphabet, Inc. | ||||||||
Class A (a) | 513,460 | 363,468,065 | ||||||
Class C (a) | 455,331 | 315,548,936 | ||||||
CoStar Group, Inc. (a) | 828,015 | 163,375,640 | ||||||
¨Facebook, Inc. Class A (a) | 4,483,400 | 527,158,172 | ||||||
|
| |||||||
1,369,550,813 | ||||||||
|
| |||||||
IT Services 8.6% | ||||||||
FleetCor Technologies, Inc. (a) | 1,228,400 | 190,008,912 | ||||||
¨MasterCard, Inc. Class A | 3,717,500 | 360,560,325 | ||||||
PayPal Holdings, Inc. (a) | 4,190,050 | 164,166,159 | ||||||
¨Visa, Inc. Class A | 7,865,100 | 607,500,324 | ||||||
|
| |||||||
1,322,235,720 | ||||||||
|
| |||||||
Life Sciences Tools & Services 1.5% |
| |||||||
Quintiles Transnational Holdings, Inc. (a) | 3,427,600 | 236,744,332 | ||||||
|
| |||||||
Media 4.2% | ||||||||
Charter Communications, Inc. Class A (a) | 1,098,200 | 233,081,968 | ||||||
Comcast Corp. Class A | 3,135,000 | 190,482,600 | ||||||
Time Warner, Inc. | 3,015,100 | 226,554,614 | ||||||
|
| |||||||
650,119,182 | ||||||||
|
| |||||||
Multiline Retail 1.3% | ||||||||
Dollar Tree, Inc. (a) | 2,570,000 | 204,854,700 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 1.2% | ||||||||
Pioneer Natural Resources Co. | 1,075,100 | 178,574,110 | ||||||
|
| |||||||
Pharmaceuticals 6.3% | ||||||||
Allergan PLC (a) | 1,286,080 | 278,513,485 | ||||||
¨Bristol-Myers Squibb Co. | 5,140,100 | 371,012,418 | ||||||
Zoetis, Inc. | 6,710,000 | 315,571,300 | ||||||
|
| |||||||
965,097,203 | ||||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2016, 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. | 11 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Real Estate Investment Trusts 1.9% |
| |||||||
American Tower Corp. | 2,845,100 | $ | 298,394,088 | |||||
|
| |||||||
Road & Rail 0.5% | ||||||||
Kansas City Southern | 816,000 | 77,316,000 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 3.0% |
| |||||||
Broadcom, Ltd. | 1,580,000 | 230,285,000 | ||||||
NXP Semiconductors N.V. (a) | 2,665,050 | 227,275,464 | ||||||
|
| |||||||
457,560,464 | ||||||||
|
| |||||||
Software 11.1% | ||||||||
Adobe Systems, Inc. (a) | 2,347,400 | 221,172,028 | ||||||
Electronic Arts, Inc. (a) | 3,555,000 | 219,876,750 | ||||||
Intuit, Inc. | 2,505,000 | 252,729,450 | ||||||
Microsoft Corp. | 6,930,100 | 345,604,087 | ||||||
Mobileye N.V. (a) | 4,960,000 | 189,224,000 | ||||||
Salesforce.com, Inc. (a) | 3,940,100 | 298,659,580 | ||||||
ServiceNow, Inc. (a) | �� | 2,090,000 | 149,393,200 | |||||
Splunk, Inc. (a) | 734,900 | 38,200,102 | ||||||
|
| |||||||
1,714,859,197 | ||||||||
|
| |||||||
Specialty Retail 3.4% | ||||||||
Home Depot, Inc. (The) | 2,178,100 | 291,625,809 | ||||||
O’Reilly Automotive, Inc. (a) | 531,350 | 139,575,018 | ||||||
Ulta Salon Cosmetics & Fragrance, Inc. (a) | 467,570 | 97,385,479 | ||||||
|
| |||||||
528,586,306 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals 2.2% |
| |||||||
Apple, Inc. | 3,599,185 | 337,387,602 | ||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 5.1% |
| |||||||
Lululemon Athletica, Inc. (a) | 2,575,050 | 168,794,527 | ||||||
¨NIKE, Inc. Class B | 7,396,900 | 435,973,286 | ||||||
Under Armour, Inc. | ||||||||
Class A (a) | 2,220,100 | 97,551,194 | ||||||
Class C (a) | 2,220,100 | 90,580,080 | ||||||
|
| |||||||
792,899,087 | ||||||||
|
| |||||||
Total Common Stocks | 15,365,823,844 | |||||||
|
| |||||||
Principal Amount | Value | |||||||
Short-Term Investment 0.6% | ||||||||
Repurchase Agreement 0.6% | ||||||||
Fixed Income Clearing Corp. | $ | 91,562,988 | $ | 91,562,988 | ||||
|
| |||||||
Total Short-Term Investment | 91,562,988 | |||||||
|
| |||||||
Total Investments | 100.2 | % | 15,457,386,832 | |||||
Other Assets, Less Liabilities | (0.2 | ) | (23,736,079 | ) | ||||
Net Assets | 100.0 | % | $ | 15,433,650,753 |
(a) | Non-income producing security. |
(b) | As of April 30, 2016, cost was $11,117,791,109 for federal income tax purposes and net unrealized appreciation was as follows: |
Gross unrealized appreciation | $ | 4,534,703,158 | ||
Gross unrealized depreciation | (195,107,435 | ) | ||
|
| |||
Net unrealized appreciation | $ | 4,339,595,723 | ||
|
|
12 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, 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 April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 15,365,823,844 | $ | — | $ | — | $ | 15,365,823,844 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 91,562,988 | — | 91,562,988 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 15,365,823,844 | $ | 91,562,988 | $ | — | $ | 15,457,386,832 | ||||||||
|
|
|
|
|
|
|
|
(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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, 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. | 13 |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 15,457,386,832 | ||
Due from custodian | 30,200,192 | |||
Receivables: | ||||
Investment securities sold | 336,797,526 | |||
Fund shares sold | 15,538,516 | |||
Dividends and interest | 5,882,062 | |||
Other assets | 228,788 | |||
|
| |||
Total assets | 15,846,033,916 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 364,613,908 | |||
Fund shares redeemed | 34,895,317 | |||
Manager (See Note 3) | 7,883,028 | |||
Transfer agent (See Note 3) | 3,512,038 | |||
NYLIFE Distributors (See Note 3) | 722,081 | |||
Shareholder communication | 413,988 | |||
Professional fees | 128,177 | |||
Custodian | 73,958 | |||
Trustees | 27,952 | |||
Accrued expenses | 112,716 | |||
|
| |||
Total liabilities | 412,383,163 | |||
|
| |||
Net assets | $ | 15,433,650,753 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 16,822,684 | ||
Additional paid-in capital | 10,233,903,875 | |||
|
| |||
10,250,726,559 | ||||
Net investment loss | (6,089,909 | ) | ||
Accumulated net realized gain (loss) on investments | 828,443,802 | |||
Net unrealized appreciation (depreciation) on investments | 4,360,570,301 | |||
|
| |||
Net assets | $ | 15,433,650,753 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 995,523,576 | ||
|
| |||
Shares of beneficial interest outstanding | 112,637,807 | |||
|
| |||
Net asset value per share outstanding | $ | 8.84 | ||
Maximum sales charge (5.50% of offering price) | 0.51 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.35 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 171,539,590 | ||
|
| |||
Shares of beneficial interest outstanding | 19,572,566 | |||
|
| |||
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 B | ||||
Net assets applicable to outstanding shares | $ | 40,087,527 | ||
|
| |||
Shares of beneficial interest outstanding | 5,105,920 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 7.85 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 350,133,033 | ||
|
| |||
Shares of beneficial interest outstanding | 44,658,493 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 7.84 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 10,070,437,824 | ||
|
| |||
Shares of beneficial interest outstanding | 1,083,902,374 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.29 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 1,828,945,209 | ||
|
| |||
Shares of beneficial interest outstanding | 200,315,729 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.13 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 517,279,848 | ||
|
| |||
Shares of beneficial interest outstanding | 58,587,566 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.83 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 94,653,658 | ||
|
| |||
Shares of beneficial interest outstanding | 11,079,461 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.54 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 1,365,050,488 | ||
|
| |||
Shares of beneficial interest outstanding | 146,408,490 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.32 | ||
|
|
14 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends | $ | 69,678,375 | ||
Interest | 14,538 | |||
|
| |||
Total income | 69,692,913 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 49,104,017 | |||
Transfer agent (See Note 3) | 9,863,590 | |||
Distribution/Service—Class A (See Note 3) | 1,354,577 | |||
Distribution/Service—Investor Class (See Note 3) | 215,678 | |||
Distribution/Service—Class B (See Note 3) | 214,862 | |||
Distribution/Service—Class C (See Note 3) | 1,851,354 | |||
Distribution/Service—Class R2 (See Note 3) | 710,959 | |||
Distribution/Service—Class R3 (See Note 3) | 254,590 | |||
Shareholder service (See Note 3) | 1,284,011 | |||
Shareholder communication | 407,246 | |||
Professional fees | 374,018 | |||
Trustees | 206,703 | |||
Custodian | 160,627 | |||
Registration | 137,720 | |||
Interest expense | 3,025 | |||
Miscellaneous | 263,223 | |||
|
| |||
Total expenses before waiver/reimbursement | 66,406,200 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (299,958 | ) | ||
|
| |||
Net expenses | 66,106,242 | |||
|
| |||
Net investment income (loss) | 3,586,671 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 849,428,097 | |||
Net change in unrealized appreciation (depreciation) on investments | (1,910,148,928 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | (1,060,720,831 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (1,057,134,160 | ) | |
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,586,671 | $ | (9,676,580 | ) | |||
Net realized gain (loss) on investments | 849,428,097 | 2,381,897,095 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (1,910,148,928 | ) | (812,353,846 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (1,057,134,160 | ) | 1,559,866,669 | |||||
|
| |||||||
Distributions to shareholders: | ||||||||
From net realized gain on investments: | ||||||||
Class A | (142,419,745 | ) | (125,570,603 | ) | ||||
Investor Class | (22,798,079 | ) | (19,330,344 | ) | ||||
Class B | (6,319,750 | ) | (5,511,858 | ) | ||||
Class C | (53,490,540 | ) | (42,270,495 | ) | ||||
Class I | (1,353,826,315 | ) | (1,298,539,884 | ) | ||||
Class R1 | (243,267,446 | ) | (207,982,444 | ) | ||||
Class R2 | (77,201,297 | ) | (92,684,573 | ) | ||||
Class R3 | (13,765,123 | ) | (15,451,512 | ) | ||||
Class R6 | (148,689,366 | ) | (69,346,873 | ) | ||||
|
| |||||||
Total distributions to shareholders | (2,061,777,661 | ) | (1,876,688,586 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 2,265,607,139 | 3,835,563,572 | ||||||
Net asset value of shares issued to shareholders in reinvestment of distributions | 1,630,825,040 | 1,486,839,316 | ||||||
Cost of shares redeemed | (3,385,014,873 | ) | (7,392,003,445 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 511,417,306 | (2,069,600,557 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | (2,607,494,515 | ) | (2,386,422,474 | ) | ||||
Net Assets | ||||||||
Beginning of period | 18,041,145,268 | 20,427,567,742 | ||||||
|
| |||||||
End of period | $ | 15,433,650,753 | $ | 18,041,145,268 | ||||
|
| |||||||
Net investment loss | $ | (6,089,909 | ) | $ | (9,676,580 | ) | ||
|
|
16 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.68 | $ | 10.91 | $ | 9.98 | $ | 7.55 | $ | 7.24 | $ | 6.58 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.02 | ) | (0.02 | ) | 0.01 | (0.02 | ) | (0.02 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | (0.56 | ) | 0.85 | 1.45 | 2.42 | 0.49 | 0.68 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.57 | ) | 0.83 | 1.43 | 2.43 | 0.47 | 0.66 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | — | — | — | (0.00 | )‡ | — | — | |||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | (0.16 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 8.84 | $ | 10.68 | $ | 10.91 | $ | 9.98 | $ | 7.55 | $ | 7.24 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (5.95 | %)(c) | 8.10 | % | 14.95 | % | 32.09 | % | 6.79 | % | 10.03 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.14 | %)†† | (0.23 | %) | (0.22 | %) | 0.17 | % | (0.20 | %) | (0.35 | %) | ||||||||||||
Net expenses | 1.00 | % (d)†† | 0.99 | % | 0.99 | % | 1.02 | % | 1.04 | % | 1.06 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.01 | % (d)†† | 0.99 | % | 0.99 | % | 1.02 | % | 1.04 | % | 1.07 | % | ||||||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | 60 | % | 52 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 995,524 | $ | 1,202,852 | $ | 1,304,641 | $ | 1,615,768 | $ | 1,611,374 | $ | 1,887,326 |
* | Unaudited. |
†† | 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) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.61 | $ | 10.84 | $ | 9.93 | $ | 7.52 | $ | 7.21 | $ | 6.55 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.03 | ) | (0.03 | ) | 0.01 | (0.02 | ) | (0.03 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | (0.57 | ) | 0.86 | 1.44 | 2.40 | 0.49 | 0.69 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.58 | ) | 0.83 | 1.41 | 2.41 | 0.47 | 0.66 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | — | — | — | (0.00 | )‡ | — | — | |||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | (0.16 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 8.76 | $ | 10.61 | $ | 10.84 | $ | 9.93 | $ | 7.52 | $ | 7.21 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (6.10 | %)(c) | 8.16 | % | 14.82 | % | 32.13 | % | 6.68 | % | 10.08 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.19 | %)†† | (0.28 | %) | (0.28 | %) | 0.09 | % | (0.28 | %) | (0.43 | %) | ||||||||||||
Net expenses | 1.05 | % (d)†† | 1.04 | % | 1.04 | % | 1.08 | % | 1.10 | % | 1.15 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.06 | % (d)†† | 1.04 | % | 1.04 | % | 1.08 | % | 1.10 | % | 1.15 | % | ||||||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | 60 | % | 52 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 171,540 | $ | 180,154 | $ | 199,826 | $ | 211,111 | $ | 199,156 | $ | 130,140 |
* | Unaudited. |
†† | 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) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.67 | $ | 10.04 | $ | 9.29 | $ | 7.09 | $ | 6.86 | $ | 6.28 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.04 | ) | (0.10 | ) | (0.10 | ) | (0.05 | ) | (0.07 | ) | (0.08 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.51 | ) | 0.79 | 1.35 | 2.25 | 0.46 | 0.66 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.55 | ) | 0.69 | 1.25 | 2.20 | 0.39 | 0.58 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | — | — | — | (0.00 | )‡ | — | — | |||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | (0.16 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 7.85 | $ | 9.67 | $ | 10.04 | $ | 9.29 | $ | 7.09 | $ | 6.86 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (6.42 | %)(c) | 7.34 | % | 14.08 | % | 30.93 | % | 5.98 | % | 9.24 | % (d) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.93 | %)†† | (1.03 | %) | (1.02 | %) | (0.65 | %) | (1.01 | %) | (1.18 | %) | ||||||||||||
Net expenses | 1.80 | % (e)†† | 1.79 | % | 1.79 | % | 1.83 | % | 1.84 | % | 1.90 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.81 | % (e)†† | 1.79 | % | 1.79 | % | 1.83 | % | 1.85 | % | 1.90 | % | ||||||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | 60 | % | 52 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 40,088 | $ | 47,779 | $ | 52,737 | $ | 59,671 | $ | 58,392 | $ | 72,591 |
* | Unaudited. |
†† | 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 return may reflect adjustments to conform to generally accepted accounting principles. |
(e) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 9.66 | $ | 10.03 | $ | 9.29 | $ | 7.09 | $ | 6.85 | $ | 6.28 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.04 | ) | (0.10 | ) | (0.10 | ) | (0.05 | ) | (0.07 | ) | (0.08 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.51 | ) | 0.79 | 1.34 | 2.25 | 0.47 | 0.65 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.55 | ) | 0.69 | 1.24 | 2.20 | 0.40 | 0.57 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | — | — | — | (0.00 | )‡ | — | — | |||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | (0.16 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 7.84 | $ | 9.66 | $ | 10.03 | $ | 9.29 | $ | 7.09 | $ | 6.85 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (6.42 | %)(c) | 7.35 | % | 13.96 | % | 31.12 | % | 5.99 | % | 9.08 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.94 | %)†† | (1.04 | %) | (1.02 | %) | (0.66 | %) | (1.02 | %) | (1.18 | %) | ||||||||||||
Net expenses | 1.80 | % (d)†† | 1.79 | % | 1.79 | % | 1.83 | % | 1.85 | % | 1.89 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.81 | % (d)†† | 1.79 | % | 1.79 | % | 1.83 | % | 1.85 | % | 1.90 | % | ||||||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | 60 | % | 52 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 350,133 | $ | 408,078 | $ | 402,714 | $ | 403,968 | $ | 375,521 | $ | 380,186 |
* | Unaudited. |
†† | 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) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
18 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31 | |||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 11.15 | $ | 11.32 | $ | 10.31 | $ | 7.80 | $ | 7.45 | $ | 6.75 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.03 | 0.00 | ‡ | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.60 | ) | 0.89 | 1.51 | 2.50 | 0.51 | 0.71 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.59 | ) | 0.89 | 1.51 | 2.53 | 0.51 | 0.70 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | — | — | — | (0.02 | ) | — | — | |||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | (0.16 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.02 | ) | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 9.29 | $ | 11.15 | $ | 11.32 | $ | 10.31 | $ | 7.80 | $ | 7.45 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (5.87 | %)(c) | 8.36 | % | 15.26 | % | 32.41 | % | 7.15 | % | 10.37 | % (d) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.11 | % †† | 0.02 | % | 0.02 | % | 0.38 | % | 0.03 | % | (0.09 | %) | ||||||||||||
Net expenses | 0.75 | % (e)†† | 0.74 | % | 0.74 | % | 0.77 | % | 0.79 | % | 0.81 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.76 | % (e)†† | 0.74 | % | 0.74 | % | 0.77 | % | 0.79 | % | 0.82 | % | ||||||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | 60 | % | 52 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 10,070,438 | $ | 12,150,253 | $ | 14,361,006 | $ | 13,254,459 | $ | 11,215,464 | $ | 8,465,658 |
* | Unaudited. |
†† | 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. Class I shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(e) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class R1 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.99 | $ | 11.17 | $ | 10.19 | $ | 7.72 | $ | 7.38 | $ | 6.70 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | 0.02 | (0.01 | ) | (0.02 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | (0.59 | ) | 0.89 | 1.49 | 2.47 | 0.51 | 0.70 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.59 | ) | 0.88 | 1.48 | 2.49 | 0.50 | 0.68 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | — | — | — | (0.02 | ) | — | — | |||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | (0.16 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.02 | ) | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 9.13 | $ | 10.99 | $ | 11.17 | $ | 10.19 | $ | 7.72 | $ | 7.38 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (5.97 | %)(c) | 8.39 | % | 15.14 | % | 32.27 | % | 6.94 | % | 10.15 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.01 | % †† | (0.08 | %) | (0.08 | %) | 0.28 | % | (0.08 | %) | (0.21 | %) | ||||||||||||
Net expenses | 0.85 | % (d)†† | 0.84 | % | 0.84 | % | 0.87 | % | 0.89 | % | 0.91 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.86 | % (d)†† | 0.84 | % | 0.84 | % | 0.87 | % | 0.89 | % | 0.92 | % | ||||||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | 60 | % | 52 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 1,828,945 | $ | 1,952,248 | $ | 2,225,940 | $ | 2,287,242 | $ | 1,950,015 | $ | 1,140,164 |
