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, 2018
Item 1. | Reports to Stockholders. |
MainStay Income Builder Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six Months or Since Inception | One Year | Five Years or Since Inception | Ten | Gross Expense Ratio3 | |||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –7.16 –1.76 | %
| | –2.16 3.53 | %
| | 4.50 5.69 | %
| | 5.63 6.23 | %
| | 1.01 1.01 | %
| ||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –7.22 –1.82 | | | –2.24 3.45 | | | 4.33 5.51 | | | 5.39 5.99 | | | 1.14 1.14 |
| ||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 12/29/1987 | | –6.90 –2.17 | | | –2.32 2.60 | | | 4.39 4.72 | | | 5.20 5.20 | | | 1.89 1.89 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | –3.12 –2.17 | | | 1.67 2.66 | | | 4.73 4.73 | | | 5.20 5.20 | | | 1.89 1.89 |
| ||||||||
Class I Shares | No Sales Charge | 1/2/2004 | –1.62 | 3.81 | �� | 5.95 | 6.51 | 0.76 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | 2/27/2015 | –1.81 | 3.43 | 3.07 | N/A | 1.11 | |||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | –1.89 | 3.21 | 8.83 | N/A | 1.36 | |||||||||||||||||||
Class R6 Shares | No Sales Charge | 2/28/2018 | –0.10 | N/A | –0.10 | N/A | 0.66 |
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, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
MSCI World Index4 | 3.40 | % | 13.22 | % | 9.28 | % | 5.48 | % | ||||||||
Bloomberg Barclays U.S. Aggregate Bond Index5 | –1.87 | –0.32 | 1.47 | 3.57 | ||||||||||||
Blended Benchmark Index6 | 0.81 | 6.35 | 5.45 | 4.87 | ||||||||||||
Morningstar World Allocation Category Average7 | 1.28 | 7.71 | 4.45 | 4.40 |
4. | The MSCI World Index is the Fund’s primary broad-based securities market index for comparison purposes. 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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Fund has selected the Bloomberg Barclays U.S. Aggregate Bond Index as a secondary benchmark. The Bloomberg 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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Fund has selected the Blended Benchmark Index as an additional benchmark. The Blended Benchmark Index consists of the MSCI World Index and the Bloomberg Barclays U.S. Aggregate Bond Index weighted 50%/50%, respectively. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | The Morningstar World Allocation Category Average is representative of funds that seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. While these portfolios do explore the whole world, most of them focus on the U.S., Canada, Japan, and the larger markets in Europe. It is rare for such portfolios to invest more than 10% of their assets in emerging markets. These portfolios typically have at least 10% of assets in bonds, less than 70% of assets in stocks, and at least 40% of assets in non-U.S. stocks or bonds. Results are based on average total returns of similar funds 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 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 982.40 | $ | 4.92 | $ | 1,019.80 | $ | 5.01 | 1.00% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 981.80 | $ | 5.55 | $ | 1,019.20 | $ | 5.66 | 1.13% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 978.30 | $ | 9.22 | $ | 1,015.50 | $ | 9.39 | 1.88% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 978.30 | $ | 9.22 | $ | 1,015.50 | $ | 9.39 | 1.88% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 983.80 | $ | 3.69 | $ | 1,021.10 | $ | 3.76 | 0.75% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 981.90 | $ | 5.41 | $ | 1,019.30 | $ | 5.51 | 1.10% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 981.10 | $ | 6.63 | $ | 1,018.10 | $ | 6.76 | 1.35% | |||||||||||
Class R6 Shares3,4 | $ | 1,000.00 | $ | 999.00 | $ | 1.09 | $ | 1,007.30 | $ | 1.09 | 0.65% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 days for Class A, Investor Class, Class B, Class C, Class I, Class R2 and Class R3 shares (to reflect the six-month period) and 61 days for Class R6 shares (to reflect the since-inception period. The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
3. | The inception date was February 28, 2018. |
4. | Expenses paid during the period reflect ongoing costs for the period from inception through April 30, 2018. Had these shares been offered for the full six-month period ended April 30, 2018, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $3.26 for Class R6 shares and the ending account value would have been $1,021.57 for Class R6 shares. |
7 |
Portfolio Composition as of April 30, 2018 (Unaudited)
See Portfolio of Investments beginning on page 13 for specific holdings within these categories.
Top Ten Holdings or Issuers Held as of April 30, 2018 (excluding short-term investment) (Unaudited)
1. | United States Treasury Notes, 1.25%–1.75%, due 10/31/21–7/31/23 |
2. | Goldman Sachs Group, Inc., 2.905%–7.50%, due 2/15/19–10/1/37 |
3. | TOTAL S.A. |
4. | AT&T, Inc. |
5. | Royal Dutch Shell PLC, Class A, Sponsored ADR |
6. | Vodafone Group PLC |
7. | GlaxoSmithKline PLC |
8. | Morgan Stanley, 2.375%–6.375%, due 7/15/19–7/24/42 |
9. | Muenchener Rueckversicherungs-Gesellschaft A.G. |
10. | Bank of America Corp., 2.738%–8.57%, due 6/17/19–2/7/42 |
8 | MainStay Income Builder Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon and Jonathan Swaney of New York Life Investment Management LLC, the Fund’s Manager; Dan Roberts, PhD, and Louis N. Cohen, CFA, of MacKay Shields LLC (“MacKay Shields”), the Subadvisor for the fixed-income portion of the Fund; and William W. 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, 2018?
Excluding all sales charges, MainStay Income Builder Fund returned –1.76% for Class A shares, –1.82% for Investor Class shares and –2.17% for Class B and Class C shares for the six months ended April 30, 2018. Over the same period, Class I shares returned –1.62%, Class R2 shares returned –1.81% and Class R3 shares returned –1.89%. For the six months ended April 30, 2018, all of these share classes underperformed the 3.40% return of the MSCI World Index,1 which is the Fund’s primary benchmark. Over the same period, Class B, Class C and Class R3 shares underperformed—and all other share classes listed above outperformed—the –1.87% return of the Bloomberg Barclays U.S. Aggregate Bond Index,1 which is a secondary benchmark for the Fund. For the six months ended April 30, 2018, all share classes listed above underperformed the 0.81% return of the Blended Benchmark Index,1 which is an additional benchmark for the Fund, and the 1.28% return of the Morningstar World Allocation Category Average.2 From their inception on February 28, 2018, through April 30, 2018, Class R6 shares returned –0.10%. See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, Jae S. Yoon and Jonathan Swaney were added as portfolio managers of the Fund and Michael Kimble was removed.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
During the reporting period, the fixed-income portion of the Fund used S&P 500® futures, and to a lesser extent Euro Stoxx 50 and Nikkei 225 futures, to enhance the Fund’s equity beta.3 This positioning did not have a material impact on the Fund’s performance during the reporting period. Foreign currency forward contracts were used to hedge exposure to foreign currency but detracted from the Fund’s returns.
What factors affected the relative performance of the equity portion of the Fund during the reporting period?
During the reporting period, the equity portion of the Fund held positions in a diversified group of companies that continued to
achieve growth in free cash flow and provide shareholders with positive returns from cash dividends, share buybacks and debt reduction. Stock selection in the consumer staples, real estate, and financials sectors, among others, however, along with underweight allocations to the consumer discretionary and information technology sectors and an overweight allocation to the utilities sector adversely affected relative performance. Stock selection and an overweight position in the energy sector contributed positively to the relative performance of the equity portion of the Fund. (Contributions take weightings and total returns into account.) From a regional perspective, stock selection in the U.S. proved troublesome and detracted from the relative performance of the equity portion of the Fund.
Which sectors were the strongest contributors to the Fund’s relative performance, and which sectors were particularly weak?
The performance of the equity portion of the Fund is primarily the result of finding companies that can grow free cash flow and are committed to returning a significant portion of that cash to shareholders. The vast majority of stocks in the equity portion of the Fund were successful in this regard and increased their dividends during the reporting period.
The strongest contributor to the relative performance of the equity portion of the Fund was an overweight allocation to the energy sector, followed by stock selection within the health care sector. Stock selection and an overweight allocation to consumer staples combined to make this sector the largest detractor from the relative performance of the equity portion of the Fund during the reporting period.
During the reporting period, which individual stocks made the strongest contributions to the absolute performance of the equity portion of the Fund and which stocks detracted the most?
Among the stocks with the strongest contributions to absolute performance in the equity portion of the Fund were Cisco Systems, Statoil and Total S.A.
Cisco Systems is the world’s largest supplier of routers and switches. A strong product refresh and wide acceptance of the Catalyst 9000 intent-based networking switch returned Cisco to organic growth and drove the company’s share price higher. The company has returned more than 50% of its cash
1. | See footnote on page 6 for more information on this index. |
2. | See footnote on page 6 for more information on the Morningstar World Allocation Category Average. |
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. |
9 |
generation to shareholders through a progressive dividend and share repurchases as of the end of the reporting period.
Statoil, which is headquartered in Norway, is an offshore oil and gas producer with an expanding global footprint. The company’s shares showed strong performance as oil prices rose, and the company reported better-than-expected results for the fourth quarter of 2017. Management also announced a dividend increase in February 2018. The company delivered fast and deep cost reductions in the recent commodity down-cycle and provided project break-evens that resulted in additional cash flow generation. Management remained focused on organic production growth while leveraging capital flexibility and improving free cash flow coverage of the company’s dividend. Statoil has returned cash to shareholders through an attractive dividend and debt reduction that seeks to further strengthen the company’s balance sheet.
Total S.A. is an integrated energy company that explores and produces crude oil and natural gas around the globe. The company refines crude oil into petroleum products such as gasoline and jet fuels and produces petrochemicals such as polyethylene and polypropylene. Total also operates gasoline filling stations on three continents. In a recent quarterly earnings release, the company announced plans to increase its dividend and buy back shares through 2020. Shares performed strongly as oil prices rose. The company remained focused on growing organic production. We believe that Total’s global scale, strong balance sheet, integrated business model, capital flexibility and cost improvements should support strong cash flow generation that could allow the company to pay an attractive dividend throughout the commodity price cycle.
Among the most substantial detractors from absolute performance in the equity portion of the Fund were PPL Corporation, Philip Morris International and Micro Focus International.
PPL is an electric utility whose shares came under pressure because of investors’ concerns over currency volatility related to Britain’s exit from the European Union. The U.K. political environment posed an additional risk because of a focus on the total price of electricity, which has risen significantly, and proposed regulatory changes that could impair PPL’s future profits.
Philip Morris is a U.S.-domiciled international tobacco company and the manufacturer of the largest international tobacco brand, Marlboro. While investors have grown increasingly excited about next-generation products at Philip Morris, a challenging pricing environment in Russia weighed on traditional combustible cigarette results. Overall, combustible product growth has remained stable and profitability on next-generation products has continued to improve. The company has consistently generated
attractive levels of free cash flow and has returned cash to shareholders through a significant and growing dividend.