* | Unaudited. |
†† | 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. Class R1 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class R2 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.68 | $ | 10.92 | $ | 9.99 | $ | 7.57 | $ | 7.26 | $ | 6.61 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.03 | ) | (0.03 | ) | 0.00 | ‡ | (0.02 | ) | (0.03 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.57 | ) | 0.85 | 1.46 | 2.42 | 0.49 | 0.68 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.58 | ) | 0.82 | 1.43 | 2.42 | 0.47 | 0.65 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | — | — | — | (0.00 | )‡ | — | — | |||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | (0.16 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 8.83 | $ | 10.68 | $ | 10.92 | $ | 9.99 | $ | 7.57 | $ | 7.26 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (6.06 | %)(c) | 8.00 | % | 14.93 | % | 31.88 | % | 6.77 | % | 9.83 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.24 | %)†† | (0.32 | %) | (0.33 | %) | 0.03 | % | (0.32 | %) | (0.46 | %) | ||||||||||||
Net expenses | 1.10 | % (d)†† | 1.09 | % | 1.09 | % | 1.12 | % | 1.14 | % | 1.16 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.11 | % (d)†† | 1.09 | % | 1.09 | % | 1.12 | % | 1.14 | % | 1.17 | % | ||||||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | 60 | % | 52 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 517,280 | $ | 674,630 | $ | 984,295 | $ | 1,014,655 | $ | 854,119 | $ | 701,183 |
* | Unaudited. |
†† | 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. Class R2 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
�� | ||||||||||||||||||||||||
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class R3 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.39 | $ | 10.67 | $ | 9.80 | $ | 7.45 | $ | 7.16 | $ | 6.53 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.02 | ) | (0.06 | ) | (0.06 | ) | (0.02 | ) | (0.04 | ) | (0.05 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.56 | ) | 0.84 | 1.43 | 2.37 | 0.49 | 0.68 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.58 | ) | 0.78 | 1.37 | 2.35 | 0.45 | 0.63 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | — | — | — | (0.00 | )‡ | — | — | |||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | (0.16 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | (0.16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 8.54 | $ | 10.39 | $ | 10.67 | $ | 9.80 | $ | 7.45 | $ | 7.16 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (6.24 | %)(c) | 7.79 | % | 14.59 | % | 31.63 | % | 6.44 | % | 9.65 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.49 | %)†† | (0.57 | %) | (0.57 | %) | (0.20 | %) | (0.57 | %) | (0.70 | %) | ||||||||||||
Net expenses | 1.35 | % (d)†† | 1.34 | % | 1.34 | % | 1.37 | % | 1.39 | % | 1.41 | % | ||||||||||||
Expenses (before reimbursement/waiver) | 1.36 | % (d)†† | 1.34 | % | 1.34 | % | 1.37 | % | 1.39 | % | 1.42 | % | ||||||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | 60 | % | 52 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 94,654 | $ | 114,118 | $ | 158,222 | $ | 219,158 | $ | 205,329 | $ | 138,883 |
* | Unaudited. |
†† | 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. Class R3 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
20 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | June 17, 2013** through October 31, | ||||||||||||||
Class R6 | 2016* | 2015 | 2014 | 2013 | ||||||||||||
Net asset value at beginning of period | $ | 11.18 | $ | 11.33 | $ | 10.31 | $ | 9.02 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income (loss) (a) | 0.01 | 0.01 | 0.01 | 0.00 | ‡ | |||||||||||
Net realized and unrealized gain (loss) on investments | (0.60 | ) | 0.90 | 1.51 | 1.29 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | (0.59 | ) | 0.91 | 1.52 | 1.29 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
From net realized gain on investments | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value at end of period | $ | 9.32 | $ | 11.18 | $ | 11.33 | $ | 10.31 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment return (b) | (5.86 | %)(c) | 8.55 | % | 15.36 | % | 14.30 | %(c) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Net investment income (loss) | 0.24 | % †† | 0.11 | % | 0.10 | % | 0.04 | %†† | ||||||||
Net expenses | 0.62 | % (d)†† | 0.62 | % | 0.62 | % | 0.62 | %†† | ||||||||
Expenses (before waiver/reimbursement) | 0.63 | % (d)†† | 0.62 | % | 0.62 | % | 0.62 | %†† | ||||||||
Portfolio turnover rate | 48 | % | 66 | % | 67 | % | 74 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 1,365,050 | $ | 1,311,034 | $ | 738,186 | $ | 147,625 |
* | Unaudited. |
** | Inception date. |
†† | 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. Class R6 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the ‘‘Trust’’) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the ‘‘Funds’’). These financial statements and notes relate to the MainStay Large Cap Growth Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers nine classes of shares. Class A shares commenced operations on July 1, 1995. Class B, Class C, Class I, Class R1 and Class R2 shares commenced operations on April 1, 2005. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class R6 shares commenced operations on June 17, 2013. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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, Class R1, Class R2, Class R3 and Class R6 shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A shares. The nine 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 Class A, Investor Class, Class R2 and Class R3 shares under a distribution plan pursuant to Rule 12b-1 under the 1940 Act. Class I, Class R1 and Class R6 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 Fund’s investment objective is to seek long-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisor or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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
22 | MainStay Large Cap Growth Fund |
participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Monthly payment information | |
• Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities and shares of Exchange-Traded Funds (“ETFs”) are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Investments in mutual funds, including money market funds, are valued at their respective 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 in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. 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. These securities are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(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 provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection
23 |
Notes to Financial Statements (Unaudited) (continued)
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 permitted only to the extent 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 provisions 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 from net investment income and distributions from net realized capital and currency gains, if any, at least 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; net of any foreign tax withheld at the source, 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. The straight-line method approximates the effective interest method for short-term investments. 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/or 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 Board. During the term of any repurchase agreement, the Manager or Subadvisor will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty 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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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.During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(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.
24 | MainStay Large Cap Growth Fund |
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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer of the Fund. Winslow Capital Management, LLC. (“Winslow” 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 Winslow, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, 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: 0.75% up to $500 million; 0.725% from $500 million to $750 million; 0.71% from $750 million to $1 billion; 0.70% from $1 billion to $2 billion; 0.66% from $2 billion to $3 billion; 0.61% from $3 billion to $7 billion; 0.585% from $7 billion to $9 billion; and 0.575% in excess of $9 billion. New York Life Investments has contractually agreed to waive a portion of its management fee so that the management fee does not exceed 0.55% of the Fund’s average daily net assets from $11 billion to $13 billion; and 0.525% of the Fund’s average daily net assets over $13 billion. This agreement will remain in effect until March 1, 2017, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval by the Board.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses of Class I shares so that Total Annual Fund Operating Expenses of Class I shares do not exceed 0.88% of the Fund’s average daily net assets. This agreement will remain in effect until March 1, 2017, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
Additionally, New York Life Investments has agreed to further voluntarily waive fees and/or reimburse the expenses of Class R1 shares so that Total Annual Fund Operating Expenses do not exceed 0.95% of its average daily net assets. This voluntary waiver or reimbursement may be discontinued at any time. 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.
During the six-month period ended April 30, 2016, the effective management fee rate was 0.61%.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $49,104,017.
State Street 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 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, Service and Shareholder 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 Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares, at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class 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, Class R1 and Class R6 shares are not subject to a distribution and/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.
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, its affiliates, or independent third party service providers are 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. This is in addition to any fees paid under a distribution plan, where applicable.
During the six-month period ended April 30, 2016, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 948,710 | ||
Class R2 | 284,383 | |||
Class R3 | 50,918 |
(C) Sales Charges. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $46,761 and $23,540, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor
25 |
Notes to Financial Statements (Unaudited) (continued)
retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $2,807, $203, $70,142 and $17,649, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 708,954 | ||
Investor Class | 153,571 | |||
Class B | 38,188 | |||
Class C | 329,156 | |||
Class I | 6,954,216 | |||
Class R1 | 1,241,588 | |||
Class R2 | 371,325 | |||
Class R3 | 66,592 |
(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.
Note 4–Federal Income Tax
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 206,173,770 | ||
Long-Term Capital Gain | 1,670,514,816 | |||
Total | $ | 1,876,688,586 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, the Fund utilized the line of credit for one day, maintained an average daily balance of $82,000,000 at a weighted average interest rate of 1.328% and incurred interest expense in the amount of $3,025. As of April 30, 2016, there were no borrowings outstanding.
Note 7–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $7,811,941 and $9,257,039, respectively.
Note 8–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 14,362,884 | $ | 131,531,582 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13,179,543 | 123,228,727 | ||||||
Shares redeemed | (27,575,662 | ) | (247,800,497 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (33,235 | ) | 6,959,812 | |||||
Shares converted into Class A (See Note 1) | 267,744 | 2,409,704 | ||||||
Shares converted from Class A (See Note 1) | (185,423 | ) | (1,605,765 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 49,086 | $ | 7,763,751 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 21,810,581 | $ | 226,524,859 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,872,016 | 110,133,517 | ||||||
Shares redeemed | (40,165,642 | ) | (416,439,846 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (7,483,045 | ) | (79,781,470 | ) | ||||
Shares converted into Class A (See Note 1) | 813,049 | 8,547,122 | ||||||
Shares converted from Class A (See Note 1) | (317,270 | ) | (3,204,527 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (6,987,266 | ) | $ | (74,438,875 | ) | |||
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26 | MainStay Large Cap Growth Fund |
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 2,047,117 | $ | 19,917,078 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,443,289 | 22,673,718 | ||||||
Shares redeemed | (2,134,412 | ) | (19,205,319 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,355,994 | 23,385,477 | ||||||
Shares converted into Investor Class (See Note 1) | 448,576 | 3,908,260 | ||||||
Shares converted from Investor Class (See Note 1) | (218,252 | ) | (1,968,219 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 2,586,318 | $ | 25,325,518 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 2,274,877 | $ | 23,481,303 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,911,381 | 19,228,420 | ||||||
Shares redeemed | (5,699,442 | ) | (58,869,533 | ) | ||||
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|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,513,184 | ) | (16,159,810 | ) | ||||
Shares converted into Investor Class (See Note 1) | 792,362 | 8,017,661 | ||||||
Shares converted from Investor Class (See Note 1) | (718,721 | ) | (7,522,265 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,439,543 | ) | $ | (15,664,414 | ) | |||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 659,861 | $ | 5,350,261 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 659,856 | 5,505,052 | ||||||
Shares redeemed | (808,924 | ) | (6,440,866 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 510,793 | 4,414,447 | ||||||
Shares converted from Class B (See Note 1) | (347,031 | ) | (2,743,980 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 163,762 | $ | 1,670,467 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 770,715 | $ | 7,275,764 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 519,992 | 4,802,784 | ||||||
Shares redeemed | (974,250 | ) | (9,169,284 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 316,457 | 2,909,264 | ||||||
Shares converted from Class B (See Note 1) | (625,907 | ) | (5,837,991 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (309,450 | ) | $ | (2,928,727 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 5,701,254 | $ | 47,138,651 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,001,163 | 24,969,683 | ||||||
Shares redeemed | (6,305,718 | ) | (50,532,043 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 2,396,699 | $ | 21,576,291 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 8,009,787 | $ | 75,101,486 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,080,388 | 19,181,176 | ||||||
Shares redeemed | (7,968,035 | ) | (75,209,893 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 2,122,140 | $ | 19,072,769 | |||||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 131,682,854 | $ | 1,248,435,766 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 101,900,227 | 1,000,660,248 | ||||||
Shares redeemed | (239,146,896 | ) | (2,275,189,060 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (5,563,815 | ) | $ | (26,093,046 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 217,439,008 | $ | 2,348,916,340 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 92,488,739 | 975,756,195 | ||||||
Shares redeemed | (489,304,127 | ) | (5,312,636,978 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (179,376,380 | ) | $ | (1,987,964,443 | ) | |||
|
|
|
| |||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 30,839,875 | $ | 310,067,709 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 25,181,545 | 243,253,727 | ||||||
Shares redeemed | (33,409,679 | ) | (315,701,733 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 22,611,741 | $ | 237,619,703 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 26,569,433 | $ | 284,821,244 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 19,995,031 | 207,948,321 | ||||||
Shares redeemed | (68,052,816 | ) | (728,357,325 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (21,488,352 | ) | $ | (235,587,760 | ) | |||
|
|
|
|
27 |
Notes to Financial Statements (Unaudited) (continued)
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 7,844,526 | $ | 71,371,607 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,403,725 | 50,524,831 | ||||||
Shares redeemed | (17,839,246 | ) | (163,241,473 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (4,590,995 | ) | $ | (41,345,035 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 15,855,834 | $ | 164,291,461 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,586,660 | 66,722,868 | ||||||
Shares redeemed | (49,429,038 | ) | (520,943,135 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (26,986,544 | ) | $ | (289,928,806 | ) | |||
|
|
|
| |||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 1,238,619 | $ | 10,851,894 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,377,716 | 12,468,332 | ||||||
Shares redeemed | (2,524,815 | ) | (22,117,315 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 91,520 | $ | 1,202,911 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 2,585,484 | $ | 26,221,607 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,388,579 | 13,719,161 | ||||||
Shares redeemed | (7,816,197 | ) | (79,215,887 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (3,842,134 | ) | $ | (39,275,119 | ) | |||
|
|
|
| |||||
Class R6 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 41,951,755 | $ | 420,942,591 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 14,978,754 | 147,540,722 | ||||||
Shares redeemed | (27,779,727 | ) | (284,786,567 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 29,150,782 | $ | 283,696,746 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 63,215,922 | $ | 678,929,508 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,566,938 | 69,346,874 | ||||||
Shares redeemed | (17,665,445 | ) | (191,161,564 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 52,117,415 | $ | 557,114,818 | |||||
|
|
|
|
Note 9–Litigation
On December 23, 2014, Cynthia Ann Redus-Tarchis and others filed a complaint against New York Life Investments in the United States District Court for the District of New Jersey. The complaint was brought derivatively on behalf of the MainStay Marketfield Fund, the MainStay Large Cap Growth Fund, and the MainStay High Yield Corporate Bond Fund and alleges that New York Life Investments violated Section 36(b) of the 1940 Act by charging excessive investment management fees. The plaintiffs seek monetary damages and other relief from New York Life Investments. New York Life Investments believes the case has no merit, and intends to vigorously defend the matter.