Micro Focus is a provider of mature enterprise software solutions as well as Linux-based open-source infrastructure solutions. The company’s share price fell because of reduced full-year guidance, as Micro Focus has executed poorly on its acquisition of HPE Software, the largest merger in the history of Micro Focus. The main issues resulted from a difficult enterprise resource planning rollout and weak sales-force planning. New management is now in place, and the company has a plan to tackle these issues. For these reasons, we believed that HPE integration could prove successful in growing cash flow per share, driving leverage down and allowing Micro Focus to progressively raise its well-covered dividend.
Did the equity portion of the Fund make any significant purchases or sales during the reporting period?
In the equity portion of the Fund new purchases during the reporting period included casino resort company Las Vegas Sands and electric utility FirstEnergy. During the reporting period, the equity portion of the Fund exited its positions in media company Regal Entertainment Group and agricultural products and chemicals company Agrium.
Las Vegas Sands is the world’s largest developer, owner and operator of integrated casino resorts. The company generates cash through casino, hotel, mall, food and beverage, and other offerings. Cash flow growth drivers include increased customer visits and increased spending per customer visit, led by the company’s core Macao market. Las Vegas Sands is committed to maintaining a strong balance sheet and returning cash to owners, primarily through attractive and steadily increasing dividends supplemented by share repurchases.
FirstEnergy is a utility holding company that serves customers in Ohio, Pennsylvania, New Jersey, West Virginia and Maryland. The company generates most of its earnings and cash flow from regulated utility operations that are involved in the generation, transmission and distribution of electricity. FirstEnergy is in the process of exiting its unregulated generation businesses, while at the same time focusing on driving regulated growth with attractive investment opportunities such as transmission reliability improvement and grid modernization. FirstEnergy offers an attractive dividend and has had regulated earnings and cash flow growth in the mid-single digits. For these reasons, we believe that the company is well positioned to grow its dividends in the future.
Regal Entertainment operates a chain of movie theaters in the United States under the Regal Cinemas, Edwards Theaters and United Artists Theaters brands. It is the largest theater circuit in the United States, with over 7,000 screens. We exited our
10 | MainStay Income Builder Fund |
position in Regal following the announcement that the company had agreed to be acquired for cash by Cineworld Group.
Agrium operates a global agricultural chemicals business with a unique business model that combines wholesale (the manufacture and sale of nitrogen, potash and phosphate fertilizers) and retail distribution of crop nutrients (made by Agrium and other producers), as well as chemicals and seeds. In late 2016, Agrium announced its intention to enter a merger-of-equals agreement with Potash Corp. The transaction was closed on January 2, 2018. The equity portion of the Fund received shares of the newly formed company, Nutrien, as part of the merger.
How did sector weightings change in the equity portion of the Fund during the reporting period?
Sector weights are generally a function of our bottom-up stock selection process. There were no significant sector weighting changes in the equity portion of the Fund during the reporting period.
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 through 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.
As of April 30, 2018, the most significantly overweight allocations relative to the MSCI World Index in the equity portion of the Fund were in the utilities and telecommunication services sectors. As of the same date, the most significantly underweight positions relative to the benchmark in the equity portion of the Fund were in the information technology and consumer discretionary sectors.
What factors affected the relative performance of the fixed-income portion of the Fund during the reporting period?
The fixed-income portion of the Fund outperformed relative to the Bloomberg Barclays U.S. Aggregate Bond Index, which is the Fund’s fixed-income benchmark, during the reporting period. This was primarily because the fixed-income portion of the Fund held an overweight position relative to this Index in
spread product,4 specifically bank loans, high-yield corporate bonds and investment-grade corporate bonds. The Federal Reserve raised the federal funds target range twice during the reporting period, so spread product—which tends to have a lower correlation to changing interest rates than do U.S. Treasury securities and mortgages—outperformed. Though credit spreads did widen a bit in the first quarter of 2018, they ended the reporting period tighter than when the reporting period began.
The fixed-income portion of the Fund held underweight positions relative to the Bloomberg Barclays U.S. Aggregate Bond Index in U.S. Treasury securities and mortgages. This positioning had a positive effect on the Fund’s performance relative to this index because both of these asset classes were negatively affected by the Federal Reserve’s rate hikes. The fixed-income portion of the Fund had a slightly shorter duration5 than the Bloomberg Barclay’s U.S. Aggregate Bond Index, which also helped performance relative to that index.
What was the duration strategy of the fixed-income portion of the Fund during the reporting period? Please state the end-of-period duration figure.
As of April 30, 2018, the fixed-income portion of the Fund had a duration of 5.8 years, which was slightly shorter than that of the Bloomberg Barclays U.S. Aggregate Bond Index.
Which market segments were the strongest contributors to the relative performance of the fixed-income portion of the Fund and which market segments were particularly weak?
Bank loans proved to be the best performing asset class on a relative basis during the reporting period. Although high-yield and investment-grade credit both had negative absolute returns during the reporting period, both sectors outperformed the Bloomberg Barclays U.S. Aggregate Bond Index. All sectors in which the fixed-income portion of the Fund held bank loan positions provided positive absolute returns during the reporting period, with holdings in the consumer cyclical, industrials and financials sectors providing the strongest performance. In the corporate bond component of the fixed-income portion of the
Fund, industrial positions were the strongest contributors while financial positions were laggards.
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 “spread product” refers to asset classes that typically trade at a spread to comparable U.S. Treasury securities. |
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. |
11 |
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 purchased new-issue corporate bonds of health care services company CVS because we had a favorable view of the company and the bonds provided a yield that we viewed as attractive relative to its peers. We swapped out of long-maturity bonds of telecommunications company Rogers Communications into bonds of the same company that mature in 2025 to shorten maturity as the yield curve6 flattened. We sold bonds in hotel operator Wyndham Worldwide because of our concerns about the company’s valuation.
How did sector weightings change in the fixed-income portion of the Fund during the reporting period?
During the reporting period, the fixed-income portion of the Fund moderately decreased its positions in high-yield corporate
bonds and bank loans. Over the same period, the fixed-income portion of the Fund increased its position in investment-grade corporate bonds.
How was the fixed-income portion of the Fund positioned at the end of the reporting period?
As of April 30, 2018, the fixed-income portion of the Fund held overweight positions relative to the Bloomberg Barclays U.S. Aggregate Bond Index in bank loans, high-yield credit and investment-grade credit. As of the same date, the fixed-income portion of the Fund held underweight positions relative to that index in U.S. Treasury securities, agency debentures and mortgage-backed securities.
6. | 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. |
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, 2018 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 50.0%† Asset-Backed Securities 0.1% |
| |||||||
Home Equity 0.1% |
| |||||||
Ameriquest Mortgage Securities, Inc. Series 2003-8, Class AF5 | $ | 20,710 | $ | 21,057 | ||||
Chase Funding Trust | 86,091 | 87,279 | ||||||
Countrywide Asset-Backed Certificates Series 2003-5, Class AF5 | 439,799 | 452,002 | ||||||
Equity One Mortgage Pass-Through Trust | 170,683 | 168,816 | ||||||
JPMorgan Mortgage Acquisition Trust | 452,495 | 319,840 | ||||||
MASTR Asset-Backed Securities Trust | 629,764 | 304,663 | ||||||
Saxon Asset Securities Trust | 79,505 | 79,032 | ||||||
Terwin Mortgage Trust Series 2005-14HE, Class AF2 | 8,836 | 8,839 | ||||||
|
| |||||||
1,441,528 | ||||||||
|
| |||||||
Student Loans 0.0%‡ |
| |||||||
KeyCorp Student Loan Trust | 237,336 | 236,419 | ||||||
|
| |||||||
Total Asset-Backed Securities | 1,677,947 | |||||||
|
| |||||||
Corporate Bonds 41.8% | ||||||||
Aerospace & Defense 0.3% |
| |||||||
KLX, Inc. | 3,485,000 | 3,637,469 | ||||||
Triumph Group, Inc. | 1,205,000 | 1,168,850 | ||||||
|
| |||||||
4,806,319 | ||||||||
|
|
Principal Amount | Value | |||||||
Agriculture 0.2% |
| |||||||
Philip Morris International, Inc. | $ | 3,550,000 | $ | 3,521,883 | ||||
Reynolds American, Inc. | 255,000 | 269,342 | ||||||
|
| |||||||
3,791,225 | ||||||||
|
| |||||||
Airlines 0.8% |
| |||||||
American Airlines Group, Inc. | 3,700,000 | 3,727,750 | ||||||
American Airlines, Inc. | ||||||||
Series 2016-2, Class AA, Pass Through Trust | 644,640 | 613,800 | ||||||
Series 2017-2, Class AA, Pass Through Trust | 1,000,000 | 959,432 | ||||||
Series 2015-2, Class AA, Pass Through Trust | 3,168,528 | 3,103,700 | ||||||
Series 2016-2, Class AA, Pass Through Trust | 227,520 | 222,323 | ||||||
Continental Airlines, Inc. | ||||||||
Series 2009-2, Class 2, Pass Through Trust | 1,405,114 | 1,484,152 | ||||||
Series 2003-ERJ-1 | 39,178 | 39,570 | ||||||
U.S. Airways Group, Inc. | ||||||||
Series 2012-1, Class A | 1,697,223 | 1,840,893 | ||||||
Series 2010-1, Class A, Pass Through Trust | 822,130 | 887,653 | ||||||
United Airlines, Inc. | 1,453,089 | 1,535,624 | ||||||
|
| |||||||
14,414,897 | ||||||||
|
| |||||||
Apparel 0.2% |
| |||||||
Hanesbrands, Inc. | 3,575,000 | 3,449,875 | ||||||
|
| |||||||
Auto Manufacturers 1.1% |
| |||||||
Daimler Finance North America LLC | 2,400,000 | 2,400,000 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Auto Manufacturers (continued) |
| |||||||
Ford Motor Co. | ||||||||
6.625%, due 10/1/28 | $ | 1,500,000 | $ | 1,700,644 | ||||
7.45%, due 7/16/31 | 450,000 | 532,721 | ||||||
8.90%, due 1/15/32 | 215,000 | 280,863 | ||||||
Ford Motor Credit Co. LLC | 350,000 | 372,429 | ||||||
General Motors Financial Co., Inc. | ||||||||
3.15%, due 6/30/22 | 900,000 | 875,603 | ||||||
3.20%, due 7/13/20 | 1,800,000 | 1,794,649 | ||||||
3.25%, due 5/15/18 | 325,000 | 325,104 | ||||||
3.45%, due 4/10/22 | 3,800,000 | 3,748,385 | ||||||
4.20%, due 3/1/21 | 2,585,000 | 2,629,970 | ||||||
Toyota Motor Credit Corp. | 4,600,000 | 4,455,924 | ||||||
|
| |||||||
19,116,292 | ||||||||
|
| |||||||
Auto Parts & Equipment 0.5% |
| |||||||
Goodyear Tire & Rubber Co. | 2,540,000 | 2,527,300 | ||||||
LKQ European Holdings B.V. | EUR 2,140,000 | 2,580,857 | ||||||
Schaeffler Finance B.V. | $ | 3,345,000 | 3,399,356 | |||||
Tenneco, Inc. | 415,000 | 388,025 | ||||||
|
| |||||||
8,895,538 | ||||||||
|
| |||||||
Banks 8.0% |
| |||||||
¨Bank of America Corp. | ||||||||
2.738%, due 1/23/22 (d) | 3,260,000 | 3,206,361 | ||||||
3.004%, due 12/20/23 (c)(d) | 1,794,000 | 1,740,950 | ||||||
3.50%, due 4/19/26 | 415,000 | 400,753 | ||||||
3.705%, due 4/24/28 (d) | 2,895,000 | 2,783,782 | ||||||
5.125%, due 6/17/19 (d)(e) | 575,000 | 582,245 | ||||||
5.875%, due 2/7/42 | 500,000 | 599,771 | ||||||
6.11%, due 1/29/37 | 1,505,000 | 1,753,085 | ||||||
6.30%, due 3/10/26 (d)(e) | 2,085,000 | 2,207,390 | ||||||
8.57%, due 11/15/24 | 485,000 | 602,629 | ||||||
Bank of New York Mellon Corp. | 3,275,000 | 3,152,188 | ||||||
Barclays PLC (United Kingdom) | ||||||||
2.75%, due 11/8/19 | 936,000 | 929,558 | ||||||
5.20%, due 5/12/26 | 5,570,000 | 5,566,870 | ||||||
BB&T Corp. | ||||||||
2.15%, due 2/1/21 | 2,315,000 | 2,256,977 | ||||||
2.75%, due 4/1/22 | 4,100,000 | 4,008,783 | ||||||
Capital One Financial Corp. | 435,000 | 424,944 | ||||||
Citibank N.A. | 4,590,000 | 4,475,298 |
Principal Amount | Value | |||||||
Banks (continued) |
| |||||||
Citigroup, Inc. | ||||||||
3.668%, due 7/24/28 (d) | $ | 1,180,000 | $ | 1,125,798 | ||||
4.05%, due 7/30/22 | 105,000 | 106,194 | ||||||
5.30%, due 5/6/44 | 1,200,000 | 1,278,112 | ||||||
6.625%, due 6/15/32 | 770,000 | 917,817 | ||||||
6.875%, due 6/1/25 | 1,715,000 | 2,004,005 | ||||||
Citizens Bank N.A. | 1,050,000 | 1,027,327 | ||||||
Citizens Financial Group, Inc. | 3,405,000 | 3,399,055 | ||||||
Discover Bank | 1,064,000 | 1,142,711 | ||||||
¨Goldman Sachs Group, Inc. | ||||||||
2.905%, due 7/24/23 (d) | 880,000 | 849,549 | ||||||
2.908%, due 6/5/23 (d) | 800,000 | 773,531 | ||||||
3.50%, due 11/16/26 | 1,085,000 | 1,027,564 | ||||||
3.625%, due 1/22/23 | 3,045,000 | 3,032,459 | ||||||
3.85%, due 1/26/27 | 4,385,000 | 4,233,811 | ||||||
5.00%, due 11/10/22 (d)(e) | 3,110,000 | 2,987,590 | ||||||
5.25%, due 7/27/21 | 805,000 | 851,550 | ||||||
6.75%, due 10/1/37 | 829,000 | 1,005,898 | ||||||
7.50%, due 2/15/19 | 2,100,000 | 2,178,962 | ||||||
Huntington Bancshares, Inc. | ||||||||
3.15%, due 3/14/21 | 3,535,000 | 3,520,022 | ||||||
5.70%, due 4/15/23 (d)(e) | 2,400,000 | 2,398,500 | ||||||
JPMorgan Chase & Co. | ||||||||
3.54%, due 5/1/28 (d) | 2,970,000 | 2,834,196 | ||||||
5.15%, due 5/1/23 (d)(e) | 4,666,000 | 4,619,340 | ||||||
6.40%, due 5/15/38 | 820,000 | 1,030,826 | ||||||
Kreditanstalt Fuer Wiederaufbau (Germany) | ||||||||
1.00%, due 6/11/18 | 4,435,000 | 4,430,077 | ||||||
1.50%, due 2/6/19 | 8,170,000 | 8,114,492 | ||||||
Lloyds Banking Group PLC (United Kingdom) | ||||||||
4.582%, due 12/10/25 | 1,633,000 | 1,614,614 | ||||||
4.65%, due 3/24/26 | 3,090,000 | 3,070,899 | ||||||
¨Morgan Stanley | ||||||||
2.375%, due 7/23/19 | 1,750,000 | 1,741,814 | ||||||
3.125%, due 1/23/23 | 4,435,000 | 4,334,160 | ||||||
3.591%, due 7/22/28 (d) | 1,360,000 | 1,292,962 | ||||||
3.875%, due 1/27/26 | 465,000 | 458,300 | ||||||
4.875%, due 11/1/22 | 1,125,000 | 1,167,836 | ||||||
5.00%, due 11/24/25 | 2,855,000 | 2,961,219 | ||||||
5.45%, due 7/15/19 (d)(e) | 2,310,000 | 2,347,538 | ||||||
6.375%, due 7/24/42 | 170,000 | 213,986 | ||||||
PNC Bank N.A. | 2,185,000 | 2,128,622 | ||||||
Royal Bank of Scotland Group PLC (United Kingdom) | ||||||||
6.00%, due 12/19/23 | 190,000 | 201,799 | ||||||
6.125%, due 12/15/22 | 1,530,000 | 1,622,205 |
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. | ||||||||
2.65%, due 4/17/20 | $ | 3,875,000 | $ | 3,829,459 | ||||
4.40%, due 7/13/27 | 600,000 | 587,814 | ||||||
Santander UK Group Holdings PLC (United Kingdom) | ||||||||
3.571%, due 1/10/23 | 2,230,000 | 2,184,773 | ||||||
3.823%, due 11/3/28 (d) | 1,640,000 | 1,538,731 | ||||||
State Street Corp. | 2,605,000 | 2,584,834 | ||||||
Toronto-Dominion Bank | 4,295,000 | 4,110,889 | ||||||
U.S. Bank N.A. | 4,050,000 | 3,987,847 | ||||||
Wachovia Corp. | 315,000 | 345,805 | ||||||
Wells Fargo & Co. | ||||||||
3.584%, due 5/22/28 (d) | 2,615,000 | 2,493,967 | ||||||
4.90%, due 11/17/45 | 55,000 | 55,771 | ||||||
5.375%, due 11/2/43 | 690,000 | 740,831 | ||||||
Wells Fargo Bank N.A. | ||||||||
2.40%, due 1/15/20 | 1,875,000 | 1,857,418 | ||||||
5.85%, due 2/1/37 | 140,000 | 165,375 | ||||||
|
| |||||||
137,220,438 | ||||||||
|
| |||||||
Beverages 1.4% |
| |||||||
Anheuser-Busch InBev Finance, Inc. | 5,725,000 | 5,597,328 | ||||||
Anheuser-Busch InBev Worldwide, Inc. (Belgium) | ||||||||
3.50%, due 1/12/24 | 675,000 | 671,708 | ||||||
4.60%, due 4/15/48 | 2,230,000 | 2,210,449 | ||||||
Coca-Cola Co. | 3,845,000 | 3,798,595 | ||||||
Constellation Brands, Inc. | 2,100,000 | 2,142,048 | ||||||