On April 20, 2015, a second amended complaint was filed which, among other things, added MainStay High Yield Opportunities Fund as an additional Fund on whose behalf the complaint was brought. New York Life Investments filed a motion to dismiss the amended complaint. This motion was denied on October 28, 2015. New York Life Investments filed an answer to the amended complaint on November 30, 2015. Discovery in the case has commenced.
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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 Large Cap Growth Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay Large Cap Growth Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreement between New York Life Investments and Winslow Capital Management LLC (“Winslow Capital”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments and Winslow Capital in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments and Winslow Capital (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates and Winslow Capital and responses from New York Life Investments and Winslow Capital to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Fund’s distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments and Winslow Capital; (ii) the investment performance of the Fund, New York Life Investments and Winslow Capital; (iii) the costs of the services provided, and profits realized, by New York Life Investments and Winslow Capital from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments and Winslow Capital. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments and Winslow Capital
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that Winslow Capital provides to the Fund. The Board evaluated Winslow Capital’s experience in serving as subadvisor to the Fund and managing other portfolios. It examined Winslow Capital’s track record and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at Winslow Capital, and Winslow Capital’s overall legal and compliance environment. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by Winslow Capital. The Board also reviewed Winslow Capital’s willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the method for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’ and Winslow Capital’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments or Winslow Capital had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and Winslow Capital to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments and Winslow Capital
The Board considered the costs of the services provided by New York Life Investments and Winslow Capital under the Agreements and the profits realized by New York Life Investments and its affiliates and Winslow Capital due to their relationships with the Fund. Although the Board did not receive specific profitability information from Winslow Capital, the Board considered representations from Winslow Capital and New York Life Investments that the subadvisory fee paid by New York Life Investments to Winslow Capital for services provided to the Fund was the result of arm’s-length negotiations. Because Winslow Capital’s subadvisory fees are negotiated at arm’s-length by New York Life Investments and are paid by New York Life Investments, not the Fund, the Board primarily considered the profits realized by New York Life Investments and its affiliates with respect to the Fund.
In evaluating the costs of the services provided by New York Life Investments and Winslow Capital and profits realized by New York Life Investments and its affiliates and Winslow Capital, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments and Winslow Capital must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments and Winslow Capital to continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to
30 | MainStay Large Cap Growth Fund |
allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund. The Board recognized, for example, the benefits to Winslow Capital from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to Winslow Capital in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities. In this regard, the Board also requested and received information from New York Life Investments and Winslow Capital concerning other business relationships between Winslow Capital and its affiliates and New York Life Investments and its affiliates.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates due to their relationships with the Fund supported the Board’s decision to approve the Agreements. With respect to Winslow Capital, the Board concluded that any profits realized by Winslow Capital due to its relationship with the Fund are the result of arm’s-length negotiations between New York Life Investments and Winslow Capital
and are based on fees paid to Winslow Capital by New York Life Investments, not the Fund.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to Winslow Capital are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments and Winslow Capital on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses. The Board noted that the Fund’s total net expenses compared favorably to peers. The Board further considered the positive overall impact of the breakpoints in the Fund’s management fee schedule. Additionally, the Board considered and determined to approve a proposal from New York Life Investments to implement a contractual waiver of the Fund’s management fee.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its
cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
32 | MainStay Large Cap Growth 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 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 or proxy voting record 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).
33 |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1694708 MS164-16 | MSLG10-06/16 (NYLIM) NL031 |
MainStay MAP Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2016
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Message from the President
The U.S. stock market experienced substantial volatility during the six months ended April 30, 2016. After holding relatively steady in November and December of 2015, stock prices sank steadily in the early weeks of 2016. Oil prices continued their long-standing descent through mid-January 2016, and slowing economic growth in China continued to be a major concern for equity investors. In February, U.S. stocks began a relatively steady recovery, and they closed the reporting period not far from where they began.
According to FTSE Russell data, U.S. stocks as a whole tended to provide positive returns, with mid-capitalization stocks generally outperforming large- and small-cap stocks. During the reporting period, value stocks generally provided positive total returns for all but the very smallest companies and outperformed growth stocks at all capitalization levels.
International and emerging-market stocks also tended to provide negative returns for the six months ended April 30, 2016. Slowing growth in China, weaker commodity prices and Brazil’s economic woes all took a toll on global stock performance.
Many sectors of the bond market showed relatively strong performance during the six-month reporting period. U.S. Treasury, agency, mortgage-backed and asset-backed securities—as well as corporate, municipal, high-yield and emerging-market bonds—all provided positive performance. Longer-term bonds tended to provide higher total returns than shorter-term bonds; and among investment-grade bonds, A-rated issues1 were particularly strong. The convertible bond market, where bond performance is tied to the value of an underlying stock, struggled during the reporting period, as many convertible issuers faced challenges.
While stock and bond markets may go up or down in ways that are hard to predict, staying the course requires a long-term
view. It may also require an ability to remain optimistic, even through periods of market volatility. During the reporting period, our managers sought to maintain a long-term perspective and generally did not make decisions based on short-term volatility. For some managers this may have proved beneficial. For example, although oil prices declined substantially in a period of supply-and-demand imbalance, they eventually recovered toward levels that were more familiar and reasonable. A similar pattern was seen in the stock market.
While our portfolio managers may closely consider daily market movements, they seek to make long-term decisions on the basis of the investment objectives of their respective Funds and the investment strategies outlined in each Fund’s prospectus. In this way, they seek to offer a consistent basis for their decisions, wherever the markets may move.
The semiannual report that follows provides more detailed information about the market changes, investment decisions and individual securities that affected your MainStay Fund during the six months ended April 30, 2016. We hope that you will read it carefully and use the information as part of your long-term investment planning and decision making.
At MainStay, we’re honored that you have chosen to invest with us, and we hope that our Funds will remain a valuable part of your investment portfolio for many years to come.
Sincerely,
Stephen P. Fisher
President
1. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations 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. 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 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. Past performance is no guarantee of future results.
Not part of the Semiannual Report
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, 30 Hudson Street, Jersey City, NJ 07302 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 April 30, 2016
Class | Sales Charge | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –8.89 –3.59 | %
|
| –11.49 –6.34 | %
|
| 6.02 7.23 | %
|
| 4.53 5.13 | %
|
| 1.11 1.11 | %
| |||||||
Investor Class Shares3 | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges |
| –8.99 –3.69 |
|
| –11.66 –6.52 |
|
| 5.83 7.04 |
|
| 4.38 4.97 |
|
| 1.25 1.25 |
| |||||||
Class B Shares | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges |
| –8.02 –4.04 |
|
| –11.04 –7.19 |
|
| 5.94 6.25 |
|
| 4.18 4.18 |
|
| 2.00 2.00 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges |
| –4.84 –4.04 |
|
| –7.96 –7.19 |
|
| 6.24 6.24 |
|
| 4.18 4.18 |
|
| 2.00 2.00 |
| |||||||
Class I Shares | No Sales Charge | –3.49 | –6.11 | 7.50 | 5.40 | 0.86 | ||||||||||||||||||
Class R1 Shares | No Sales Charge | –3.51 | –6.18 | 7.38 | 5.28 | 0.96 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | –3.66 | –6.46 | 7.12 | 5.04 | 1.21 | ||||||||||||||||||
Class R3 Shares4 | No Sales Charge | –3.75 | –6.65 | 6.86 | 4.77 | 1.46 |
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, changes 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 may 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 (if any), 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 would likely have been different. |
4. | Performance figures for Class R3 shares, which were first offered on April 28, 2006, include the historical performance of Class A shares through April 27, 2006, adjusted for differences in certain expenses and fees. Unadjusted, the performance shown for Class R3 shares would likely have been different. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | FIve Years | Ten Years | ||||||||||||
Russell 3000® Index5 | 0.06 | % | –0.18 | % | 10.50 | % | 6.85 | % | ||||||||
S&P 500® Index6 | 0.43 | 1.21 | 11.02 | 6.91 | ||||||||||||
Average Lipper Large-Cap Core Fund7 | –0.79 | –1.30 | 9.30 | 5.93 |
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. | “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 secondary benchmark. Results assume reinvestment of all income 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 average characteristics 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 MAP Fund |
Cost in Dollars of a $1,000 Investment in MainStay MAP Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2015, to April 30, 2016, 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 November 1, 2015, to April 30, 2016.
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 April 30, 2016. 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.
Share Class | Beginning Account Value 11/1/15 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/16 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/16 | Expenses Paid During Period1 | |||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 964.10 | $ | 5.47 | $ | 1,019.30 | $ | 5.62 | ||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 963.10 | $ | 6.35 | $ | 1,018.40 | $ | 6.52 | ||||||||||
Class B Shares | $ | 1,000.00 | $ | 959.60 | $ | 9.99 | $ | 1,014.70 | $ | 10.27 | ||||||||||
Class C Shares | $ | 1,000.00 | $ | 959.60 | $ | 9.99 | $ | 1,014.70 | $ | 10.27 | ||||||||||
Class I Shares | $ | 1,000.00 | $ | 965.10 | $ | 4.25 | $ | 1,020.50 | $ | 4.37 | ||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 964.90 | $ | 4.74 | $ | 1,020.00 | $ | 4.87 | ||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 963.40 | $ | 5.96 | $ | 1,018.80 | $ | 6.12 | ||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 962.50 | $ | 7.17 | $ | 1,017.60 | $ | 7.37 |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class (1.12% for Class A, 1.30% for Investor Class, 2.05% for Class B and Class C, 0.87% for Class I, 0.97% for Class R1, 1.22% for Class R2 and 1.47% for Class R3) multiplied by the average account value over the period, divided by 366 and multiplied by 182 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
7 |
Industry Composition as of April 30, 2016 (Unaudited)
Media | 10.5 | % | ||
Pharmaceuticals | 6.2 | |||
Aerospace & Defense | 6.0 | |||
Banks | 6.0 | |||
Capital Markets | 5.0 | |||
Oil, Gas & Consumable Fuels | 4.7 | |||
Technology Hardware, Storage & Peripherals | 4.7 | |||
Chemicals | 4.4 | |||
Consumer Finance | 4.3 | |||
Software | 3.6 | |||
Health Care Providers & Services | 3.5 | |||
Health Care Equipment & Supplies | 2.9 | |||
Insurance | 2.7 | |||
Real Estate Investment Trusts | 2.6 | |||
Internet Software & Services | 2.5 | |||
Food & Staples Retailing | 2.2 | |||
Semiconductors & Semiconductor Equipment | 2.1 | |||
IT Services | 2.0 | |||
Auto Components | 1.9 | |||
Beverages | 1.9 | |||
Diversified Financial Services | 1.8 | |||
Machinery | 1.7 | |||
Specialty Retail | 1.6 |
Biotechnology | �� | 1.4 | % | |
Household Durables | 1.4 | |||
Road & Rail | 1.4 | |||
Industrial Conglomerates | 1.2 | |||
Hotels, Restaurants & Leisure | 1.0 | |||
Construction Materials | 0.8 | |||
Airlines | 0.7 | |||
Internet & Catalog Retail | 0.7 | |||
Wireless Telecommunication Services | 0.7 | |||
Electronic Equipment, Instruments & Components | 0.6 | |||
Real Estate Management & Development | 0.6 | |||
Diversified Telecommunication Services | 0.5 | |||
Electrical Equipment | 0.5 | |||
Energy Equipment & Services | 0.4 | |||
Multi-Utilities | 0.3 | |||
Tobacco | 0.3 | |||
Commercial Services & Supplies | 0.2 | |||
Construction & Engineering | 0.2 | |||
Household Products | 0.2 | |||
Food Products | 0.1 | |||
Short-Term Investment | 2.5 | |||
Other Assets, Less Liabilities | –0.5 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 13 for specific holdings within these categories.
Top Ten Holdings or Issuers Held as of April 30, 2016 (excluding short-term investment) (Unaudited)
1. | Apple, Inc. |
2. | Boeing Co. (The) |
3. | Medtronic PLC |
4. | American Express Co. |
5. | Oracle Corp. |
6. | Liberty SiriusXM Group |
7. | Allergan PLC |
8. | Comcast Corp. Class A |
9. | Monsanto Co. |
10. | Wells Fargo & Co. |
8 | MainStay MAP Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Roger Lob, Christopher Mullarkey and James Mulvey of the Fund’s Subadvisor Markston International LLC (“Markston International”) and by portfolio managers Jerrold K. Senser, Thomas M. Cole, CFA, Andrew P. Starr, CFA, Matthew T. Swanson, CFA, and J. Christian Kirtley, CFA, of the Fund’s Subadvisor Institutional Capital LLC (“ICAP”).
How did MainStay MAP Fund perform relative to its benchmarks and peers during the six months ended April 30, 2016?
Excluding all sales charges, MainStay MAP Fund returned –3.59% for Class A shares, –3.69% for Investor Class shares and –4.04% for Class B and Class C shares for the six months ended April 30, 2016. Over the same period, Class I shares returned –3.49%, Class R1 shares returned –3.51%, Class R2 shares returned –3.66% and Class R3 shares returned –3.75%. For the six months ended April 30, 2016, all share classes underperformed the 0.06% return of the Russell 3000® Index,1 which is the Fund’s primary benchmark, and the 0.43% return of the S&P 500® Index,1 which is the Fund’s secondary benchmark. For the six months ended April 30, 2016, all share classes underperformed the –0.79% return of the Average Lipper2 Large-Cap Core Fund. See page 5 for Fund returns with applicable sales charges.
What factors affected the Fund’s performance during the reporting period?
Markston International
The underperformance of our portion of the Fund relative to the Russell 3000® Index was primarily a result of commodity-related stocks. Specifically, in December 2015 and January 2016, our stock selections in the energy sector detracted from relative performance.