Molson Coors Brewing Co. | 2,000,000 | 1,831,216 | ||||||
PepsiCo, Inc. | ||||||||
1.35%, due 10/4/19 | 2,225,000 | 2,186,463 | ||||||
2.375%, due 10/6/26 | 2,225,000 | 2,033,755 | ||||||
3.00%, due 10/15/27 | 3,000,000 | 2,838,863 | ||||||
|
| |||||||
23,310,425 | ||||||||
|
| |||||||
Biotechnology 0.5% |
| |||||||
Biogen, Inc. | 3,480,000 | 3,480,913 | ||||||
Celgene Corp. | ||||||||
3.625%, due 5/15/24 | 3,600,000 | 3,520,136 | ||||||
4.55%, due 2/20/48 | 1,650,000 | 1,548,549 | ||||||
|
| |||||||
8,549,598 | ||||||||
|
|
Principal Amount | Value | |||||||
Building Materials 0.9% |
| |||||||
Cemex S.A.B. de C.V. | $ | 4,255,000 | $ | 4,665,607 | ||||
Fortune Brands Home & Security, Inc. | 4,420,000 | 4,444,502 | ||||||
Johnson Controls International PLC | 1,305,000 | 1,294,949 | ||||||
Masco Corp. | 1,575,000 | 1,584,844 | ||||||
Standard Industries, Inc. | 2,940,000 | 2,978,588 | ||||||
|
| |||||||
14,968,490 | ||||||||
|
| |||||||
Chemicals 0.8% |
| |||||||
Air Liquide Finance S.A. (France) (c) | ||||||||
1.375%, due 9/27/19 | 2,535,000 | 2,480,617 | ||||||
1.75%, due 9/27/21 | 1,725,000 | 1,640,673 | ||||||
Braskem Netherlands Finance B.V. | 4,275,000 | 4,005,675 | ||||||
Dow Chemical Co. | ||||||||
4.125%, due 11/15/21 | 1,605,000 | 1,640,337 | ||||||
8.55%, due 5/15/19 | 75,000 | 79,420 | ||||||
Mexichem S.A.B. de C.V. | 1,800,000 | 1,678,860 | ||||||
WR Grace & Co-Conn | 1,885,000 | 1,936,442 | ||||||
|
| |||||||
13,462,024 | ||||||||
|
| |||||||
Commercial Services 0.4% |
| |||||||
Herc Rentals, Inc. | 1,694,000 | 1,828,673 | ||||||
Service Corp. International | ||||||||
4.625%, due 12/15/27 | 1,325,000 | 1,295,585 | ||||||
5.375%, due 1/15/22 | 3,600,000 | 3,664,800 | ||||||
|
| |||||||
6,789,058 | ||||||||
|
| |||||||
Computers 0.7% |
| |||||||
Apple, Inc. | ||||||||
1.55%, due 8/4/21 | 1,500,000 | 1,433,442 | ||||||
3.20%, due 5/11/27 | 900,000 | 868,819 | ||||||
3.35%, due 2/9/27 | 3,480,000 | 3,405,691 | ||||||
3.85%, due 5/4/43 | 2,235,000 | 2,136,686 | ||||||
3.85%, due 8/4/46 | 1,090,000 | 1,033,388 | ||||||
International Business Machines Corp. | 2,050,000 | 2,465,802 | ||||||
|
| |||||||
11,343,828 | ||||||||
|
| |||||||
Cosmetics & Personal Care 0.2% |
| |||||||
Unilever Capital Corp. | 3,100,000 | 3,035,023 | ||||||
|
|
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Diversified Financial Services 2.0% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | $ | 4,265,000 | $ | 4,374,745 | ||||
Air Lease Corp. | ||||||||
2.125%, due 1/15/20 | 1,950,000 | 1,913,124 | ||||||
2.75%, due 1/15/23 | 1,850,000 | 1,767,902 | ||||||
4.25%, due 9/15/24 | 1,185,000 | 1,190,279 | ||||||
Caterpillar Financial Services Corp. | 4,990,000 | 4,972,838 | ||||||
CIT Group, Inc. | ||||||||
3.875%, due 2/19/19 | 870,000 | 874,037 | ||||||
5.00%, due 8/15/22 | 968,000 | 989,780 | ||||||
Discover Financial Services | 1,491,000 | 1,476,334 | ||||||
GE Capital International Funding Co. | 6,500,000 | 6,352,221 | ||||||
International Lease Finance Corp. | ||||||||
5.875%, due 4/1/19 | 1,255,000 | 1,288,967 | ||||||
6.25%, due 5/15/19 | 1,074,000 | 1,109,236 | ||||||
OneMain Financial Holdings LLC | 732,000 | 757,620 | ||||||
Peachtree Corners Funding Trust | 940,000 | 929,000 | ||||||
Springleaf Finance Corp. | ||||||||
5.25%, due 12/15/19 | 700,000 | 708,736 | ||||||
6.00%, due 6/1/20 | 475,000 | 493,406 | ||||||
Synchrony Financial | 5,000,000 | 4,919,397 | ||||||
|
| |||||||
34,117,622 | ||||||||
|
| |||||||
Electric 1.7% |
| |||||||
AEP Transmission Co. LLC | 2,350,000 | 2,234,609 | ||||||
CMS Energy Corp. | ||||||||
3.875%, due 3/1/24 | 1,540,000 | 1,543,014 | ||||||
5.05%, due 3/15/22 | 1,220,000 | 1,282,697 | ||||||
6.25%, due 2/1/20 | 1,225,000 | 1,287,370 | ||||||
Consolidated Edison, Inc. | 1,205,000 | 1,181,533 | ||||||
Duquesne Light Holdings, Inc. | 2,590,000 | 2,752,915 | ||||||
FirstEnergy Transmission LLC | 2,555,000 | 2,869,526 | ||||||
Florida Power & Light Co. | 2,060,000 | 1,961,954 | ||||||
Great Plains Energy, Inc. | 1,130,000 | 1,187,050 | ||||||
MidAmerican Energy Co. | ||||||||
3.95%, due 8/1/47 | 835,000 | 828,068 | ||||||
4.40%, due 10/15/44 | 2,200,000 | 2,329,921 |
Principal Amount | Value | |||||||
Electric (continued) |
| |||||||
PECO Energy Co. | $ | 1,195,000 | $ | 1,313,497 | ||||
Potomac Electric Power Co. | 1,735,000 | 1,755,627 | ||||||
PPL Electric Utilities Corp. | 2,200,000 | 2,174,239 | ||||||
Public Service Electric & Gas Co. | 2,235,000 | 2,119,807 | ||||||
Puget Energy, Inc. | 815,000 | 869,496 | ||||||
WEC Energy Group, Inc. | 1,095,000 | 1,085,506 | ||||||
|
| |||||||
28,776,829 | ||||||||
|
| |||||||
Entertainment 0.1% |
| |||||||
International Game Technology PLC | 2,255,000 | 2,308,556 | ||||||
|
| |||||||
Environmental Controls 0.3% |
| |||||||
Republic Services, Inc. | 1,615,000 | 1,692,611 | ||||||
Waste Management, Inc. | ||||||||
2.40%, due 5/15/23 | 2,275,000 | 2,156,932 | ||||||
3.15%, due 11/15/27 | 1,080,000 | 1,013,913 | ||||||
|
| |||||||
4,863,456 | ||||||||
|
| |||||||
Food 1.4% |
| |||||||
Kerry Group Financial Services | 2,899,000 | 2,839,993 | ||||||
Kraft Heinz Foods Co. | ||||||||
4.875%, due 2/15/25 (c) | 2,123,000 | 2,208,996 | ||||||
5.00%, due 6/4/42 | 1,150,000 | 1,125,119 | ||||||
Kroger Co. | 2,555,000 | 2,502,439 | ||||||
Mondelez International Holdings Netherlands B.V. (Netherlands) (c) | ||||||||
1.625%, due 10/28/19 | 2,790,000 | 2,734,764 | ||||||
2.00%, due 10/28/21 | 3,050,000 | 2,904,401 | ||||||
Smithfield Foods, Inc. (c) | ||||||||
2.70%, due 1/31/20 | 1,690,000 | 1,663,666 | ||||||
3.35%, due 2/1/22 | 1,575,000 | 1,525,590 | ||||||
Sysco Corp. | 1,735,000 | 1,637,638 | ||||||
Tyson Foods, Inc. | 4,235,000 | 4,225,978 | ||||||
|
| |||||||
23,368,584 | ||||||||
|
| |||||||
Gas 0.3% |
| |||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | ||||||||
5.50%, due 5/20/25 | 735,000 | 722,138 | ||||||
5.625%, due 5/20/24 | 1,140,000 | 1,134,300 | ||||||
5.75%, due 5/20/27 | 520,000 | 500,500 |
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) | ||||||||
Gas (continued) |
| |||||||
NiSource, Inc. | $ | 3,670,000 | $ | 3,516,888 | ||||
|
| |||||||
5,873,826 | ||||||||
|
| |||||||
Health Care—Products 1.2% |
| |||||||
Abbott Laboratories | 2,215,000 | 2,184,175 | ||||||
Baxter International, Inc. | 2,585,000 | 2,208,968 | ||||||
Becton Dickinson & Co. | 4,380,000 | 4,148,901 | ||||||
Boston Scientific Corp. | 3,740,000 | 3,705,116 | ||||||
Medtronic Global Holdings SCA | 3,090,000 | 3,064,846 | ||||||
Stryker Corp. | 3,395,000 | 3,349,363 | ||||||
Thermo Fisher Scientific, Inc. | 1,425,000 | 1,380,592 | ||||||
|
| |||||||
20,041,961 | ||||||||
|
| |||||||
Health Care—Services 0.2% |
| |||||||
Cigna Corp. | 270,000 | 277,042 | ||||||
Laboratory Corp. of America Holdings | 3,510,000 | 3,510,944 | ||||||
|
| |||||||
3,787,986 | ||||||||
|
| |||||||
Home Builders 0.9% |
| |||||||
Lennar Corp. | ||||||||
4.50%, due 6/15/19 | 2,400,000 | 2,418,000 | ||||||
4.50%, due 11/15/19 | 750,000 | 758,438 | ||||||
5.875%, due 11/15/24 (c) | 1,345,000 | 1,388,712 | ||||||
8.375%, due 5/15/18 (c) | 2,000,000 | 2,000,000 | ||||||
MDC Holdings, Inc. | 2,750,000 | 2,825,625 | ||||||
Toll Brothers Finance Corp. | 1,340,000 | 1,417,050 | ||||||
TRI Pointe Group, Inc. / TRI Pointe Homes, Inc. | ||||||||
4.375%, due 6/15/19 | 1,000,000 | 1,001,250 | ||||||
5.875%, due 6/15/24 | 2,935,000 | 2,975,356 | ||||||
|
| |||||||
14,784,431 | ||||||||
|
| |||||||
Housewares 0.1% |
| |||||||
Newell Brands, Inc. | 1,415,000 | 1,403,813 | ||||||
|
|
Principal Amount | Value | |||||||
Insurance 2.5% |
| |||||||
Alterra Finance LLC | $ | 200,000 | $ | 212,438 | ||||
AXA Equitable Holdings, Inc. | 2,305,000 | 2,209,000 | ||||||
Jackson National Life Global Funding | 3,580,000 | 3,532,449 | ||||||
Liberty Mutual Group, Inc. (c) | ||||||||
4.25%, due 6/15/23 | 850,000 | 862,034 | ||||||
6.50%, due 3/15/35 | 220,000 | 264,343 | ||||||
7.80%, due 3/7/87 | 1,760,000 | 2,129,600 | ||||||
10.75%, due 6/15/88 (d) | 750,000 | 1,155,000 | ||||||
Lincoln National Corp. | 3,400,000 | 3,301,437 | ||||||
Markel Corp. | 2,350,000 | 2,461,374 | ||||||
MassMutual Global Funding II (c) | ||||||||
2.10%, due 8/2/18 | 1,200,000 | 1,198,436 | ||||||
2.50%, due 10/17/22 | 3,347,000 | 3,224,544 | ||||||
2.95%, due 1/11/25 | 1,105,000 | 1,057,149 | ||||||
Metropolitan Life Global Funding I | 2,250,000 | 2,213,790 | ||||||
Oil Insurance, Ltd. | 1,320,000 | 1,273,800 | ||||||
Pricoa Global Funding I | 2,135,000 | 2,105,174 | ||||||
Principal Life Global Funding II | 4,070,000 | 3,933,416 | ||||||
Protective Life Corp. | 1,640,000 | 2,385,562 | ||||||
Provident Cos., Inc. | 2,115,000 | 2,539,553 | ||||||
Prudential Financial, Inc. | ||||||||
4.418%, due 3/27/48 | 1,845,000 | 1,870,828 | ||||||
5.625%, due 6/15/43 (d) | 1,760,000 | 1,837,000 | ||||||
Voya Financial, Inc. | 690,000 | 659,203 | ||||||
XLIT, Ltd. | 2,155,000 | 2,146,636 | ||||||
|
| |||||||
42,572,766 | ||||||||
|
| |||||||
Internet 1.5% |
| |||||||
Alibaba Group Holding, Ltd. | 3,710,000 | 3,494,220 | ||||||
Amazon.com, Inc. | ||||||||
3.30%, due 12/5/21 | 2,185,000 | 2,200,336 | ||||||
3.875%, due 8/22/37 (c) | 1,590,000 | 1,576,007 | ||||||
5.20%, due 12/3/25 | 3,375,000 | 3,733,707 | ||||||
Booking Holdings, Inc. | 2,225,000 | 2,156,850 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Internet (continued) |
| |||||||
eBay, Inc. | $ | 3,840,000 | $ | 3,882,954 | ||||
Expedia Group, Inc. | 500,000 | 456,071 | ||||||
Match Group, Inc. | 3,995,000 | 4,214,725 | ||||||
Tencent Holdings, Ltd. (China) (c) | ||||||||
3.595%, due 1/19/28 | 1,475,000 | 1,401,689 | ||||||
3.925%, due 1/19/38 | 1,910,000 | 1,800,975 | ||||||
|
| |||||||
24,917,534 | ||||||||
|
| |||||||
Iron & Steel 0.3% |
| |||||||
ArcelorMittal | 2,300,000 | 2,725,500 | ||||||
Vale Overseas, Ltd. | 1,800,000 | 2,086,920 | ||||||
|
| |||||||
4,812,420 | ||||||||
|
| |||||||
Lodging 0.8% |
| |||||||
Choice Hotels International, Inc. | 3,260,000 | 3,447,450 | ||||||
Hilton Domestic Operating Co., Inc. | 2,390,000 | 2,296,670 | ||||||
Marriott International, Inc. | ||||||||
2.30%, due 1/15/22 | 2,450,000 | 2,347,093 | ||||||
6.75%, due 5/15/18 | 265,000 | 265,409 | ||||||
7.15%, due 12/1/19 | 1,900,000 | 2,014,353 | ||||||
MGM Resorts International | ||||||||
6.75%, due 10/1/20 | 2,390,000 | 2,539,375 | ||||||
8.625%, due 2/1/19 | 80,000 | 82,878 | ||||||
Wyndham Worldwide Corp. | 410,000 | 407,211 | ||||||
|
| |||||||
13,400,439 | ||||||||
|
| |||||||
Machinery���Diversified 0.2% |
| |||||||
CNH Industrial Capital LLC | 3,945,000 | 4,075,816 | ||||||
|
| |||||||
Media 1.2% |
| |||||||
21st Century Fox America, Inc. | ||||||||
3.00%, due 9/15/22 | 2,230,000 | 2,188,532 | ||||||
6.65%, due 11/15/37 | 1,710,000 | 2,177,286 | ||||||
DISH DBS Corp. | 2,050,000 | 1,885,488 | ||||||
Grupo Televisa S.A.B. | 1,500,000 | 1,671,955 | ||||||
NBC Universal Media LLC | 160,000 | 166,660 | ||||||
Sky PLC | 950,000 | 949,424 |
Principal Amount | Value | |||||||
Media (continued) |
| |||||||
Time Warner Cable LLC | $ | 1,350,000 | $ | 1,587,400 | ||||
Time Warner Entertainment Co., L.P. | ||||||||
8.375%, due 3/15/23 | 800,000 | 942,191 | ||||||
8.375%, due 7/15/33 | 1,000,000 | 1,295,175 | ||||||
Time Warner, Inc. | 2,500,000 | 2,416,731 | ||||||
UPCB Finance IV, Ltd. | 2,050,000 | 2,003,875 | ||||||
Vrio Finco 1, LLC / Vrio Finco 2, Inc. | 2,775,000 | 2,764,594 | ||||||
Walt Disney Co. | 850,000 | 809,492 | ||||||
|
| |||||||
20,858,803 | ||||||||
|
| |||||||
Metal Fabricate & Hardware 0.3% |
| |||||||
Precision Castparts Corp. | ||||||||
3.25%, due 6/15/25 | 4,040,000 | 3,951,951 | ||||||
3.90%, due 1/15/43 | 835,000 | 812,016 | ||||||
|
| |||||||
4,763,967 | ||||||||
|
| |||||||
Mining 0.5% |
| |||||||
Anglo American Capital PLC | 1,295,000 | 1,313,524 | ||||||
FMG Resources (August 2006) Pty, Ltd. (Australia) (c) | ||||||||
5.125%, due 5/15/24 | 2,280,000 | 2,251,500 | ||||||
9.75%, due 3/1/22 | 298,455 | 328,897 | ||||||
Southern Copper Corp. | 2,035,000 | 2,276,440 | ||||||
Teck Resources, Ltd. | 2,060,000 | 2,147,550 | ||||||
|
| |||||||
8,317,911 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 0.5% |
| |||||||
Amsted Industries, Inc. | 3,785,000 | 3,777,922 | ||||||
Siemens Financieringsmaatschappij N.V. | 2,130,000 | 2,085,494 | ||||||
Textron Financial Corp. | 3,540,000 | 3,265,650 | ||||||
|
| |||||||
9,129,066 | ||||||||
|
| |||||||
Oil & Gas 1.0% |
| |||||||
Andeavor | 1,260,000 | 1,330,116 | ||||||
Cenovus Energy, Inc. | 955,000 | 918,273 |
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) | ||||||||
Oil & Gas (continued) |
| |||||||
Gazprom OAO Via Gaz Capital S.A. 7.288%, due 8/16/37 | $ | 2,065,000 | $ | 2,379,913 | ||||
Petrobras Global Finance B.V. | 4,120,000 | 4,418,700 | ||||||
Petroleos Mexicanos | 2,780,000 | 2,683,812 | ||||||
Valero Energy Corp. | ||||||||
6.125%, due 2/1/20 | 2,385,000 | 2,505,145 | ||||||
6.625%, due 6/15/37 | 2,645,000 | 3,302,896 | ||||||
|
| |||||||
17,538,855 | ||||||||
|
| |||||||
Packaging & Containers 0.5% |
| |||||||
Ball Corp. | 3,700,000 | 3,834,125 | ||||||
Crown Americas LLC / Crown Americas Capital Corp. IV | 1,400,000 | 1,377,250 | ||||||
Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC | 1,938,215 | 1,952,752 | ||||||
Sealed Air Corp. | 1,900,000 | 1,964,125 | ||||||
|
| |||||||
9,128,252 | ||||||||
|
| |||||||
Pharmaceuticals 0.6% |
| |||||||
Allergan Funding SCS | 4,050,000 | 3,982,221 | ||||||
CVS Pass-Through Trust | 168,173 | 175,949 | ||||||
Johnson & Johnson | 3,245,000 | 3,062,877 | ||||||
Valeant Pharmaceuticals International, Inc. | 2,290,000 | 2,278,550 | ||||||
|
| |||||||
9,499,597 | ||||||||
|
| |||||||
Pipelines 1.0% |
| |||||||
Andeavor Logistics, L.P. / Tesoro Logistics Finance Corp. | 1,845,000 | 1,897,952 | ||||||
Columbia Pipeline Group, Inc. | 2,995,000 | 2,986,880 | ||||||
Enterprise Products Operating LLC | 3,145,000 | 2,973,331 | ||||||
MPLX, L.P. | ||||||||
4.875%, due 6/1/25 | 100,000 | 103,523 | ||||||
5.50%, due 2/15/23 | 1,975,000 | 2,021,906 | ||||||
Southern Natural Gas Co. LLC | 880,000 | 921,283 |
Principal Amount | Value | |||||||
Pipelines (continued) |
| |||||||
Spectra Energy Partners, L.P. | $ | 1,740,000 | $ | 1,784,819 | ||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | 2,120,000 | 2,114,700 | ||||||
Transcontinental Gas Pipe Line Co. LLC | 2,340,000 | 2,252,352 | ||||||
|
| |||||||
17,056,746 | ||||||||
|
| |||||||
Real Estate Investment Trusts 1.1% |
| |||||||
American Tower Corp. | 2,945,000 | 2,733,359 | ||||||
CoreCivic, Inc. | 810,000 | 801,900 | ||||||
Crown Castle International Corp. | ||||||||
3.40%, due 2/15/21 | 2,080,000 | 2,081,708 | ||||||
5.25%, due 1/15/23 | 3,510,000 | 3,702,839 | ||||||
Digital Realty Trust, L.P. | ||||||||
2.75%, due 2/1/23 | 140,000 | 133,147 | ||||||
3.70%, due 8/15/27 | 500,000 | 475,061 | ||||||
Essex Portfolio, L.P. | 1,490,000 | 1,413,191 | ||||||
Iron Mountain, Inc. (c) | ||||||||
4.875%, due 9/15/27 | 1,860,000 | 1,750,725 | ||||||
5.25%, due 3/15/28 | 1,440,000 | 1,355,400 | ||||||
Kilroy Realty, L.P. | 2,060,000 | 1,968,444 | ||||||
UDR, Inc. | 2,000,000 | 1,886,261 | ||||||
Welltower, Inc. | 890,000 | 873,269 | ||||||
|
| |||||||
19,175,304 | ||||||||
|
| |||||||
Retail 1.9% |
| |||||||
Alimentation Couche-Tard, Inc. (Canada) (c) | ||||||||
3.55%, due 7/26/27 | 4,435,000 | 4,198,056 | ||||||
4.50%, due 7/26/47 | 1,950,000 | 1,866,105 | ||||||
AutoZone, Inc. | 1,500,000 | 1,446,742 | ||||||
Brinker International, Inc. | 1,885,000 | 1,884,057 | ||||||
CVS Health Corp. | 3,725,000 | 3,751,959 | ||||||
4.78%, due 3/25/38 | 1,110,000 | 1,097,642 | ||||||
5.05%, due 3/25/48 | 2,220,000 | 2,255,290 | ||||||
CK Hutchison International (17) II, Ltd. | 2,620,000 | 2,456,794 | ||||||
Dollar Tree, Inc. | 1,425,000 | 1,414,596 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Retail (continued) |
| |||||||
Home Depot, Inc. | $ | 1,955,000 | $ | 1,744,020 | ||||
McDonald’s Corp. | 965,000 | 866,508 | ||||||
QVC, Inc. | 2,660,000 | 2,686,486 | ||||||
Starbucks Corp. | 2,220,000 | 2,052,276 | ||||||
TJX Cos., Inc. | 6,450,000 | 5,751,651 | ||||||
|
| |||||||
33,472,182 | ||||||||
|
| |||||||
Semiconductors 0.6% |
| |||||||
Intel Corp. | 2,300,000 | 2,153,438 | ||||||
NXP B.V. / NXP Funding LLC | 1,610,000 | 1,622,075 | ||||||
Qorvo, Inc. | 3,740,000 | 4,062,575 | ||||||
Sensata Technologies B.V. | 2,990,000 | 2,982,525 | ||||||
|
| |||||||
10,820,613 | ||||||||
|
| |||||||
Software 0.8% |
| |||||||
Microsoft Corp. | ||||||||
3.45%, due 8/8/36 | 765,000 | 730,960 | ||||||
4.20%, due 11/3/35 | 1,025,000 | 1,073,868 | ||||||