ICAP
In our portion of the Fund that invests in U.S. equities, a number of key drivers affected performance relative to the S&P 500® Index. Favorable stock selection in the consumer discretionary and energy sectors added to relative performance. Stock selection in the health care and financials sectors, however, detracted from relative performance. Our portion of the Fund that invests in U.S. equities benefited from an underweight position relative to the S&P 500® Index in the information technology sector, which underperformed the Index during the reporting period. However, an underweight position in the consumer staples sector detracted from relative performance, as the sector outperformed the Index during the reporting period.
In our portion of the Fund that invests in global equities, energy, consumer discretionary and industrials were the best-performing sectors on an absolute basis. In this portion of the Fund, the weakest-performing sectors on an absolute basis were financials, consumer staples and information technology.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s performance and which sectors were particularly weak?
Markston International
In our portion of the Fund, the strongest positive sector contributions to relative performance during the reporting period came from consumer discretionary, health care and materials. (Contributions take weightings and total returns into account.) Performance in the consumer discretionary sector was driven by stock selection. Our portion of the Fund held an underweight position relative to the Russell 3000® Index in health care and a slightly overweight position relative to the Index in materials. Allocations were the key drivers of performance in those sectors.
The sectors that detracted the most from relative performance in our portion of the Fund were energy, financials and utilities. Stock selection in the energy and financials sectors detracted from performance. An overweight position relative to the Russell 3000® Index in the financials sector and an underweight position relative to the Index in the utilities sector detracted from relative performance.
ICAP
In our portion of the Fund that invests in U.S. equities, the sectors that made the strongest positive contributions to performance relative to the S&P 500® Index were consumer discretionary and energy. Favorable stock selection was the primary driver in both sectors. The sectors that detracted the most from the Fund’s performance relative to the Index were health care, financials and consumer staples. Stock selection was the primary driver in health care and financials. In the consumer discretionary sector, an underweight position relative to the S&P 500® Index detracted from relative performance.
In our portion of the Fund that invests in global equities, the top contributing sectors on an absolute basis were energy, industrials and consumer discretionary. The sectors that detracted the most from absolute performance were financials, health care and information technology.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s performance and which stocks detracted the most?
Markston International
In our portion of the Fund, the strongest positive contributors to absolute performance were medical device company Medtronic, media company Liberty Broadband and insurance company
1. | See footnote on page 6 for more information on this index. |
2. | See footnote on page 6 for more information on Lipper Inc. |
9 |
Chubb. Medtronic showed top- and bottom-line growth that helped reduce the company’s discount to its peer group. Liberty Broadband, the spin-off from Liberty Media, has an ownership stake in Charter Communications as its principal asset. Charter Communications’ core operating profitability improved during the reporting period. In addition, investors anticipated that the Federal Communications Commission would approve Charter Communications’ acquisitions of Time Warner Cable and Bright House Networks. Chubb, a property and casualty insurer, performed well after shareholders approved its merger with Ace Limited.
The stocks that detracted the most from absolute performance in our portion of the Fund were aerospace & defense company Boeing, credit card company American Express and consumer electronics and computer company Apple. Boeing was hit with a Securities and Exchange Commission accounting probe that led to a sell-off in its stock. American Express lost Costco as a major customer. Shares of Apple faced difficulties related to the company’s size, which we believed could leave investors looking for faster ways to compound their money.
ICAP
In our portion of the Fund that invests in U.S. equities, the stocks that made the strongest positive contributions to the Fund’s absolute performance were diversified consumer products manufacturer Newell Brands, appliance manufacturer Whirlpool and integrated oil & gas company Chevron. Newell Brands had lagged for a period as the level of debt incurred to acquire Jarden was not well received by investors who preferred low-beta3 investments. We believed that projected synergies from the deal were too conservative, that the company might pay down debt faster than expected and that the company’s brand portfolio was more defensive than investors perceived. At Whirlpool, we believed that positive fundamental changes were underway. In our view, the stock’s valuation was depressed because of exposure to Brazil and other emerging markets and because of concerns about the company’s ability to expand profit margins. We believed that the stock could benefit from acquisition synergies, from operating leverage as North American sales volume improved and from lower costs for raw materials. Chevron performed strongly as prospects for improved free cash flow began to be reflected in the stock’s valuation, partly because of rising oil prices and lower capital expenditures. We sold Chevron from our portion of the Fund as the stock neared our price target.
Primary detractors from absolute performance in our portion of the Fund that invests in U.S. equities included specialty
pharmaceutical company Allergan, wealth manager Ameriprise Financial and consumer electronics and computer company Apple. Allergan lagged when the announced merger with Pfizer was called off. We continued to like Allergan as a stand-alone company, however, and we have added to the position in our portion of the Fund. The planned sale of Allergan’s generics division to Teva Pharmaceutical Industries, Ltd., was expected to give the company approximately $36 billion in capital to deploy, likely for share repurchase or acquisitions. We believed that the company had an attractive product pipeline, was increasing its revenue and was reducing costs to widen margins. Ameriprise Financial has lagged because of a difficult market and lower-than-expected net flows in its wealth management business. We sold the position from our portion of the Fund in favor of stocks with stronger investment catalysts. Apple underperformed because of short-term sales headwinds in China. We believed that the company would be able to generate sustainable mid-single-digit earnings-per-share growth, driven by the strength of its ecosystem, its annuity-like replacement cycle and its ability to attract new users. In our opinion, this could result in an improved valuation.
In our portion of the Fund that invests in global equities, the stocks that made the strongest positive contributions to the Fund’s absolute performance were Danish biotechnology company Genmab, global banking company Citigroup and Dutch health and nutrition products company Koninklijke DSM (“DSM”). Genmab’s launch of cancer drug Daratumumab progressed during the reporting period. We believed that the drug had strong potential given the strength of clinical data. Nevertheless, we sold the position in favor of stocks with greater upside potential. Citi-group benefited from improved execution and efficiency, which drove increased profitability and balance-sheet strength. We believed that investors were undervaluing DSM by giving a low implied value for the nutrition business and no credit for joint ventures. In our view, the company’s nutrition business could secure a higher value from cost-saving programs with performance-stimulating potential. We believed that DSM would be able to move past the collapse in vitamin E prices that masked underlying strength in the business in recent years.
Primary detractors from absolute performance in our portion of the Fund that invests in global equities included Allergan, Royal Bank of Scotland (“RBS”) and Deutsche Bank. During the reporting period, RBS was completely remaking itself from a global universal bank to one focused only on retail and commercial banking in the U.K. and Ireland. After several false starts under previous management, the company’s current chief executive officer, Ross McEwan, had defined what the bank
3. | Beta is a measure of volatility in relation to the market as a whole. A beta higher than 1 indicates that a security or portfolio will tend to exhibit higher volatility than the market. A beta lower than 1 indicates that a security or portfolio will tend to exhibit lower volatility than the market. |
10 | MainStay MAP Fund |
would look like going forward. We believed that core earnings power would stabilize and start growing in 2016, which could help address investor concerns about profitability. We believed that capital could be returned to shareholders once those concerns were addressed. Deutsche Bank is one of the leading investment banks in the world, with particular strength in Europe and fixed-income products. The company began to address its own history of poor risk management and execution, among other concerns. We anticipated a major, positive cultural change under the company’s new chief executive officer, John Cryan. Several managers have been replaced by Cryan, bringing a new attitude toward risk-taking and balance-sheet use. The bank still needs to build modern information technology systems and cut costs, which might take years. Even so, the overall trajectory of the bank was positive, which could be reflected in higher returns and a higher valuation over time.
Did the Fund make any significant purchases or sales during the reporting period?
Markston International
During the reporting period, our portion of the Fund reduced the degree to which it was underweight relative to the Russell 3000® Index in the health care sector by purchasing the drug manufacturers AbbVie and Allergan. In both cases, we felt that the stocks were inexpensive and had been unduly punished by a general sell-off in the health care sector. During the reporting period, our portion of the Fund reduced its energy sector exposure relative to the Russell 3000® Index by eliminating positions in integrated oil & gas company Chevron and independent oil and gas company Chesapeake Energy. We also sold small portions of other energy-related holdings to bring the energy weighting in our portion of the Fund in line with the energy weighting in the Russell 3000® Index.
ICAP
We continued to look for stocks with attractive valuations and specific catalysts that we believed could trigger appreciation in 12 to 18 months. We initiated a position in Royal Dutch Shell, a large integrated oil & gas company. We believed that investors had underestimated the free cash flow improvement potential from lower capital and operating expenditures. In our view, while the company has been slow to address costs, the recently acquired BG Group could be at a free cash inflection point and synergies from the deal may create upside potential. The company’s 8% dividend yield indicates possible investor skepticism. In financials, we added banking company Wells Fargo. The stock pulled back with the rest of the large-cap banks because of the Federal Reserve rate-hike expectations and credit-quality issues in the
energy lending space. We found the current valuation level attractive. Wells Fargo was also added in our portion of the Fund that invests in global equities. Semiconductor manufacturer Intel was added to both portions of the Fund that we manage. We believed that the company could generate sustainable mid-single-digit revenue growth and low-double-digit earnings growth, driven by growth in the data center, the Internet of Things,4 and memory, coupled with better performance in mobile. In our view, the current valuation assumed no revenue growth and continued mobile losses.
In addition to the sales already mentioned, we sold diversified pharmaceutical company Novartis and diversified industrial company General Electric from our portion of the Fund that invests in U.S. equities. We sold these positions in favor of stocks that we believed 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?
Markston International
As mentioned, our portion of the Fund purchased two pharmaceutical companies to reduce the degree to which we were underweight relative to the Russell 3000® Index in the health care sector. We also slightly increased our financial exposure relative to the benchmark by purchasing banks that were priced below book value while reducing allocations to other financial holdings that were trading at a multiple of earnings.
ICAP
In our portion of the Fund that invests in U.S. equities, we increased sector exposure relative to the S&P 500® Index in the information technology and financials sectors. While we increased our allocation to the information technology sector, our portion of the Fund that invests in U.S. equities remained underweight relative to the S&P 500® Index. In the financials sector, we increased an already overweight position relative to the Index. During the reporting period, our U.S.-equity portion of the Fund decreased its sector weightings relative to the S&P 500® Index in health care and energy. In the health care sector, we decreased the degree to which we were overweight relative to the Index. In the energy sector, we moved from an overweight position relative to the Index to an underweight position.
In our portion of the Fund that invests in global equities, we increased our absolute weightings in the financials and industrials sectors, and we decreased our weightings in the energy and health care sectors.
4. | The Internet of Things (IoT) is a system of uniquely identifiable animate or inanimate entities or devices—such as satellites, servers, cell towers, smart phones and GPS devices—able to share data without human intervention. |
11 |
How was the Fund positioned at the end of the reporting period?
Markston International
As of April 30, 2016, our portion of the Fund held overweight positions relative to the Russell 3000® Index in the consumer discretionary and industrials sectors. As of the same date, our portion of the Fund held underweight positions relative to the Index in the health care and utilities sectors.
ICAP
As of April 30, 2016, our portion of the Fund that invests in U.S. equities was most significantly overweight relative to the S&P
500® Index in the financials and consumer discretionary sectors. As of the same date, our domestic equity portion of the Fund was most significantly underweight relative to Index in the consumer staples and information technology sectors. As of April 30, 2016, the largest weightings in our portion of the Fund that invests in global equities were in the financials and health care sectors. As of the same date, the smallest weightings were in the consumer staples and utilities sectors. 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 forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
12 | MainStay MAP Fund |
Portfolio of Investments April 30, 2016 (Unaudited)
Shares | Value | |||||||
Common Stocks 98.0%† | ||||||||
Aerospace & Defense 6.0% |
| |||||||
¨Boeing Co. (The) | 295,649 | $ | 39,853,485 | |||||
Honeywell International, Inc. | 113,510 | 12,970,788 | ||||||
Northrop Grumman Corp. | 28,313 | 5,839,839 | ||||||
Orbital ATK, Inc. | 33,900 | 2,949,300 | ||||||
Raytheon Co. | 117,255 | 14,815,169 | ||||||
Safran S.A. | 85,200 | 5,870,083 | ||||||
United Technologies Corp. | 49,970 | 5,215,369 | ||||||
|
| |||||||
87,514,033 | ||||||||
|
| |||||||
Airlines 0.7% |
| |||||||
Delta Air Lines, Inc. | 251,350 | 10,473,754 | ||||||
|
| |||||||
Auto Components 1.9% |
| |||||||
Bridgestone Corp. | 138,000 | 5,338,421 | ||||||
Johnson Controls, Inc. | 562,045 | 23,268,663 | ||||||
|
| |||||||
28,607,084 | ||||||||
|
| |||||||
Banks 6.0% |
| |||||||
Bank of America Corp. | 628,569 | 9,151,965 | ||||||
Citigroup, Inc. | 567,145 | 26,247,471 | ||||||
JPMorgan Chase & Co. | 124,092 | 7,842,614 | ||||||
Royal Bank of Scotland Group PLC (a) | 2,597,820 | 8,730,356 | ||||||
U.S. Bancorp | 201,712 | 8,611,085 | ||||||
¨Wells Fargo & Co. | 549,800 | 27,479,004 | ||||||
|
| |||||||
88,062,495 | ||||||||
|
| |||||||
Beverages 1.9% |
| |||||||
Coca-Cola Co. (The) | 153,150 | 6,861,120 | ||||||
PepsiCo., Inc. | 129,466 | 13,329,820 | ||||||
Pernod Ricard S.A. | 65,550 | 7,076,473 | ||||||
|
| |||||||