MSCI, Inc. | 3,610,000 | 3,771,367 | ||||||
Oracle Corp. | ||||||||
3.80%, due 11/15/37 | 2,105,000 | 2,037,748 | ||||||
4.30%, due 7/8/34 | 2,085,000 | 2,168,344 | ||||||
PTC, Inc. | 1,415,000 | 1,482,213 | ||||||
salesforce.com, Inc. | ||||||||
3.25%, due 4/11/23 | 1,300,000 | 1,289,442 | ||||||
3.70%, due 4/11/28 | 1,915,000 | 1,896,586 | ||||||
|
| |||||||
14,450,528 | ||||||||
|
| |||||||
Telecommunications 1.7% |
| |||||||
¨AT&T, Inc. | 3,730,000 | 3,661,361 | ||||||
CommScope Technologies LLC | 850,000 | 873,375 | ||||||
CommScope, Inc. | 3,090,000 | 3,113,175 | ||||||
Hughes Satellite Systems Corp. | 990,000 | 1,019,700 |
Principal Amount | Value | |||||||
Telecommunications (continued) |
| |||||||
Rogers Communications, Inc. (Canada) | ||||||||
4.30%, due 2/15/48 | $ | 2,320,000 | $ | 2,235,088 | ||||
5.45%, due 10/1/43 | 380,000 | 421,528 | ||||||
Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC (c) | ||||||||
3.36%, due 3/20/23 | 4,681,250 | 4,664,257 | ||||||
4.738%, due 3/20/25 | 2,625,000 | 2,651,250 | ||||||
Telecom Italia Capital S.A. (Italy) | ||||||||
7.175%, due 6/18/19 | 1,930,000 | 2,004,788 | ||||||
7.721%, due 6/4/38 | 1,385,000 | 1,668,925 | ||||||
Telecom Italia S.p.A. | 1,110,000 | 1,130,535 | ||||||
Telefonica Emisiones SAU (Spain) | ||||||||
4.57%, due 4/27/23 | 2,552,000 | 2,661,996 | ||||||
5.213%, due 3/8/47 | 1,735,000 | 1,808,242 | ||||||
5.462%, due 2/16/21 | 395,000 | 417,818 | ||||||
|
| |||||||
28,332,038 | ||||||||
|
| |||||||
Textiles 0.3% |
| |||||||
Cintas Corp. No 2 | 4,335,000 | 4,257,599 | ||||||
|
| |||||||
Transportation 0.3% |
| |||||||
United Parcel Service, Inc. | 4,635,000 | 4,470,562 | ||||||
XPO Logistics, Inc. | 1,015,000 | 1,047,987 | ||||||
|
| |||||||
5,518,549 | ||||||||
|
| |||||||
Total Corporate Bonds | 714,579,079 | |||||||
|
| |||||||
Foreign Bonds 0.1% | ||||||||
Banks 0.1% |
| |||||||
Barclays Bank PLC | GBP 1,186,000 | 1,983,541 | ||||||
|
| |||||||
Total Foreign Bonds | 1,983,541 | |||||||
|
| |||||||
Loan Assignments 5.4% (b) | ||||||||
Advertising 0.1% |
| |||||||
Outfront Media Capital LLC 2017 Term Loan B | $ | 2,200,000 | 2,211,394 | |||||
|
|
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) | ||||||||
Building Materials 0.3% |
| |||||||
Builders FirstSource, Inc. | $ | 1,777,387 | $ | 1,786,274 | ||||
Quikrete Holdings, Inc. | 2,399,038 | 2,408,335 | ||||||
|
| |||||||
4,194,609 | ||||||||
|
| |||||||
Chemicals 0.2% |
| |||||||
Axalta Coating Systems U.S. Holdings, Inc. | 2,443,750 | 2,452,723 | ||||||
|
| |||||||
Commercial Services 0.5% |
| |||||||
Allied Universal Holdco LLC | 2,524,245 | 2,475,022 | ||||||
Global Payments, Inc. | 1,326,600 | 1,335,129 | ||||||
U.S. Security Associates Holdings, Inc. 2016 Term Loan | 3,940,643 | 3,965,272 | ||||||
|
| |||||||
7,775,423 | ||||||||
|
| |||||||
Computers 0.1% |
| |||||||
Tempo Acquisition LLC | 2,431,625 | 2,443,783 | ||||||
|
| |||||||
Containers, Packaging & Glass 0.2% |
| |||||||
BWAY Holding Co. | ||||||||
2017 Term Loan B | 7,087 | 7,124 | ||||||
2017 Term Loan B | 2,806,650 | 2,821,267 | ||||||
Reynolds Group Holdings, Inc. | 861,902 | 867,094 | ||||||
|
| |||||||
3,695,485 | ||||||||
|
|
Principal Amount | Value | |||||||
Electrical Components & Equipment 0.1% |
| |||||||
Electro Rent Corp. | $ | 2,083,625 | $ | 2,104,461 | ||||
|
| |||||||
Entertainment 0.1% |
| |||||||
Scientific Games International, Inc. | ||||||||
2018 Term Loan B5 | 349,818 | 351,907 | ||||||
2018 Term Loan B5 | 1,475,607 | 1,484,419 | ||||||
|
| |||||||
1,836,326 | ||||||||
|
| |||||||
Environmental Controls 0.5% |
| |||||||
Advanced Disposal Services, Inc. | 4,448,984 | 4,474,984 | ||||||
GFL Environmental, Inc. | 3,447,500 | 3,447,500 | ||||||
|
| |||||||
7,922,484 | ||||||||
|
| |||||||
Food & Staples Retailing 0.3% |
| |||||||
U.S. Foods, Inc. | 5,221,988 | 5,264,056 | ||||||
|
| |||||||
Health Care—Products 0.3% |
| |||||||
Ortho-Clinical Diagnostics S.A. | 2,251,522 | 2,264,550 | ||||||
Sterigenics-Nordion Holdings LLC | 3,019,500 | 3,033,655 | ||||||
|
| |||||||
5,298,205 | ||||||||
|
| |||||||
Healthcare, Education & Childcare 0.3% |
| |||||||
ExamWorks Group, Inc. | 3,605,214 | 3,624,365 | ||||||
U.S. Renal Care, Inc. | 1,700,000 | 1,702,125 | ||||||
|
| |||||||
5,326,490 | ||||||||
|
|
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Loan Assignments (continued) | ||||||||
Household Products & Wares 0.5% |
| |||||||
KIK Custom Products, Inc. | $ | 7,110,294 | $ | 7,173,000 | ||||
Prestige Brands, Inc. | 1,583,406 | 1,590,758 | ||||||
|
| |||||||
8,763,758 | ||||||||
|
| |||||||
Insurance 0.2% |
| |||||||
MPH Acquisition Holdings LLC | 3,744,669 | 3,763,392 | ||||||
|
| |||||||
Machinery—Diversified 0.1% |
| |||||||
Titan Acquisition, Ltd. | 2,200,000 | 2,202,064 | ||||||
|
| |||||||
Media 0.3% |
| |||||||
Nielsen Finance LLC | 881,100 | 884,955 | ||||||
Virgin Media Bristol LLC | 3,650,000 | 3,667,235 | ||||||
|
| |||||||
4,552,190 | ||||||||
|
| |||||||
Packaging & Containers 0.5% |
| |||||||
Albea Beauty Holdings S.A | 2,325,000 | 2,335,172 | ||||||
Berry Global, Inc. | ||||||||
Term Loan Q | 2,624,690 | 2,639,273 | ||||||
Term Loan Q | 4,070,865 | 4,093,482 | ||||||
|
| |||||||
9,067,927 | ||||||||
|
|
Principal Amount | Value | |||||||
Software 0.2% |
| |||||||
First Data Corp. | $ | 2,490,979 | $ | 2,499,468 | ||||
|
| |||||||
Telecommunications 0.6% |
| |||||||
Level 3 Financing, Inc. | 10,000,000 | 10,035,710 | ||||||
|
| |||||||
Transportation 0.1% |
| |||||||
XPO Logistics, Inc. | 1,575,000 | 1,583,133 | ||||||
|
| |||||||
Total Loan Assignments | 92,993,081 | |||||||
|
| |||||||
Mortgage-Backed Securities 0.1% | ||||||||
Commercial Mortgage Loans |
| |||||||
Bayview Commercial Asset Trust Series 2006-4A, Class A1 | 114,249 | 109,398 | ||||||
Four Times Square Trust Series 2006-4TS, Class A | 832,607 | 874,800 | ||||||
|
| |||||||
984,198 | ||||||||
|
| |||||||
Residential Mortgage (Collateralized Mortgage Obligation) 0.0%‡ |
| |||||||
Mortgage Equity Conversion Asset Trust | 415,438 | 375,275 | ||||||
|
| |||||||
Total Mortgage-Backed Securities | 1,359,473 | |||||||
|
| |||||||
U.S. Government & Federal Agencies 2.5% | ||||||||
Federal Home Loan Mortgage Corporation |
| |||||||
6.50%, due 2/1/27 | 21 | 24 | ||||||
6.50%, due 5/1/29 | 19,767 | 22,266 | ||||||
6.50%, due 6/1/29 | 4,987 | 5,617 | ||||||
6.50%, due 7/1/29 | 23,667 | 26,660 | ||||||
6.50%, due 8/1/29 | 7,855 | 8,848 |
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. |
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
Federal Home Loan Mortgage Corporation |
| |||||||
6.50%, due 9/1/29 | $ | 531 | $ | 598 | ||||
6.50%, due 6/1/32 | 2,596 | 2,924 | ||||||
6.50%, due 1/1/37 | 1,973 | 2,223 | ||||||
7.00%, due 9/1/26 | 3,874 | 4,147 | ||||||
7.00%, due 7/1/32 | 9,181 | 10,187 | ||||||
7.50%, due 5/1/32 | 4,404 | 4,634 | ||||||
|
| |||||||
88,128 | ||||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
(zero coupon), due 10/9/19 | 2,700,000 | 2,601,792 | ||||||
4.50%, due 7/1/20 | 563 | 567 | ||||||
4.50%, due 3/1/21 | 1,426 | 1,437 | ||||||
6.00%, due 4/1/19 | 117 | 129 | ||||||
7.00%, due 10/1/37 | 433 | 491 | ||||||
7.00%, due 11/1/37 | 15,467 | 17,324 | ||||||
|
| |||||||
2,621,740 | ||||||||
|
| |||||||
Government National Mortgage Association |
| |||||||
5.00%, due 12/15/37 | 1,273 | 1,353 | ||||||
5.50%, due 9/15/35 | 4,262 | 4,613 | ||||||
6.50%, due 4/15/29 | 13 | 14 | ||||||
6.50%, due 8/15/29 | 9 | 10 | ||||||
6.50%, due 10/15/31 | 2,046 | 2,305 | ||||||
7.00%, due 12/15/25 | 3,066 | 3,085 | ||||||
7.00%, due 11/15/27 | 6,253 | 6,639 | ||||||
7.00%, due 12/15/27 | 29,308 | 31,350 | ||||||
7.50%, due 6/15/26 | 275 | 295 | ||||||
7.50%, due 10/15/30 | 15,143 | 15,589 | ||||||
8.00%, due 10/15/26 | 2,811 | 2,985 | ||||||
8.50%, due 11/15/26 | 17,266 | 17,450 | ||||||
|
| |||||||
85,688 | ||||||||
|
| |||||||
United States Treasury Bonds 0.4% |
| |||||||
3.00%, due 2/15/47 | 945,000 | 927,909 | ||||||
3.75%, due 11/15/43 | 5,715,000 | 6,384,726 | ||||||
|
| |||||||
7,312,635 | ||||||||
|
| |||||||
¨United States Treasury Notes 1.9% |
| |||||||
1.25%, due 10/31/21 | 5,395,000 | 5,136,419 | ||||||
1.25%, due 7/31/23 | 25,125,000 | 23,213,144 | ||||||
1.75%, due 9/30/22 | 3,800,000 | 3,640,727 | ||||||
|
| |||||||
31,990,290 | ||||||||
|
| |||||||