27,267,413 | ||||||||
|
| |||||||
Biotechnology 1.4% |
| |||||||
AbbVie, Inc. | 179,543 | 10,952,123 | ||||||
Celgene Corp. (a) | 89,400 | 9,244,854 | ||||||
|
| |||||||
20,196,977 | ||||||||
|
| |||||||
Capital Markets 5.0% |
| |||||||
Bank of New York Mellon Corp. (The) | 81,900 | 3,295,656 | ||||||
Daiwa Securities Group, Inc. | 1,109,550 | 6,738,639 | ||||||
Deutsche Bank A.G. Registered | 393,880 | 7,428,175 | ||||||
Goldman Sachs Group, Inc. (The) | 96,949 | 15,910,301 | ||||||
Julius Baer Group, Ltd. (a) | 232,840 | 9,953,892 | ||||||
Morgan Stanley | 114,470 | 3,097,558 | ||||||
Northern Trust Corp. | 210,696 | 14,976,272 | ||||||
State Street Corp. | 197,844 | 12,325,681 | ||||||
|
| |||||||
73,726,174 | ||||||||
|
| |||||||
Chemicals 4.4% |
| |||||||
Akzo Nobel N.V. | 120,477 | 8,537,864 |
Shares | Value | |||||||
Chemicals (continued) |
| |||||||
E.I. du Pont de Nemours & Co. | 251,213 | $ | 16,557,449 | |||||
FMC Corp. | 29,526 | 1,277,294 | ||||||
Koninklijke DSM N.V. | 159,772 | 9,798,641 | ||||||
¨Monsanto Co. | 305,897 | 28,656,431 | ||||||
|
| |||||||
64,827,679 | ||||||||
|
| |||||||
Commercial Services & Supplies 0.2% |
| |||||||
Covanta Holding Corp. | 180,600 | 2,936,556 | ||||||
|
| |||||||
Construction & Engineering 0.2% |
| |||||||
Jacobs Engineering Group, Inc. (a) | 67,102 | 2,991,407 | ||||||
|
| |||||||
Construction Materials 0.8% |
| |||||||
LafargeHolcim, Ltd. Registered (a) | 224,095 | 11,346,080 | ||||||
|
| |||||||
Consumer Finance 4.3% |
| |||||||
Ally Financial, Inc. (a) | 1,160,900 | 20,675,629 | ||||||
¨American Express Co. | 572,949 | 37,488,053 | ||||||
Discover Financial Services | 99,344 | 5,590,087 | ||||||
|
| |||||||
63,753,769 | ||||||||
|
| |||||||
Diversified Financial Services 1.8% |
| |||||||
Berkshire Hathaway, Inc. Class B (a) | 28,034 | 4,078,386 | ||||||
Intercontinental Exchange, Inc. | 93,540 | 22,452,406 | ||||||
|
| |||||||
26,530,792 | ||||||||
|
| |||||||
Diversified Telecommunication Services 0.5% |
| |||||||
AT&T, Inc. | 111,592 | 4,332,001 | ||||||
Verizon Communications, Inc. | 53,406 | 2,720,502 | ||||||
|
| |||||||
7,052,503 | ||||||||
|
| |||||||
Electrical Equipment 0.5% |
| |||||||
Rockwell Automation, Inc. | 59,547 | 6,756,798 | ||||||
|
| |||||||
Electronic Equipment, Instruments & Components 0.6% |
| |||||||
Corning, Inc. | 73,600 | 1,374,112 | ||||||
TE Connectivity, Ltd. | 122,574 | 7,290,701 | ||||||
|
| |||||||
8,664,813 | ||||||||
|
| |||||||
Energy Equipment & Services 0.4% |
| |||||||
Schlumberger, Ltd. | 71,700 | 5,760,378 | ||||||
|
| |||||||
Food & Staples Retailing 2.2% |
| |||||||
CVS Health Corp. | 157,326 | 15,811,263 | ||||||
Wal-Mart Stores, Inc. | 69,254 | 4,631,015 | ||||||
Walgreens Boots Alliance, Inc. | 143,990 | 11,415,527 | ||||||
|
| |||||||
31,857,805 | ||||||||
|
| |||||||
Food Products 0.1% |
| |||||||
Mondelez International, Inc. Class A | 49,600 | 2,130,816 | ||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2016, 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. | 13 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Health Care Equipment & Supplies 2.9% |
| |||||||
Abbott Laboratories | 86,077 | $ | 3,348,395 | |||||
Baxter International, Inc. | 38,250 | 1,691,415 | ||||||
¨Medtronic PLC | 476,411 | 37,707,931 | ||||||
|
| |||||||
42,747,741 | ||||||||
|
| |||||||
Health Care Providers & Services 3.5% |
| |||||||
Aetna, Inc. | 234,751 | 26,355,495 | ||||||
McKesson Corp. | 144,870 | 24,312,083 | ||||||
|
| |||||||
50,667,578 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure 1.0% |
| |||||||
McDonald’s Corp. | 29,151 | 3,687,310 | ||||||
Sands China, Ltd. | 1,228,810 | 4,403,939 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 78,671 | 6,441,582 | ||||||
|
| |||||||
14,532,831 | ||||||||
|
| |||||||
Household Durables 1.4% |
| |||||||
Newell Brands, Inc. | 160,750 | 7,320,555 | ||||||
Whirlpool Corp. | 77,740 | 13,537,644 | ||||||
|
| |||||||
20,858,199 | ||||||||
|
| |||||||
Household Products 0.2% |
| |||||||
Procter & Gamble Co. (The) | 34,856 | 2,792,663 | ||||||
|
| |||||||
Industrial Conglomerates 1.2% |
| |||||||
3M Co. | 17,596 | 2,945,218 | ||||||
CK Hutchison Holdings, Ltd. | 722,380 | 8,656,193 | ||||||
General Electric Co. | 182,300 | 5,605,725 | ||||||
|
| |||||||
17,207,136 | ||||||||
|
| |||||||
Insurance 2.7% |
| |||||||
American International Group, Inc. | 114,593 | 6,396,581 | ||||||
Chubb, Ltd. | 65,987 | 7,777,228 | ||||||
MetLife, Inc. | 123,623 | 5,575,398 | ||||||
Travelers Cos., Inc. (The) | 141,198 | 15,517,660 | ||||||
W.R. Berkley Corp. | 76,123 | 4,262,888 | ||||||
|
| |||||||
39,529,755 | ||||||||
|
| |||||||
Internet & Catalog Retail 0.7% |
| |||||||
Liberty Interactive Corp. QVC Group Class A (a) | 307,124 | 8,046,649 | ||||||
Liberty TripAdvisor Holdings, Inc. Class A (a) | 41,215 | 909,203 | ||||||
Liberty Ventures (a) | 50,701 | 2,028,040 | ||||||
|
| |||||||
10,983,892 | ||||||||
|
| |||||||
Internet Software & Services 2.5% |
| |||||||
Alibaba Group Holding, Ltd., Sponsored ADR (a) | 15,200 | 1,169,488 | ||||||
Alphabet, Inc. | ||||||||
Class A (a) | 13,250 | 9,379,410 | ||||||
Class C (a) | 21,926 | 15,194,937 | ||||||
eBay, Inc. (a) | 175,556 | 4,288,833 | ||||||
VeriSign, Inc. (a) | 62,835 | 5,428,944 |
Shares | Value | |||||||
Internet Software & Services (continued) |
| |||||||
Yahoo!, Inc. (a) | 45,000 | $ | 1,647,000 | |||||
|
| |||||||
37,108,612 | ||||||||
|
| |||||||
IT Services 2.0% |
| |||||||
Automatic Data Processing, Inc. | 127,588 | 11,283,883 | ||||||
International Business Machines Corp. | 59,864 | 8,736,552 | ||||||
PayPal Holdings, Inc. (a) | 256,766 | 10,060,092 | ||||||
|
| |||||||
30,080,527 | ||||||||
|
| |||||||
Machinery 1.7% |
| |||||||
Caterpillar, Inc. | 79,140 | 6,150,761 | ||||||
Pentair PLC | 312,840 | 18,169,747 | ||||||
|
| |||||||
24,320,508 | ||||||||
|
| |||||||
Media 10.5% |
| |||||||
¨Comcast Corp. Class A | 490,763 | 29,818,760 | ||||||
DISH Network Corp. Class A (a) | 301,100 | 14,841,219 | ||||||
Grupo Televisa S.A.B., Sponsored ADR | 523,990 | 15,316,228 | ||||||
Liberty Braves Group | ||||||||
Class A (a) | 21,459 | 335,619 | ||||||
Class C (a) | 56,850 | 848,202 | ||||||
Liberty Broadband Corp. | ||||||||
Class A (a) | 23,879 | 1,368,744 | ||||||
Class C (a) | 122,898 | 7,035,910 | ||||||
Liberty Media Group | ||||||||
Class A (a) | 53,649 | 981,777 | ||||||
Class C (a) | 142,126 | 2,558,268 | ||||||
¨Liberty SiriusXM Group | ||||||||
Class A (a) | 214,597 | 7,032,344 | ||||||
Class C (a) | 742,056 | 23,760,633 | ||||||
Madison Square Garden Co. (The) Class A (a) | 55,653 | 8,736,408 | ||||||
MSG Networks, Inc. Class A (a) | 157,913 | 2,698,733 | ||||||
Starz Class A (a) | 81,377 | 2,214,268 | ||||||
Time Warner, Inc. | 150,545 | 11,311,951 | ||||||
Twenty-First Century Fox, Inc. | ||||||||
Class A | 508,545 | 15,388,572 | ||||||
Class B | 241,060 | 7,260,727 | ||||||
Walt Disney Co. (The) | 32,100 | 3,314,646 | ||||||
|
| |||||||
154,823,009 | ||||||||
|
| |||||||
Multi-Utilities 0.3% |
| |||||||
E.ON S.E. | 482,040 | 4,972,609 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 4.7% |
| |||||||
Anadarko Petroleum Corp. | 61,013 | 3,219,046 | ||||||
Apache Corp. | 76,273 | 4,149,251 | ||||||
ConocoPhillips | 99,606 | 4,760,171 | ||||||
Devon Energy Corp. | 56,260 | 1,951,097 | ||||||
EOG Resources, Inc. | 57,112 | 4,718,593 | ||||||
Hess Corp. | 70,555 | 4,206,489 | ||||||
Marathon Oil Corp. | 56,914 | 801,918 | ||||||
Marathon Petroleum Corp. | 199,640 | 7,801,931 | ||||||
Oil Search, Ltd. | 627,650 | 3,354,952 |
14 | MainStay MAP Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Oil, Gas & Consumable Fuels (continued) |
| |||||||
Phillips 66 | 27,928 | $ | 2,293,168 | |||||
Royal Dutch Shell PLC Class A, Sponsored ADR | 281,950 | 14,912,336 | ||||||
Spectra Energy Corp. | 206,876 | 6,469,013 | ||||||
Total S.A. | 161,500 | 8,123,783 | ||||||
Williams Cos., Inc. (The) | 98,546 | 1,910,807 | ||||||
|
| |||||||
68,672,555 | ||||||||
|
| |||||||
Pharmaceuticals 6.2% |
| |||||||
¨Allergan PLC (a) | 138,615 | 30,018,464 | ||||||
Johnson & Johnson | 73,450 | 8,232,276 | ||||||
Mallinckrodt PLC (a) | 217,200 | 13,579,344 | ||||||
Merck & Co., Inc. | 94,390 | 5,176,348 | ||||||
Novartis A.G. Registered | 120,600 | 9,202,460 | ||||||
Pfizer, Inc. | 130,744 | 4,276,636 | ||||||
Teva Pharmaceutical Industries, Ltd., Sponsored ADR | 364,659 | 19,855,683 | ||||||
|
| |||||||
90,341,211 | ||||||||
|
| |||||||
Real Estate Investment Trusts 2.6% |
| |||||||
American Tower Corp. | 187,000 | 19,612,560 | ||||||
HCP, Inc. | 211,436 | 7,152,880 | ||||||
UDR, Inc. | 286,224 | 9,994,942 | ||||||
Weyerhaeuser Co. | 42,800 | 1,374,736 | ||||||
|
| |||||||
38,135,118 | ||||||||
|
| |||||||
Real Estate Management & Development 0.6% |
| |||||||
Mitsubishi Estate Co., Ltd. | 454,550 | 9,061,095 | ||||||
|
| |||||||
Road & Rail 1.4% |
| |||||||
CSX Corp. | 216,125 | 5,893,729 | ||||||
Union Pacific Corp. | 159,965 | 13,953,747 | ||||||
|
| |||||||
19,847,476 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 2.1% |
| |||||||
ASML Holding N.V. | 52,100 | 5,035,061 | ||||||
Intel Corp. | 768,266 | 23,263,095 | ||||||
Texas Instruments, Inc. | 53,000 | 3,023,120 | ||||||
|
| |||||||
31,321,276 | ||||||||
|
| |||||||
Software 3.6% |
| |||||||
Microsoft Corp. | 389,115 | 19,405,165 | ||||||
¨Oracle Corp. | 856,768 | 34,150,773 | ||||||
|
| |||||||
53,555,938 | ||||||||
|
| |||||||
Specialty Retail 1.6% |
| |||||||
Home Depot, Inc. (The) | 71,258 | 9,540,734 | ||||||
Lowe’s Cos., Inc. | 165,307 | 12,566,638 | ||||||
Outerwall, Inc. | 30,168 | 1,246,240 | ||||||
|
| |||||||
23,353,612 | ||||||||
|
|
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals 4.7% |
| |||||||
¨Apple, Inc. | 631,469 | $ | 59,193,904 | |||||
Samsung Electronics Co., Ltd., GDR | 17,040 | 9,286,800 | ||||||
|
| |||||||
68,480,704 | ||||||||
|
| |||||||
Tobacco 0.3% |
| |||||||
Philip Morris International, Inc. | 49,654 | 4,872,050 | ||||||
|
| |||||||
Wireless Telecommunication Services 0.7% |
| |||||||
Vodafone Group PLC, Sponsored ADR | 294,518 | 9,642,519 | ||||||
|
| |||||||
Total Common Stocks |
| 1,438,365,940 | ||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 2.5% | ||||||||
Repurchase Agreement 2.5% |
| |||||||
Fixed Income Clearing Corp. | $ | 37,215,047 | 37,215,047 | |||||
|
| |||||||
Total Short-Term Investment |
| 37,215,047 | ||||||
|
| |||||||
Total Investments | 100.5 | % | 1,475,580,987 | |||||
Other Assets, Less Liabilities | (0.5 | ) | (7,187,543 | ) | ||||
Net Assets | 100.0 | % | $ | 1,468,393,444 |
(a) | Non-income producing security. |
(b) | As of April 30, 2016, cost was $1,217,259,522 for federal income tax purposes and net unrealized appreciation was as follows: |
Gross unrealized appreciation | $ | 324,942,964 | ||
Gross unrealized depreciation | (66,621,499 | ) | ||
|
| |||
Net unrealized appreciation | $ | 258,321,465 | ||
|
|
The following abbreviations are used in the preceding pages:
ADR—American Depositary Receipt
GDR—Global Depositary Receipt
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments April 30, 2016 (Unaudited) (continued)
The following is a summary of the fair valuations according to the inputs used as of April 30, 2016, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 1,438,365,940 | $ | — | $ | — | $ | 1,438,365,940 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 37,215,047 | — | 37,215,047 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,438,365,940 | $ | 37,215,047 | $ | — | $ | 1,475,580,987 | ||||||||
|
|
|
|
|
|
|
|
(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 period ended April 30, 2016, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)
As of April 30, 2016, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
16 | MainStay MAP Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of April 30, 2016 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 1,475,580,987 | ||
Receivables: | ||||
Investment securities sold | 5,193,082 | |||
Dividends and interest | 1,862,832 | |||
Fund shares sold | 442,887 | |||
Other assets | 59,066 | |||
|
| |||
Total assets | 1,483,138,854 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 10,695,982 | |||
Fund shares redeemed | 2,372,884 | |||
Manager (See Note 3) | 905,885 | |||
Transfer agent (See Note 3) | 418,064 | |||
NYLIFE Distributors (See Note 3) | 216,693 | |||
Shareholder communication | 52,340 | |||
Professional fees | 46,034 | |||
Custodian | 22,466 | |||
Trustees | 3,413 | |||
Accrued expenses | 11,649 | |||
|
| |||
Total liabilities | 14,745,410 | |||
|
| |||
Net assets | $ | 1,468,393,444 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 419,615 | ||
Additional paid-in capital | 1,188,901,971 | |||
|
| |||
1,189,321,586 | ||||
Undistributed net investment income | 7,704,221 | |||
Accumulated net realized gain (loss) on investments and foreign currency transactions | 1,805,428 | |||
Net unrealized appreciation (depreciation) on investments | 269,551,088 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | 11,121 | |||
|
| |||
Net assets | $ | 1,468,393,444 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 298,206,859 | ||
|
| |||
Shares of beneficial interest outstanding | 8,562,422 | |||
|
| |||
Net asset value per share outstanding | $ | 34.83 | ||
Maximum sales charge (5.50% of offering price) | 2.03 | |||
|
| |||
Maximum offering price per share outstanding | $ | 36.86 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 142,857,660 | ||
|
| |||
Shares of beneficial interest outstanding | 4,104,552 | |||
|
| |||
Net asset value per share outstanding | $ | 34.80 | ||
Maximum sales charge (5.50% of offering price) | 2.03 | |||
|
| |||
Maximum offering price per share outstanding | $ | 36.83 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 45,968,724 | ||
|
| |||
Shares of beneficial interest outstanding | 1,455,204 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 31.59 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 104,221,131 | ||
|
| |||
Shares of beneficial interest outstanding | 3,299,173 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 31.59 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 869,313,879 | ||
|
| |||
Shares of beneficial interest outstanding | 24,316,415 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 35.75 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 2,284,307 | ||
|
| |||
Shares of beneficial interest outstanding | 65,199 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 35.04 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 4,639,830 | ||
|
| |||
Shares of beneficial interest outstanding | 132,668 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 34.97 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 901,054 | ||
|
| |||
Shares of beneficial interest outstanding | 25,865 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 34.84 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Statement of Operations for the six months ended April 30, 2016 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 16,214,823 | ||
Interest | 3,667 | |||
|
| |||
Total income | 16,218,490 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 5,894,609 | |||
Distribution/Service—Class A (See Note 3) | 378,425 | |||
Distribution/Service—Investor Class (See Note 3) | 176,018 | |||
Distribution/Service—Class B (See Note 3) | 239,873 | |||
Distribution/Service—Class C (See Note 3) | 549,575 | |||
Distribution/Service—Class R2 (See Note 3) | 9,369 | |||
Distribution/Service—Class R3 (See Note 3) | 2,450 | |||
Transfer agent (See Note 3) | 978,417 | |||
Professional fees | 67,385 | |||
Shareholder communication | 60,139 | |||
Registration | 51,653 | |||
Custodian | 38,128 | |||
Trustees | 20,819 | |||
Shareholder service (See Note 3) | 5,810 | |||
Interest expense | 3,372 | |||
Miscellaneous | 37,903 | |||
|
| |||
Total expenses | 8,513,945 | |||
|
| |||
Net investment income (loss) | 7,704,545 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 13,043,768 | |||
Foreign currency transactions | (8,294 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | 13,035,474 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (93,269,426 | ) | ||
Translation of other assets and liabilities in foreign currencies | 37,045 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (93,232,381 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (80,196,907 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (72,492,362 | ) | |
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $286,506. |
18 | MainStay MAP Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the six months ended April 30, 2016 (Unaudited) and the year ended October 31, 2015
2016 | 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 7,704,545 | $ | 19,186,634 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 13,035,474 | 314,552,795 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (93,232,381 | ) | (294,096,738 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (72,492,362 | ) | 39,642,691 | |||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (3,061,205 | ) | (5,197,213 | ) | ||||
Investor Class | (1,189,707 | ) | (1,972,392 | ) | ||||
Class B | (17,692 | ) | (450,841 | ) | ||||
Class C | (46,546 | ) | (903,543 | ) | ||||
Class I | (12,582,733 | ) | (24,145,735 | ) | ||||
Class R1 | (38,388 | ) | (56,485 | ) | ||||
Class R2 | (79,075 | ) | (200,863 | ) | ||||
Class R3 | (5,958 | ) | (14,757 | ) | ||||
|
| |||||||
(17,021,304 | ) | (32,941,829 | ) | |||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | (51,337,913 | ) | (28,567,209 | ) | ||||
Investor Class | (23,271,134 | ) | (11,968,176 | ) | ||||
Class B | (9,123,617 | ) | (6,073,597 | ) | ||||
Class C | (20,855,020 | ) | (12,124,005 | ) | ||||
Class I | (164,507,596 | ) | (113,212,950 | ) | ||||
Class R1 | (559,032 | ) | (285,824 | ) | ||||
Class R2 | (1,526,398 | ) | (1,208,532 | ) | ||||
Class R3 | (175,776 | ) | (111,793 | ) | ||||
|
| |||||||
(271,356,486 | ) | (173,552,086 | ) | |||||
|
| |||||||
Total dividends and distributions to shareholders | (288,377,790 | ) | (206,493,915 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 82,738,458 | 177,192,328 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 280,617,486 | 201,308,974 | ||||||
Cost of shares redeemed | (337,096,765 | ) | (670,919,606 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 26,259,179 | (292,418,304 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | (334,610,973 | ) | (459,269,528 | ) |
2016 | 2015 | |||||||
Net Assets | ||||||||
Beginning of period | $ | 1,803,004,417 | $ | 2,262,273,945 | ||||
|
| |||||||
End of period | $ | 1,468,393,444 | $ | 1,803,004,417 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 7,704,221 | $ | 17,020,980 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class A | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 43.32 | $ | 46.81 | $ | 43.28 | $ | 34.07 | $ | 30.47 | $ | 29.79 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.16 | 0.38 | 0.67 | 0.41 | 0.40 | 0.37 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.55 | ) | 0.50 | 4.21 | 9.19 | 3.56 | 0.63 | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.06 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (1.39 | ) | 0.88 | 4.88 | 9.60 | 3.96 | 0.94 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.40 | ) | (0.67 | ) | (0.45 | ) | (0.39 | ) | (0.36 | ) | (0.26 | ) | ||||||||||||
From net realized gain on investments | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (7.10 | ) | (4.37 | ) | (1.35 | ) | (0.39 | ) | (0.36 | ) | (0.26 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 34.83 | $ | 43.32 | $ | 46.81 | $ | 43.28 | $ | 34.07 | $ | 30.47 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (3.59 | %)(c) | 1.80 | % | 11.55 | % | 28.47 | % | 13.14 | % | 3.16 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.92 | % †† | 0.85 | % | 1.49 | % | 1.07 | % | 1.24 | % | 1.18 | % | ||||||||||||
Net expenses | 1.12 | % ††(d) | 1.11 | % | 1.11 | % | 1.11 | % | 1.14 | % | 1.14 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 51 | % | 32 | % | 29 | % | 40 | % | 44 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 298,207 | $ | 336,812 | $ | 364,162 | $ | 356,657 | $ | 294,247 | $ | 296,453 |
* | Unaudited. |
†† | 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) | Net of interest expense which is less than one-tenth of a percent. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 43.27 | $ | 46.77 | $ | 43.24 | $ | 34.04 | $ | 30.44 | $ | 29.76 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.13 | 0.31 | 0.60 | 0.34 | 0.34 | 0.31 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.56 | ) | 0.50 | 4.21 | 9.18 | 3.55 | 0.63 | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.06 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (1.43 | ) | 0.81 | 4.81 | 9.52 | 3.89 | 0.88 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.34 | ) | (0.61 | ) | (0.38 | ) | (0.32 | ) | (0.29 | ) | (0.20 | ) | ||||||||||||
From net realized gain on investments | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (7.04 | ) | (4.31 | ) | (1.28 | ) | (0.32 | ) | (0.29 | ) | (0.20 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 34.80 | $ | 43.27 | $ | 46.77 | $ | 43.24 | $ | 34.04 | $ | 30.44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (3.69 | %)(c) | 1.63 | % | 11.38 | % | 28.26 | % | 12.88 | % | 2.96 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.73 | % †† | 0.71 | % | 1.34 | % | 0.88 | % | 1.04 | % | 0.98 | % | ||||||||||||
Net expenses | 1.30 | % ††(d) | 1.25 | % | 1.26 | % | 1.30 | % | 1.34 | % | 1.34 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 51 | % | 32 | % | 29 | % | 40 | % | 44 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 142,858 | $ | 151,582 | $ | 152,202 | $ | 144,892 | $ | 120,771 | $ | 114,786 |
* | Unaudited. |
†† | 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) | Net of interest expense which is less than one-tenth of a percent. |
20 | MainStay MAP Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class B | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 39.74 | $ | 43.25 | $ | 40.08 | $ | 31.55 | $ | 28.21 | $ | 27.63 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | (0.01 | ) | 0.26 | 0.06 | 0.10 | 0.07 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.44 | ) | 0.48 | 3.89 | 8.54 | 3.29 | 0.58 | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.05 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (1.44 | ) | 0.47 | 4.15 | 8.60 | 3.39 | 0.60 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.28 | ) | (0.08 | ) | (0.07 | ) | (0.05 | ) | (0.02 | ) | ||||||||||||
From net realized gain on investments | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (6.71 | ) | (3.98 | ) | (0.98 | ) | (0.07 | ) | (0.05 | ) | (0.02 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 31.59 | $ | 39.74 | $ | 43.25 | $ | 40.08 | $ | 31.55 | $ | 28.21 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (4.04 | %)(c) | 0.89 | % | 10.55 | % | 27.30 | % | 12.04 | % | 2.18 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.01 | %)†† | (0.03 | %) | 0.63 | % | 0.16 | % | 0.33 | % | 0.24 | % | ||||||||||||
Net expenses | 2.05 | % ††(d) | 2.00 | % | 2.01 | % | 2.05 | % | 2.09 | % | 2.09 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 51 | % | 32 | % | 29 | % | 40 | % | 44 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 45,969 | $ | 54,423 | $ | 71,195 | $ | 82,695 | $ | 86,613 | $ | 110,794 |
* | Unaudited. |
†† | 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) | Net of interest expense which is less than one-tenth of a percent. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 39.73 | $ | 43.25 | $ | 40.08 | $ | 31.56 | $ | 28.21 | $ | 27.63 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | (0.02 | ) | 0.25 | 0.05 | 0.09 | 0.07 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.43 | ) | 0.48 | 3.90 | 8.54 | 3.31 | 0.58 | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.05 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (1.43 | ) | 0.46 | 4.15 | 8.59 | 3.40 | 0.60 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.01 | ) | (0.28 | ) | (0.08 | ) | (0.07 | ) | (0.05 | ) | (0.02 | ) | ||||||||||||
From net realized gain on investments | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (6.71 | ) | (3.98 | ) | (0.98 | ) | (0.07 | ) | (0.05 | ) | (0.02 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 31.59 | $ | 39.73 | $ | 43.25 | $ | 40.08 | $ | 31.56 | $ | 28.21 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (4.04 | %)(c) | 0.89 | % | 10.55 | % | 27.26 | % | 12.07 | % | 2.18 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.02 | %)†† | (0.04 | %) | 0.60 | % | 0.14 | % | 0.31 | % | 0.23 | % | ||||||||||||
Net expenses | 2.05 | % ††(d) | 2.00 | % | 2.01 | % | 2.05 | % | 2.09 | % | 2.09 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 51 | % | 32 | % | 29 | % | 40 | % | 44 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 104,221 | $ | 125,642 | $ | 143,427 | $ | 141,628 | $ | 125,700 | $ | 136,274 |
* | Unaudited. |
†† | 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) | Net of interest expense which is 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. | 21 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class I | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 44.35 | $ | 47.82 | $ | 44.18 | $ | 34.77 | $ | 31.10 | $ | 30.39 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.21 | 0.50 | 0.80 | 0.52 | 0.49 | 0.45 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.60 | ) | 0.52 | 4.29 | 9.37 | 3.62 | 0.66 | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.06 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (1.39 | ) | 1.02 | 5.09 | 9.89 | 4.11 | 1.05 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.51 | ) | (0.79 | ) | (0.55 | ) | (0.48 | ) | (0.44 | ) | (0.34 | ) | ||||||||||||
From net realized gain on investments | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (7.21 | ) | (4.49 | ) | (1.45 | ) | (0.48 | ) | (0.44 | ) | (0.34 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 35.75 | $ | 44.35 | $ | 47.82 | $ | 44.18 | $ | 34.77 | $ | 31.10 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (3.49 | %)(c) | 2.06 | % | 11.82 | % | 28.79 | % | 13.40 | % | 3.43 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 1.18 | % †† | 1.10 | % | 1.76 | % | 1.33 | % | 1.48 | % | 1.42 | % | ||||||||||||
Net expenses | 0.87 | % ††(d) | 0.86 | % | 0.86 | % | 0.86 | % | 0.89 | % | 0.89 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 51 | % | 32 | % | 29 | % | 40 | % | 44 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 869,314 | $ | 1,119,884 | $ | 1,506,564 | $ | 1,417,814 | $ | 1,358,999 | $ | 1,188,911 |
* | Unaudited. |
†† | 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. Class I shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Net of interest expense which is less than one-tenth of a percent. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class R1 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 43.57 | $ | 47.05 | $ | 43.49 | $ | 34.23 | $ | 30.63 | $ | 29.93 | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.19 | 0.45 | 0.73 | 0.54 | 0.44 | 0.31 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.56 | ) | 0.50 | 4.24 | 9.14 | 3.58 | 0.77 | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.07 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (1.37 | ) | 0.95 | 4.97 | 9.68 | 4.02 | 1.01 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.46 | ) | (0.73 | ) | (0.51 | ) | (0.42 | ) | (0.42 | ) | (0.31 | ) | ||||||||||||
From net realized gain on investments | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (7.16 | ) | (4.43 | ) | (1.41 | ) | (0.42 | ) | (0.42 | ) | (0.31 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 35.04 | $ | 43.57 | $ | 47.05 | $ | 43.49 | $ | 34.23 | $ | 30.63 | ||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (3.51 | %)(c) | 1.94 | % | 11.71 | % | 28.63 | % | 13.26 | % | 3.35 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 1.08 | % †† | 1.02 | % | 1.63 | % | 1.43 | % | 1.37 | % | 1.02 | % | ||||||||||||
Net expenses | 0.97 | % ††(d) | 0.96 | % | 0.96 | % | 0.96 | % | 0.99 | % | 0.99 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 51 | % | 32 | % | 29 | % | 40 | % | 44 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 2,284 | $ | 3,607 | $ | 7,368 | $ | 6,737 | $ | 21,761 | $ | 17,611 |
* | Unaudited. |
†† | 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. Class R1 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Net of interest expense which is less than one-tenth of a percent. |
22 | MainStay MAP Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class R2 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 43.44 | $ | 46.92 | $ | 43.38 | $ | 34.12 | $ | 30.53 | $ | 29.85 | ||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.15 | 0.34 | 0.63 | 0.38 | 0.38 | 0.34 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.57 | ) | 0.49 | 4.22 | 9.21 | 3.54 | 0.63 | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.06 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (1.42 | ) | 0.83 | 4.85 | 9.59 | 3.92 | 0.91 | |||||||||||||||||
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|
|
|
|
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| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.35 | ) | (0.61 | ) | (0.41 | ) | (0.33 | ) | (0.33 | ) | (0.23 | ) | ||||||||||||
From net realized gain on investments | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | — | — | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (7.05 | ) | (4.31 | ) | (1.31 | ) | (0.33 | ) | (0.33 | ) | (0.23 | ) | ||||||||||||
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| |||||||||||||
Net asset value at end of period | $ | 34.97 | $ | 43.44 | $ | 46.92 | $ | 43.38 | $ | 34.12 | $ | 30.53 | ||||||||||||
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|
|
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|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (3.66 | %)(c) | 1.68 | % | 11.43 | % | 28.36 | % | 12.99 | % | 3.05 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.82 | % †† | 0.76 | % | 1.42 | % | 0.98 | % | 1.16 | % | 1.08 | % | ||||||||||||
Net expenses | 1.22 | % ††(d) | 1.21 | % | 1.21 | % | 1.21 | % | 1.24 | % | 1.24 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 51 | % | 32 | % | 29 | % | 40 | % | 44 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 4,640 | $ | 9,993 | $ | 15,956 | $ | 20,140 | $ | 19,072 | $ | 22,733 |
* | Unaudited. |
†† | 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. Class R2 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Net of interest expense which is less than one-tenth of a percent. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class R3 | 2016* | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Net asset value at beginning of period | $ | 43.22 | $ | 46.68 | $ | 43.16 | $ | 33.94 | $ | 30.38 | $ | 29.71 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.10 | 0.22 | 0.54 | 0.29 | 0.30 | 0.25 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.55 | ) | 0.51 | 4.17 | 9.16 | 3.53 | 0.64 | |||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.06 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (1.45 | ) | 0.73 | 4.71 | 9.45 | 3.83 | 0.83 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.49 | ) | (0.29 | ) | (0.23 | ) | (0.27 | ) | (0.16 | ) | ||||||||||||
From net realized gain on investments | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (6.93 | ) | (4.19 | ) | (1.19 | ) | (0.23 | ) | (0.27 | ) | (0.16 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 34.84 | $ | 43.22 | $ | 46.68 | $ | 43.16 | $ | 33.94 | $ | 30.38 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (3.75 | %)(c) | 1.42 | % | 11.18 | % | 28.03 | % | 12.72 | % | 2.79 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.57 | % †† | 0.51 | % | 1.20 | % | 0.74 | % | 0.94 | % | 0.80 | % | ||||||||||||
Net expenses | 1.47 | % ††(d) | 1.46 | % | 1.46 | % | 1.46 | % | 1.49 | % | 1.49 | % | ||||||||||||
Portfolio turnover rate | 22 | % | 51 | % | 32 | % | 29 | % | 40 | % | 44 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 901 | $ | 1,062 | $ | 1,400 | $ | 1,696 | $ | 1,809 | $ | 2,380 |
* | Unaudited. |
†† | 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. Class R3 shares are not subject to sales charges. |
(c) | Total investment return is not annualized. |
(d) | Net of interest expense which is 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. | 23 |
Notes to Financial Statements (Unaudited)
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business 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 twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MAP Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers eight classes of shares. Class A, Class B and Class C shares commenced operations on June 9, 1999. Class I shares commenced operations in 1970 (under a former class designation) and were redesignated as Class I shares on June 9, 1999. Class R1 and Class R2 shares commenced operations on January 2, 2004. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares, but a contingent deferred sales charge (“CDSC”) is imposed on certain redemptions of such shares 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 CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on redemptions made within six years of the date of purchase of such 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, Class R1, Class R2 and Class R3 shares are offered at NAV and are not subject to a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, depending upon eligibility, Class A shares may convert to Investor Class shares and Investor Class shares may convert to Class A shares. The eight 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 Class A, Investor Class, Class R2 and Class R3 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 Fund’s investment objective is to seek long-term appreciation of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. 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 usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisors (as defined in Note 3(A)) to the Fund.