Total U.S. Government & Federal Agencies | 42,098,481 | |||||||
|
| |||||||
Total Long-Term Bonds | 854,691,602 | |||||||
|
| |||||||
Shares | Value | |||||||
Common Stocks 44.5% | ||||||||
Aerospace & Defense 0.9% |
| |||||||
BAE Systems PLC (United Kingdom) | 1,215,583 | $ | 10,200,937 | |||||
Lockheed Martin Corp. | 17,305 | 5,552,136 | ||||||
|
| |||||||
15,753,073 | ||||||||
|
| |||||||
Air Freight & Logistics 0.9% |
| |||||||
Deutsche Post A.G., Registered (Germany) | 199,294 | 8,678,396 | ||||||
United Parcel Service, Inc., Class B | 58,895 | 6,684,582 | ||||||
|
| |||||||
15,362,978 | ||||||||
|
| |||||||
Auto Components 0.3% |
| |||||||
Cie Generale des Etablissements Michelin SCA (France) | 42,985 | 6,032,284 | ||||||
|
| |||||||
Automobiles 0.5% |
| |||||||
Daimler A.G., Registered Shares (Germany) | 102,717 | 8,097,184 | ||||||
|
| |||||||
Banks 2.2% |
| |||||||
Commonwealth Bank of Australia (Australia) | 95,739 | 5,158,884 | ||||||
Lloyds Banking Group PLC (United Kingdom) | 7,031,682 | 6,249,710 | ||||||
People’s United Financial, Inc. | 274,657 | 5,023,476 | ||||||
Royal Bank of Canada (Canada) | 74,730 | 5,682,961 | ||||||
Svenska Handelsbanken A.B., Class A (Sweden) | 453,017 | 5,057,632 | ||||||
Wells Fargo & Co. | 74,526 | 3,872,371 | ||||||
Westpac Banking Corp. (Australia) | 316,805 | 6,805,166 | ||||||
|
| |||||||
37,850,200 | ||||||||
|
| |||||||
Beverages 0.8% |
| |||||||
Coca-Cola Co. | 94,902 | 4,100,715 | ||||||
Diageo PLC (United Kingdom) | 127,280 | 4,527,322 | ||||||
PepsiCo., Inc. | 42,705 | 4,310,643 | ||||||
|
| |||||||
12,938,680 | ||||||||
|
| |||||||
Biotechnology 0.3% |
| |||||||
AbbVie, Inc. | 53,312 | 5,147,274 | ||||||
|
| |||||||
Capital Markets 0.8% |
| |||||||
BlackRock, Inc. | 9,211 | 4,803,537 | ||||||
CME Group, Inc. | 27,912 | 4,401,164 | ||||||
Singapore Exchange, Ltd. (Singapore) | 777,886 | 4,535,381 | ||||||
|
| |||||||
13,740,082 | ||||||||
|
| |||||||
Chemicals 1.1% |
| |||||||
BASF S.E. (Germany) | 85,690 | 8,902,456 | ||||||
DowDuPont, Inc. | 83,178 | 5,260,177 | ||||||
Nutrien, Ltd. (Canada) | 102,438 | 4,664,002 | ||||||
|
| |||||||
18,826,635 | ||||||||
|
|
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, 2018 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Commercial Services & Supplies 0.0%‡ |
| |||||||
Quad/Graphics, Inc. | 10 | $ | 247 | |||||
|
| |||||||
Communications Equipment 0.6% |
| |||||||
Cisco Systems, Inc. | 241,441 | 10,693,422 | ||||||
|
| |||||||
Construction & Engineering 0.4% |
| |||||||
Vinci S.A. (France) (i) | 68,664 | 6,856,333 | ||||||
|
| |||||||
Diversified Telecommunication Services 4.2% |
| |||||||
¨AT&T, Inc. | 365,651 | 11,956,788 | ||||||
BCE, Inc. (Canada) | 317,346 | 13,467,957 | ||||||
CenturyLink, Inc. | 240,604 | 4,470,422 | ||||||
Deutsche Telekom A.G., Registered (Germany) | 624,957 | 10,927,258 | ||||||
Singapore Telecommunications, Ltd. (Singapore) | 1,764,815 | 4,690,585 | ||||||
Swisscom A.G., Registered (Switzerland) | 14,235 | 6,826,505 | ||||||
TELUS Corp. (Canada) | 177,691 | 6,359,205 | ||||||
Verizon Communications, Inc. | 278,844 | 13,760,951 | ||||||
|
| |||||||
72,459,671 | ||||||||
|
| |||||||
Electric Utilities 4.3% |
| |||||||
American Electric Power Co., Inc. | 84,574 | 5,918,489 | ||||||
Duke Energy Corp. | 156,030 | 12,507,365 | ||||||
Entergy Corp. | 114,161 | 9,314,396 | ||||||
FirstEnergy Corp. | 168,869 | 5,809,094 | ||||||
PPL Corp. | 275,495 | 8,016,904 | ||||||
Red Electrica Corp. S.A. (Spain) | 360,906 | 7,512,073 | ||||||
Southern Co. | 120,302 | 5,548,328 | ||||||
SSE PLC (United Kingdom) | 338,576 | 6,425,468 | ||||||
Terna Rete Elettrica Nazionale S.p.A. (Italy) | 2,184,142 | 13,088,127 | ||||||
|
| |||||||
74,140,244 | ||||||||
|
| |||||||
Electrical Equipment 0.7% |
| |||||||
Eaton Corp. PLC | 85,690 | 6,429,321 | ||||||
Emerson Electric Co. | 84,016 | 5,579,502 | ||||||
|
| |||||||
12,008,823 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts 1.9% |
| |||||||
Iron Mountain, Inc. | 224,694 | 7,626,114 | ||||||
Public Storage | 22,888 | 4,618,341 | ||||||
Unibail-Rodamco S.E. (France) | 46,055 | 11,062,023 | ||||||
Welltower, Inc. | 173,056 | 9,248,113 | ||||||
|
| |||||||
32,554,591 | ||||||||
|
| |||||||
Food Products 0.8% |
| |||||||
Nestle S.A., Registered (Switzerland) | 93,506 | 7,228,860 | ||||||
Orkla ASA (Norway) | 691,947 | 6,396,334 | ||||||
|
| |||||||
13,625,194 | ||||||||
|
|
Shares | Value | |||||||
Gas Utilities 0.4% |
| |||||||
Gas Natural SDG S.A. (Spain) | 246,187 | $ | 6,194,271 | |||||
|
| |||||||
Health Care Providers & Services 0.3% |
| |||||||
Sonic Healthcare, Ltd. (Australia) | 263,771 | 4,681,481 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure 0.7% |
| |||||||
Las Vegas Sands Corp. | 81,783 | 5,997,147 | ||||||
McDonald’s Corp. | 37,681 | 6,309,307 | ||||||
|
| |||||||
12,306,454 | ||||||||
|
| |||||||
Household Durables 0.3% |
| |||||||
Leggett & Platt, Inc. | 112,765 | 4,572,621 | ||||||
|
| |||||||
Household Products 0.6% |
| |||||||
Kimberly-Clark Corp. | 58,336 | 6,040,109 | ||||||
Procter & Gamble Co. | 65,873 | 4,765,253 | ||||||
|
| |||||||
10,805,362 | ||||||||
|
| |||||||
Industrial Conglomerates 0.3% |
| |||||||
Siemens A.G., Registered (Germany) | 41,589 | 5,290,528 | ||||||
|
| |||||||
Insurance 3.5% |
| |||||||
Allianz S.E., Registered (Germany) | 47,171 | 11,159,079 | ||||||
Arthur J. Gallagher & Co. | 66,152 | 4,629,979 | ||||||
Assicurazioni Generali S.p.A. (Italy) | 245,628 | 4,952,687 | ||||||
AXA S.A. (France) | 454,971 | 13,005,762 | ||||||
MetLife, Inc. | 142,911 | 6,812,567 | ||||||
¨Muenchener Rueckversicherungs-Gesellschaft A.G., Registered (Germany) | 60,569 | 13,878,667 | ||||||
SCOR S.E. (France) (i) | 148,214 | 6,014,731 | ||||||
|
| |||||||
60,453,472 | ||||||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, Inc. (f)(g)(h)(j)(k) | 12 | 7,432 | ||||||
|
| |||||||
Multi-Utilities 1.8% |
| |||||||
Ameren Corp. | 94,064 | 5,514,032 | ||||||
Dominion Energy, Inc. | 128,396 | 8,546,038 | ||||||
National Grid PLC (United Kingdom) | 957,394 | 11,088,709 | ||||||
WEC Energy Group, Inc. | 86,528 | 5,562,020 | ||||||
|
| |||||||
30,710,799 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels 5.2% |
| |||||||
Enterprise Products Partners, L.P. | 352,254 | 9,454,497 | ||||||
Exxon Mobil Corp. | 104,113 | 8,094,786 | ||||||
Magellan Midstream Partners, L.P. | 82,899 | 5,457,241 | ||||||
Occidental Petroleum Corp. | 134,816 | 10,415,884 | ||||||
Pembina Pipeline Corp. (Canada) | 175,568 | 5,591,320 | ||||||
¨Royal Dutch Shell PLC, Class A, Sponsored ADR (Netherlands) | 221,345 | 15,472,016 |
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. |
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Oil, Gas & Consumable Fuels (continued) |
| |||||||
Snam S.p.A. (Italy) | 1,815,141 | $ | 8,704,044 | |||||
Statoil ASA (Norway) | 379,608 | 9,715,304 | ||||||
¨TOTAL S.A. (France) | 257,910 | 16,195,817 | ||||||
|
| |||||||
89,100,909 | ||||||||
|
| |||||||
Personal Products 0.5% |
| |||||||
Unilever PLC (United Kingdom) | 145,702 | 8,164,902 | ||||||
|
| |||||||
Pharmaceuticals 4.1% |
| |||||||
AstraZeneca PLC, Sponsored ADR (United Kingdom) | 375,142 | 13,328,795 | ||||||
¨GlaxoSmithKline PLC (United Kingdom) | 725,442 | 14,557,339 | ||||||
Johnson & Johnson | 41,310 | 5,225,302 | ||||||
Merck & Co., Inc. | 94,064 | 5,537,548 | ||||||
Novartis A.G., Registered (Switzerland) | 99,088 | 7,621,469 | ||||||
Pfizer, Inc. | 294,475 | 10,780,730 | ||||||
Roche Holding A.G. (Switzerland) | 32,657 | 7,245,340 | ||||||
Sanofi(France) | 71,455 | 5,640,118 | ||||||
|
| |||||||
69,936,641 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 1.4% |
| |||||||
Intel Corp. | 126,722 | 6,541,390 | ||||||
QUALCOMM, Inc. | 97,414 | 4,969,088 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR (Taiwan) | 111,091 | 4,271,449 | ||||||
Texas Instruments, Inc. | 75,363 | 7,644,069 | ||||||
|
| |||||||
23,425,996 | ||||||||
|
| |||||||
Software 0.5% |
| |||||||
Micro Focus International PLC (United Kingdom) | 177,243 | 3,069,676 | ||||||
Microsoft Corp. | 59,174 | 5,533,953 | ||||||
|
| |||||||
8,603,629 | ||||||||
|
| |||||||
Tobacco 2.8% |
| |||||||
Altria Group, Inc. | 212,971 | 11,949,803 | ||||||
British American Tobacco PLC (United Kingdom) | 165,241 | 9,080,364 | ||||||