To assess the appropriateness of security valuations, the Manager, Subadvisors or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Sub-Committee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available. Any action taken by the Sub-Committee with respect to the valuation of a portfolio security or other asset is submitted by the Valuation Committee to the Board for its review and ratification, if appropriate, at its next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a 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
24 | MainStay MAP Fund |
participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of April 30, 2016, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Equity and credit default swap curves | • Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses 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 asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon its sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market
price were readily available. During the six-month period ended April 30, 2016, there were no material changes to the fair value methodologies.
Equity and non-equity securities which may be valued in this manner include, but are not limited to: (i) a security for which trading 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 for which the market price is not readily available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisors reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of April 30, 2016, there were no securities held by the Fund that were fair valued in such a manner.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close 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 Subadvisors conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Sub-Committee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated 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, certain 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 valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of April 30, 2016, no foreign equity securities held by the Fund were fair valued in such a manner.
Equity securities and shares of Exchange-Traded Funds (“ETFs”) are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Investments in mutual funds, including money market funds, are valued at their respective 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 (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisors. Those values reflect broker/dealer supplied prices and electronic data processing techniques, if the evaluated bid or mean prices are deemed
25 |
Notes to Financial Statements (Unaudited) (continued)
by the Manager, in consultation with the Subadvisors, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government & federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase 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 at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. 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. These securities are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured 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.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A Fund security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or Subadvisors might wish to sell, and these securities could have the effect of decreasing the overall level of the 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 measuring 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 Subadvisors measure the liquidity of the Fund’s investments; in doing so, the Manager or Subadvisors 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 by methods deemed reasonable in good faith in such a manner as the Board deems appropriate to reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was measured as of April 30, 2016 and can change at any time in response
to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of April 30, 2016, the Fund did not hold any securities deemed to be illiquid under procedures approved by the Board.
(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 provisions are required.
Management evaluates the Fund’s 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 permitted only to the extent 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 provisions 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) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability on the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized appreciation (depreciation). Taxes related to capital gains realized during the six-month period ended April 30, 2016, if any, are reflected as part of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations. Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least 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.
26 | MainStay MAP Fund |
(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. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, 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. The straight-line method approximates the effective interest method for short-term investments. 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.
(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/or 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 or Subadvisors to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or Subadvisors will continue to monitor the creditworthiness of the seller. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the seller secured by the securities transferred to the Fund.
When the Fund enters into repurchase agreements, the Fund’s custodian takes possession of the collateral pledged for investments in the repurchase agreement. The underlying collateral is valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the seller’s default on 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, such as in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings and possible realized loss to the Fund.
(I) Rights and Warrants. Rights are certificates that permit the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. 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 such warrants are not exercised by the date of its expiration. The Fund is exposed to risk until the sale or exercise of each right or warrant is completed. As of April 30, 2016, 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 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 a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also 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. During the six-month period ended April 30, 2016, the Fund did not have any portfolio securities on loan.
(K) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies 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 appreciation or depreciation 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 may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency
27 |
Notes to Financial Statements (Unaudited) (continued)
forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk, and illiquidity risk. Counterparty risk is heightened for these investments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also 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 also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations.
(L) Foreign Currency Transactions. The Fund’s books and records are maintained 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 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.
(M) 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 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. 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.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisors. 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 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, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer of the Fund. Markston International LLC (“Markston” or “Subadvisor”) and Institutional Capital LLC (“ICAP” or “Subadvisor”), each registered investment advisers, serve as Subadvisors to the Fund and manage a portion of the Fund’s assets, as designated by New York Life Investments from time to time, subject to the oversight of New York Life Investments. ICAP is a wholly-owned subsidiary of New York Life. Each Subadvisor is responsible for the day-to-day portfolio management of the Fund with respect to its allocated portion of the Fund’s assets. Pursuant to the terms of an Amended and Restated Subadvisory Agreement between New York Life Investments and ICAP, and pursuant to the terms of a Subadvisory Agreement between New York Life Investments and Markston (“Subadvisory Agreements”), New York Life Investments pays for the services of the Subadvisors.
Under the Management Agreement, 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: 0.75% up to
28 | MainStay MAP Fund |
$1 billion; 0.70% from $1 billion to $3 billion; and 0.675% in excess of $3 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million.
During the six-month period ended April 30, 2016, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.74% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
During the six-month period ended April 30, 2016, New York Life Investments earned fees from the Fund in the amount of $5,894,609.
State Street 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 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, Service and Shareholder 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 Class A, Investor Class and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class 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 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.
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, its affiliates, or independent third party service providers are 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. This is in addition to any fees paid under a distribution plan, where applicable.
During the six-month period ended April 30, 2016, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 1,573 | ||
Class R2 | 3,747 | |||
Class R3 | 490 |
(C) Sales Charges. During the six-month period ended April 30, 2016, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $12,450 and $18,504, respectively. During the six-month period ended April 30, 2016, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $446, $65, $21,682 and $580, respectively.
(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. During the six-month period ended April 30, 2016, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 134,164 | ||
Investor Class | 191,202 | |||
Class B | 65,087 | |||
Class C | 149,085 | |||
Class I | 433,657 | |||
Class R1 | 1,397 | |||
Class R2 | 3,390 | |||
Class R3 | 435 |
(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. As of April 30, 2016, New York Life and its affiliates beneficially held shares of the Fund with values and percentages of net assets as follows:
Class I | $ | 95,341,478 | 11.0 | % |
29 |
Notes to Financial Statements (Unaudited) (continued)
Note 4–Federal Income Tax
During the year ended October 31, 2015, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2015 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 42,577,199 | ||
Long-Term Capital Gain | 163,916,716 | |||
Total | $ | 206,493,915 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments, 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 4, 2015, under an amended and restated credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.10% of the average commitment amount payable quarterly, regardless of usage, to Bank of New York Mellon, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain affiliated funds based upon their respective 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 Credit Agreement expires on August 2, 2016, although the Fund, certain affiliated funds and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to August 4, 2015, the aggregate commitment amount was $600,000,000 with an additional uncommitted amount of $100,000,000, and the commitment fee was at an annual rate of 0.08% of the average commitment amount. During the six-month period ended April 30, 2016, the Fund utilized the line of credit for four days, maintained an average daily balance of $22,691,840 at a weighted average interest rate of 1.337% and incurred interest expense in the amount of $3,372. As of April 30, 2016, there were no borrowings outstanding.
Note 7–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2016, purchases and sales of securities, other than short-term securities, were $352,350 and $594,800, respectively.
Note 8–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 235,058 | $ | 8,614,976 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,473,310 | 52,494,049 | ||||||
Shares redeemed | (979,401 | ) | (34,607,211 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 728,967 | 26,501,814 | ||||||
Shares converted into Class A (See Note 1) | 86,224 | 2,647,323 | ||||||
Shares converted from Class A (See Note 1) | (27,404 | ) | (936,933 | ) | ||||
|
| |||||||
Net increase (decrease) | 787,787 | $ | 28,212,204 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 564,044 | $ | 24,857,281 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 742,410 | 32,465,588 | ||||||
Shares redeemed | (1,406,032 | ) | (61,791,301 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (99,578 | ) | (4,468,432 | ) | ||||
Shares converted into Class A (See Note 1) | 232,747 | 10,333,172 | ||||||
Shares converted from Class A (See Note 1) | (138,252 | ) | (5,611,127 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (5,083 | ) | $ | 253,613 | ||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 103,781 | $ | 3,627,106 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 685,316 | 24,417,828 | ||||||
Shares redeemed | (259,210 | ) | (9,151,957 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 529,887 | 18,892,977 | ||||||
Shares converted into Investor Class (See Note 1) | 126,520 | 4,335,930 | ||||||
Shares converted from Investor Class (See Note 1) | (54,733 | ) | (1,894,793 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 601,674 | $ | 21,334,114 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 211,158 | $ | 9,286,777 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 318,159 | 13,916,248 | ||||||
Shares redeemed | (425,477 | ) | (18,734,580 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 103,840 | 4,468,445 | ||||||
Shares converted into Investor Class (See Note 1) | 324,377 | 13,698,186 | ||||||
Shares converted from Investor Class (See Note 1) | (179,819 | ) | (8,030,386 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 248,398 | $ | 10,136,245 | |||||
|
| |||||||
30 | MainStay MAP Fund |
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 77,944 | $ | 2,484,803 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 275,208 | 8,927,759 | ||||||
Shares redeemed | (134,685 | ) | (4,324,855 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 218,467 | 7,087,707 | ||||||
Shares converted from Class B (See Note 1) | (132,903 | ) | (4,151,527 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 85,564 | $ | 2,936,180 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 127,959 | $ | 5,186,970 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 156,623 | 6,332,294 | ||||||
Shares redeemed | (301,739 | ) | (12,195,306 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (17,157 | ) | (676,042 | ) | ||||
Shares converted from Class B (See Note 1) | (259,251 | ) | (10,389,845 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (276,408 | ) | $ | (11,065,887 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 159,960 | $ | 5,197,945 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 526,965 | 17,094,739 | ||||||
Shares redeemed | (549,926 | ) | (17,438,709 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 136,999 | $ | 4,853,975 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 275,014 | $ | 11,149,629 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 260,869 | 10,546,917 | ||||||
Shares redeemed | (689,780 | ) | (27,913,347 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (153,897 | ) | $ | (6,216,801 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 1,724,147 | $ | 61,937,241 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,802,003 | 175,417,157 | ||||||
Shares redeemed | (7,462,706 | ) | (264,806,051 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (936,556 | ) | $ | (27,451,653 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 2,796,007 | $ | 124,713,395 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,050,915 | 136,253,853 | ||||||
Shares redeemed | (12,097,821 | ) | (537,781,237 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (6,250,899 | ) | $ | (276,813,989 | ) | |||
|
| |||||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 8,774 | $ | 309,345 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 16,678 | 597,420 | ||||||
Shares redeemed | (43,026 | ) | (1,506,905 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (17,574 | ) | $ | (600,140 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 16,703 | $ | 732,583 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 7,794 | 342,310 | ||||||
Shares redeemed | (98,330 | ) | (4,612,672 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (73,833 | ) | $ | (3,537,779 | ) | |||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 11,162 | $ | 399,982 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 41,542 | 1,486,800 | ||||||
Shares redeemed | (150,063 | ) | (4,973,158 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (97,359 | ) | $ | (3,086,376 | ) | |||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 25,166 | $ | 1,118,113 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 30,194 | 1,325,214 | ||||||
Shares redeemed | (165,432 | ) | (7,381,264 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (110,072 | ) | $ | (4,937,937 | ) | |||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2016: | ||||||||
Shares sold | 4,463 | $ | 167,060 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,092 | 181,734 | ||||||
Shares redeemed | (8,271 | ) | (287,919 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 1,284 | $ | 60,875 | |||||
|
| |||||||
Year ended October 31, 2015: | ||||||||
Shares sold | 3,330 | $ | 147,580 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,892 | 126,550 | ||||||
Shares redeemed | (11,622 | ) | (509,899 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (5,400 | ) | $ | (235,769 | ) | |||
|
|
Note 9–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the six-month period ended April 30, 2016, events and transactions subsequent to April 30, 2016, 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.
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (the “1940 Act”), requires that each mutual fund’s board of trustees annually review and approve the fund’s investment advisory agreement(s). At its December 8-10, 2015 meeting, the Board of Trustees of the MainStay Group of Funds (“Board”) unanimously approved the Management Agreement with respect to the MainStay MAP Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreements between New York Life Investments and Institutional Capital LLC (“ICAP”) and Markston International LLC (“Markston”) with respect to the Fund.
In reaching its decision to approve the Agreements, the Board considered information furnished by New York Life Investments, ICAP and Markston in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2015 and December 2015, as well as other relevant information furnished to the Board throughout the year. Information requested by and furnished to the Board in connection with the contract review process included, among other items, reports on the Fund and “peer funds” prepared by Strategic Insight Mutual Fund Research and Consulting, LLC (“Strategic Insight”), an independent third-party service provider engaged by the Board to report objectively on the Fund’s investment performance, management fee and total expenses. The Board also considered information on the fees charged to any other investment advisory clients of New York Life Investments, ICAP and Markston (including institutional separate accounts) that follow investment strategies similar to the Fund and the rationale for any differences in the Fund’s management and subadvisory fees and the fees charged to those other investment advisory clients. In addition, the Board requested and received information on the profitability of the Fund to New York Life Investments and its affiliates, including ICAP as subadvisor to the Fund, and Markston and responses from New York Life Investments, ICAP and Markston to a series of questions encompassing a variety of topics prepared on behalf of the Board by independent legal counsel to the Board and its Trustees who are not “interested persons” (as such term is defined under the 1940 Act) of the Fund (the “Independent Trustees”). Information provided to the Board at its meetings throughout the year included, among other items, detailed investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments. The structure and format for this regular reporting were developed in consultation with the Board. The Board also received from New York Life Investments throughout the year, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. At various meetings, the Independent Trustees also met in executive session with their independent legal counsel, and met with senior management of New York Life Investments without other representatives of New York Life Investments present.
Throughout the year and specifically in connection with its June meeting each year, the Board also received an overview of the Fund’s distribution arrangements. In addition, the Board received information regarding the Fund’s asset levels, share purchase and redemption activity and the payment of Rule 12b-1 distribution and service fees by the Fund. New York Life Investments also provided the Board with information regarding the revenue sharing payments made to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the Agreements, the Trustees comprehensively reviewed and evaluated all of the information and factors they believed to be relevant and appropriate in light of legal advice furnished to them by independent legal counsel and through the exercise of their own business judgment. The broad factors considered by the Board are described in greater detail below and included, among other items: (i) the nature, scope and quality of the services provided to the Fund by New York Life Investments, ICAP and Markston; (ii) the investment performance of the Fund, New York Life Investments, ICAP and Markston; (iii) the costs of the services provided, and profits realized, by New York Life Investments, ICAP and Markston from their relationship with the Fund; (iv) the extent to which economies of scale have been realized or may be realized if the Fund grows and the extent to which economies of scale have benefited or may benefit Fund shareholders; and (v) the reasonableness of the Fund’s management and subadvisory fees and overall total ordinary operating expenses, particularly as compared to any similar funds and accounts managed by New York Life Investments, ICAP and Markston. The Board also considered the reasonableness of the Fund’s management fee and overall total ordinary operating expenses as compared to the peer funds identified by Strategic Insight.
While individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the Agreements was based on a consideration of the information provided to the Trustees throughout the year, as well as information furnished specifically in connection with the contract review process. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years. In addition to considering the above-referenced factors, the Board observed that in the marketplace there are a range of investment options available to shareholders of the Fund and that the Fund’s shareholders, having had the opportunity to consider other investment options, have chosen to invest in the Fund. The factors that figured prominently in the Board’s decision to approve the Agreements are summarized in more detail below.
Nature, Scope and Quality of Services to Be Provided by New York Life Investments, ICAP and Markston
The Board examined the nature, scope and quality of the services that New York Life Investments provides to the Fund. The Board evaluated New York Life Investments’ experience and capabilities in serving as manager of the Fund, noting that New York Life Investments manages other mutual funds, serves a variety of other investment advisory clients, including other pooled investment vehicles, and has experience with overseeing mutual fund service providers, including subadvisors. The Board considered the experience of senior personnel at New York Life Investments providing management and administrative services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board also considered the full range of services that New York Life Investments supplies to the Fund under the terms of the Management Agreement, including: (i) fund accounting and on-going oversight services provided by New York Life Investments’ Fund Administration and Accounting Group; (ii) investment oversight and analytical services provided by New York Life Investments’ Investment Consulting Group; (iii) compliance services provided by the Fund’s Chief Compliance Officer as well as New York Life Investments’ Compliance
32 | MainStay MAP Fund |
Department, including oversight and implementation of the Fund’s compliance program; (iv) legal services provided by New York Life Investments’ Office of the General Counsel; and (v) risk management and portfolio trading oversight and analysis by compliance and investment personnel. Additional information about the non-advisory services provided by New York Life Investments is set forth in the Fund’s Management Agreement. The Board also considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security and shareholder privacy resources that benefit the Fund and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board also considered benefits to shareholders of being part of the MainStay Group of Funds, including the privilege of exchanging investments between the same class of shares without the imposition of a sales charge, as described more fully in the Fund’s prospectus.
The Board also examined the nature, scope and quality of the investment advisory services that ICAP and Markston provide to the Fund. The Board evaluated ICAP’s and Markston’s experience in serving as subadvisors to the Fund and managing other portfolios. It examined ICAP’s and Markston’s track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at ICAP and Markston, and ICAP’s and Markston’s overall legal and compliance environments. The Board further considered New York Life Investments’ policies, procedures and systems to reasonably assure compliance with applicable laws and regulations. In addition, the Board considered the policies and procedures in place with respect to matters that may involve conflicts of interest between the Fund’s investments and those of other accounts managed by ICAP and Markston. The Board also reviewed ICAP’s and Markston’s willingness to invest in personnel that benefit the Fund. In this regard, the Board considered the experience of the Fund’s portfolio managers, the number of accounts managed by the portfolio managers and the methods for compensating portfolio managers.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund should continue to benefit from the nature, scope and quality of these services as a result of New York Life Investments’, ICAP’s and Markston’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered detailed investment reports on the Fund’s performance provided to the Board throughout the year by the Investment Consulting Group of New York Life Investments. These reports include, among other items, information on the Fund’s gross and net returns, the Fund’s investment performance relative to relevant investment categories and Fund benchmarks, the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, and in light of market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
In considering the Fund’s investment performance, the Board focused principally on the Fund’s long-term performance track record. The Board also gave weight to its ongoing discussions with senior management at New York Life Investments concerning the Fund’s investment performance as well as discussions between the Fund’s portfolio managers and the Board’s Investment Committee that occur regularly, generally on an annual basis. In addition, the Board considered any specific actions that New York Life Investments, ICAP or Markston had taken, or had agreed with the Board to take, to enhance Fund investment performance and the results of those actions. The Board noted that the Fund had underperformed relative to peers in various periods and considered its discussions with representatives from New York Life Investments, ICAP and Markston regarding this underperformance. The Board acknowledged favorably that ICAP had worked with an independent consultant to improve the investment performance of the funds that it manages.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments, ICAP and Markston to enhance investment returns, supported a determination to approve the Agreements. The Fund discloses more information about investment performance in the Portfolio Management Discussion and Analysis, Investment and Performance Comparison and Financial Highlights sections of this Semiannual Report and in the Fund’s prospectus.
Costs of the Services Provided, and Profits Realized, by New York Life Investments, ICAP and Markston
The Board considered the costs of the services provided by New York Life Investments, ICAP and Markston under the Agreements and the profits realized by New York Life Investments and its affiliates, including ICAP, and Markston due to their relationships with the Fund. Because ICAP is an affiliate of New York Life Investments whose subadvisory fees are paid directly by New York Life Investments, the Board considered cost and profitability information for New York Life Investments and ICAP in the aggregate. Although the Board did not receive specific profitability information from Markston, the Board considered representations from Markston and New York Life Investments that the subadvisory fee paid by New York Life Investments to Markston for services provided to the Fund was the result of arm’s-length negotiations. Because Markston’s subadvisory fees are negotiated at arm’s-length by New York Life Investments and are paid by New York Life Investments, not the Fund, the Board primarily considered the profits realized by New York Life Investments and its affiliates with respect to the Fund.
In evaluating the costs of the services provided by New York Life Investments, ICAP and Markston and profits realized by New York Life Investments and its affiliates, including ICAP, and Markston, the Board considered, among other factors, each party’s investments in personnel, systems, equipment and other resources necessary to manage the Fund, and that New York Life Investments is responsible for paying the subadvisory fees for the Fund. The Board acknowledged that New York Life Investments, ICAP and Markston must be in a position to pay and retain experienced professional personnel to provide services to the Fund and that the ability to maintain a strong financial position is important in order for New York Life Investments, ICAP and Markston to
33 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements (Unaudited) (continued)
continue to provide high-quality services to the Fund. The Board also recognized that the Fund benefits from the allocation of certain fixed costs across the MainStay Group of Funds, among other benefits resulting from its relationship with New York Life Investments.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, since such information generally is not publicly available and may be impacted by numerous factors, including the structure of a fund manager’s organization, the types of funds it manages, the methodology used to allocate certain fixed costs to specific funds, and the manager’s capital structure and costs of capital. In connection with the annual fund profitability analysis that New York Life Investments presents to the Board, the Board in 2014 engaged Bobroff Consulting, Inc., an independent third-party consultant, to review the methods used to allocate costs to the MainStay Funds, and among individual Funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated Subadvisers that provide services to the MainStay Funds; (ii) how costs are allocated to the Fund and other funds managed by New York Life Investments, and to other lines of businesses; and (iii) how New York Life Investments’ cost allocation methods and profitability reports compare to industry practices. The Board noted that the independent consultant had concluded that New York Life Investments’ methods for allocating costs and procedures for estimating overall profitability of the funds in the MainStay Group of Funds, including the Fund, are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. While recognizing the difficulty in evaluating a manager’s profitability with respect to the Fund and noting that other profitability methodologies may also be reasonable, the Board concluded that the profitability methodology presented by New York Life Investments to the Board was reasonable in all material respects.
In considering the costs and profitability of the Fund, the Board also considered certain fall-out benefits that may be realized by New York Life Investments and its affiliates due to their relationships with the Fund. The Board recognized, for example, the benefits to ICAP and Markston from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to ICAP and Markston in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities. In this regard, the Board also requested and received information from New York Life Investments and Markston concerning other business relationships between Markston and its affiliates and New York Life Investments and its affiliates.
The Board further considered that, in addition to fees earned by New York Life Investments for managing the Fund, New York Life Investments’ affiliates also earn revenues from serving the Fund in various other capacities, including as the Fund’s transfer agent and distributor. The Board observed that information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, was furnished to the Board as part of the 15(c) process. The Board noted that, although it assessed the overall profitability of the Fund to New York Life Investments and its affiliates as part of the contract review process, when considering the reasonableness of the fees to be paid to New York Life Investments and its affiliates under the Agreements, the Board considered the profitability of New York Life
Investments’ relationship with the Fund on a pre-tax basis and without regard to distribution expenses.
After evaluating the information presented to the Board, the Board concluded, within the context of its overall determinations regarding the Agreements, that any profits realized by New York Life Investments and its affiliates, including ICAP, due to their relationships with the Fund supported the Board’s decision to approve the Agreements. With respect to Markston, the Board concluded that any profits realized by Markston due to its relationship with the Fund are the result of arm’s-length negotiations between New York Life Investments and Markston and are based on fees paid to Markston by New York Life Investments, not the Fund.
Extent to Which Economies of Scale May Be Realized as the Fund Grows
The Board considered whether the Fund’s expense structure permits economies of scale to be shared with Fund investors. The Board also considered a report from New York Life Investments, prepared at the request of the Board, that addressed economies of scale in the mutual fund business generally, the changing economics of the mutual fund business and the various ways in which the benefits of economies of scale may be shared with the Fund and other funds in the MainStay Group of Funds. While recognizing the difficulty of determining economies of scale with precision, the Board acknowledged that economies of scale may be shared with the Fund in a number of ways, including, for example, through the imposition of management fee breakpoints and by initially setting relatively low management fees. The Board reviewed information from New York Life Investments showing how the Fund’s management fee schedule compared to fee schedules of other funds and accounts managed by New York Life Investments. The Board also reviewed information from Strategic Insight showing how the Fund’s management fee schedule hypothetically would compare with fees paid for similar services by peer funds at varying asset levels. Additionally, the Board considered New York Life Investments’ assessment of the extent economies of scale existed for Funds that had experienced significant increases of assets during the year.
Based on this information, the Board concluded, within the context of its overall determinations regarding the Agreements, that the Fund’s expense structure appropriately reflects economies of scale for the benefit of Fund investors. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure as the Fund grows over time.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees to be paid under the Agreements and the Fund’s expected total ordinary operating expenses. The Board primarily considered the reasonableness of the management fee paid by the Fund to New York Life Investments, because the fees paid to ICAP and Markston are paid by New York Life Investments, not the Fund.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic Insight on the fees and expenses charged by similar mutual funds
34 | MainStay MAP Fund |
managed by other investment advisers. In addition, the Board considered information provided by New York Life Investments, ICAP and Markston on fees charged to other investment advisory clients, including institutional separate accounts and other funds with similar investment objectives as the Fund. The Board particularly considered differences in the contractual management fee schedules of the retail MainStay Funds and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board also took into account explanations provided by New York Life Investments about the different scope of services provided to registered investment companies as compared with other investment advisory clients. Additionally, the Board considered the impact of any contractual breakpoints, voluntary waivers and expense limitation arrangements on the Fund’s net management fee and expenses.
The Board noted that, outside of the Fund’s management fee and the fees charged under a share class’s Rule 12b-1 and/or shareholder services plans, a share class’s most significant “other expenses” are transfer agent fees. Transfer agent fees are charged to the Fund based on the number of shareholder accounts (a “per-account” fee) as compared with certain other fees (e.g., management fees), which are charged based on the Fund’s average net assets. The Board took into account information from New York Life Investments showing that the Fund’s transfer agent fee schedule is reasonable, including industry data demonstrating that the per-account fees that NYLIM Service Company LLC, the Fund’s transfer agent, charges the Fund are within the range of per-account fees charged by transfer agents to other mutual funds. In addition, the Board considered NYLIM Service Company LLC’s profitability in connection with the transfer agent services it provides to the Fund. The Board also noted information received from NYLIM Service Company LLC regarding the sub-transfer agency payments it made to intermediaries in connection with the services it provides to the Fund.
The Board considered that, because the Fund’s transfer agent fees are billed on a per-account basis, the impact of transfer agent fees on a share class’s expense ratio may be more significant in cases where the share class has a high number of accounts with limited assets (i.e., small accounts). The Board observed that transfer agent fees are a significant portion of total expenses of a number of funds in the MainStay Group of Funds. The impact of transfer agent fees on the expense ratios of these MainStay Funds tend to be greater than for other open-end retail funds, because the MainStay Group of Funds generally has a significant number of small accounts relative to competitor funds. The Board acknowledged the role that the MainStay Group of Funds historically has played in serving the investment needs of New York Life Insurance Company (“New York Life”) policyholders, who often maintain smaller account balances than other fund investors. The Board also recognized measures that it and New York Life Investments have taken in recent years to mitigate the effect of small accounts on the expense ratios of Fund share classes, including: (i) encouraging New York Life agents to consolidate multiple small accounts held by the same investor into one MainStay Asset Allocation Fund account; (ii) introducing Investor Class shares for certain MainStay Funds in early 2008 to consolidate smaller account investors; (iii) closing small accounts with balances below $250 in Investor Class shares or $750 in all other classes of shares; (iv) eliminating an exception with no minimum investment amount with respect to AutoInvest accounts with subsequent
monthly purchases of $100; (v) since 2007, charging an annual $20.00 small account fee on certain accounts with balances below $1,000; and (vi) modifying the approach for billing transfer agent expenses to reduce the degree of subsidization by large accounts of smaller accounts. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments in 2014, 2015 and 2016. In addition, the Board acknowledged New York Life Investments’ continued efforts to encourage intermediaries to consolidate small accounts in multiple Funds held by the same investor into a single Asset Allocation Fund account, if appropriate under the circumstances, in an effort to mitigate the effect of small accounts on the funds in the MainStay Group of Funds.
After considering all of the factors outlined above, the Board concluded that the Fund’s management and subadvisory fees and total ordinary operating expenses were within a range that is competitive and, within the context of the Board’s overall conclusions regarding the Agreements, support a conclusion that these fees and expenses are reasonable.
Conclusion
On the basis of the information and factors summarized above and the evaluation thereof, the Board as a whole, including the Independent Trustees who are not parties to the Agreements or “interested persons” of any such party voting separately, unanimously voted to approve the Agreements.
35 |
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 or proxy voting record 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).
36 | MainStay MAP Fund |
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MainStay Funds
MainStay offers a wide range of Funds for virtually any investment need. The full array of MainStay open-end offerings is listed here, with information about the manager, subadvisors, legal counsel and independent registered public accounting firms.
Equity
U.S. Equity
MainStay Common Stock Fund
MainStay Cornerstone Growth Fund
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap 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. Equity Opportunities Fund
International/Global Equity
MainStay Emerging Markets Opportunities Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
MainStay Epoch International Small Cap Fund
MainStay ICAP International Fund
MainStay International Equity Fund
MainStay International Opportunities Fund
Income
Taxable Bond
MainStay Floating Rate Fund
MainStay Global High Income Fund
MainStay Government Fund
MainStay High Yield Corporate Bond Fund
MainStay High Yield Opportunities Fund
MainStay Indexed Bond Fund
MainStay Short Duration High Yield Fund
MainStay Total Return Bond Fund
MainStay Unconstrained Bond Fund
Municipal/Tax Advantaged Bond
MainStay California Tax Free Opportunities Fund1
MainStay High Yield Municipal Bond Fund
MainStay New York Tax Free Opportunities Fund2
MainStay Tax Advantaged Short Term Bond Fund
MainStay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Balanced Fund
MainStay Convertible Fund
MainStay Income Builder Fund
Alternative
MainStay Absolute Return Multi-Strategy Fund
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam France S.A.S.3
Paris, France
Cornerstone Capital Management Holdings LLC3
New York, New York
Cornerstone Capital Management LLC3
Bloomington, Minnesota
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
Institutional Capital LLC3
Chicago, Illinois
MacKay Shields LLC3
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC3
New York, New York
Winslow Capital Management LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Independent Registered Public Accounting Firms
KPMG LLP
1. This Fund is only registered for sale in AZ, CA, NV, OR, UT, and WA.
2. This Fund is only registered for sale in CT, DE, FL, MA, NJ, NY, and VT.
3. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
mainstayinvestments.com
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. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed through NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2016 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 |
1695309 MS164-16 | MSMP10-06/16 (NYLIM) NL030 |
Item 2. | Code of Ethics. |
Not applicable.
Item 3. | Audit Committee Financial Expert. |
Not applicable.
Item 4. | Principal Accountant Fees and Services. |
Not applicable.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | 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) | 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.
THE MAINSTAY FUNDS
By: | /s/ Stephen P. Fisher | |
Stephen P. Fisher President and Principal Executive Officer | ||
Date: | July 8, 2016 |
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 | |
Stephen P. Fisher President and Principal Executive Officer | ||
Date: | July 8, 2016 | |
By: | /s/ Jack R. Benintende | |
Jack R. Benintende Treasurer and Principal Financial and Accounting Officer | ||
Date: | July 8, 2016 |
EXHIBIT INDEX
(a) | 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. |