British American Tobacco PLC Sponsored ADR (United Kingdom) | 78,712 | 4,299,249 | ||||||
Imperial Brands PLC (United Kingdom) | 354,487 | 12,657,760 | ||||||
Philip Morris International, Inc. | 117,790 | 9,658,780 | ||||||
|
| |||||||
47,645,956 | ||||||||
|
| |||||||
Wireless Telecommunication Services 1.4% |
| |||||||
Rogers Communications, Inc., Class B (Canada) | 172,139 | 8,125,974 | ||||||
¨Vodafone Group PLC (United Kingdom) | 5,227,427 | 15,209,947 | ||||||
|
| |||||||
23,335,921 | ||||||||
|
| |||||||
Total Common Stocks | 761,323,289 | |||||||
|
|
Principal Amount | Value | |||||||
Short-Term Investment 3.3% | ||||||||
Repurchase Agreement 3.3% |
| |||||||
Fixed Income Clearing Corp. | $ | 56,569,475 | $ | 56,569,475 | ||||
|
| |||||||
Total Short-Term Investment | 56,569,475 | |||||||
|
| |||||||
Total Investments | 97.8 | % | 1,672,584,366 | |||||
Other Assets, Less Liabilities | 2.2 | 36,708,881 | ||||||
Net Assets | 100.0 | % | $ | 1,709,293,247 |
‡ | Less than one-tenth of a percent. |
(a) | Step coupon—Rate shown was the rate in effect as of April 30, 2018. |
(b) | Floating rate—Rate shown was the rate in effect as of April 30, 2018. |
(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) | Fixed to floating rate—Rate shown was the rate in effect as of April 30, 2018. |
(e) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(f) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2018, the total market value of fair valued securities was $558,656, which represented less than one-tenth of a percent of the Fund’s net assets. |
(g) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(h) | Illiquid security—As of April 30, 2018, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $382,707, which represented less than one-tenth of a percent of the Fund’s net assets. |
(i) | All or a portion of this security was held on loan. As of April 30, 2018, the market value of securities loaned was $12,774,594 and the Fund received non-cash collateral in the amount of $13,696,925 (See Note 2(M)). |
(j) | Restricted security. |
(k) | Non-income producing security. |
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, 2018 (Unaudited) (continued)
Foreign Currency Forward Contracts
As of April 30, 2018, the Fund held the following foreign currency forward contracts1:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
CAD | 24,110,000 | USD | 18,734,944 | JPMorgan Chase Bank | 5/2/18 | $ | 43,421 | |||||||||||||
JPY | 4,038,000,000 | USD | 37,155,155 | JPMorgan Chase Bank | 8/1/18 | 16,748 | ||||||||||||||
USD | 19,600,989 | CAD | 24,110,000 | JPMorgan Chase Bank | 5/2/18 | 822,623 | ||||||||||||||
USD | 103,145,800 | EUR | 82,095,000 | JPMorgan Chase Bank | 5/2/18 | 4,007,905 | ||||||||||||||
USD | 100,643,708 | EUR | 82,095,000 | JPMorgan Chase Bank | 8/1/18 | 811,139 | ||||||||||||||
USD | 57,415,058 | GBP | 40,110,000 | JPMorgan Chase Bank | 5/2/18 | 2,195,647 | ||||||||||||||
USD | 56,150,831 | GBP | 40,110,000 | JPMorgan Chase Bank | 8/1/18 | 686,545 | ||||||||||||||
Total unrealized appreciation | 8,584,028 | |||||||||||||||||||
EUR | 82,095,000 | USD | 99,942,453 | JPMorgan Chase Bank | 5/2/18 | (804,558 | ) | |||||||||||||
GBP | 40,110,000 | USD | 55,914,543 | JPMorgan Chase Bank | 5/2/18 | (695,131 | ) | |||||||||||||
JPY | 4,038,650,000 | USD | 37,347,842 | JPMorgan Chase Bank | 5/2/18 | (404,465 | ) | |||||||||||||
USD | 18,773,074 | CAD | 24,110,000 | JPMorgan Chase Bank | 8/1/18 | (44,340 | ) | |||||||||||||
USD | 36,925,475 | JPY | 4,038,650,000 | JPMorgan Chase Bank | 5/2/18 | (17,902 | ) | |||||||||||||
Total unrealized depreciation | (1,966,396 | ) | ||||||||||||||||||
Net unrealized appreciation | $ | 6,617,632 |
1. | Foreign Currency Forward Contracts are subject to limitations such that they cannot be “sold or repurchased,” although the Fund would be able to exit the transaction through other means, such as through the execution of an offsetting transaction. |
Futures Contracts
As of April 30, 2018, the Fund held the following futures contracts1:
Type | Number of Contracts Long (Short) | Expiration Date | Value at Trade Date | Current Notional Amount | Unrealized Appreciation (Depreciation)2 | |||||||||||||||
2-Year United States Treasury Note | (546 | ) | June 2018 | $ | (116,100,597 | ) | $ | (115,777,594 | ) | $ | 323,003 | |||||||||
5-Year United States Treasury Note | 1,265 | June 2018 | 144,469,440 | 143,587,383 | (882,057 | ) | ||||||||||||||
10-Year United States Treasury Note | 522 | June 2018 | 62,764,504 | 62,444,250 | (320,254 | ) | ||||||||||||||
10-Year United States Treasury Ultra Note | (156 | ) | June 2018 | (20,024,896 | ) | (19,950,938 | ) | 73,958 | ||||||||||||
S&P 500 Index Mini | 1,410 | June 2018 | 196,620,496 | 186,613,500 | (10,006,996 | ) | ||||||||||||||
Euro Stoxx 50 | 1,965 | June 2018 | 77,824,075 | 82,435,600 | 4,611,525 | |||||||||||||||
Nikkei 225 | 595 | June 2018 | 57,803,809 | 61,067,451 | 3,263,642 | |||||||||||||||
United States Treasury Bond | (102 | ) | June 2018 | (14,719,107 | ) | (14,672,062 | ) | 47,045 | ||||||||||||
United States Treasury Ultra Bond | 207 | June 2018 | 32,224,564 | 32,524,875 | 300,311 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||
$ | 420,862,288 | $ | 418,272,465 | $ | (2,589,823 | ) | ||||||||||||||
|
|
|
|
|
|
1. | As of April 30, 2018, cash in the amount of $18,682,460 was on deposit with a broker or futures commission merchant 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, 2018. |
The following abbreviations are used in the preceding pages:
ADR—American Depositary Receipt
CAD—Canadian Dollar
EUR—Euro
GBP—British Pound Sterling
JPY—Japanese Yen
LIBOR—London Interbank Offered Rate
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 summary of the fair valuations according to the inputs used as of April 30, 2018, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 1,677,947 | $ | — | $ | 1,677,947 | ||||||||
Corporate Bonds | — | 714,579,079 | — | 714,579,079 | ||||||||||||
Foreign Bonds | — | 1,983,541 | — | 1,983,541 | ||||||||||||
Loan Assignments (b) | — | 90,888,620 | 2,104,461 | 92,993,081 | ||||||||||||
Mortgage-Backed Securities (c) | — | 984,198 | 375,275 | 1,359,473 | ||||||||||||
U.S. Government & Federal Agencies | — | 42,098,481 | — | 42,098,481 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 852,211,866 | 2,479,736 | 854,691,602 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (d) | 484,010,019 | 277,305,838 | 7,432 | 761,323,289 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 56,569,475 | — | 56,569,475 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 484,010,019 | 1,186,087,179 | 2,487,168 | 1,672,584,366 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (e) | — | 8,584,028 | — | 8,584,028 | ||||||||||||
Futures Contracts (e) | 8,619,484 | — | — | 8,619,484 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | 8,619,484 | 8,584,028 | — | 17,203,512 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 492,629,503 | $ | 1,194,671,207 | $ | 2,487,168 | $ | 1,689,787,878 | ||||||||
|
|
|
|
|
|
|
|
Liability Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (e) | $ | — | $ | (1,966,396 | ) | $ | — | $ | (1,966,396 | ) | ||||||
Futures Contracts (e) | (11,209,307 | ) | — | — | (11,209,307 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | $ | (11,209,307 | ) | $ | (1,966,396 | ) | $ | — | $ | (13,175,703 | ) | |||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $2,104,461 is held in Electrical Components & Equipment within the Loan Assignments section of the Portfolio of Investments. |
(c) | The Level 3 security valued at $375,275 is held in Residential Mortgage (Collateralized Mortgage Obligation) within the Mortgage-Backed Securities section of the Portfolio of Investments. |
(d) | The Level 3 security valued at $7,432 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.
As of April 30, 2018, certain foreign equity securities with a market value of $338,573,217 transferred from Level 1 to Level 2 as the price of these securities were based on utilizing significant other observable inputs. As of October 31, 2017, the fair value obtained for these securities were based on utilizing quoted prices in active markets.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Portfolio of Investments April 30, 2018 (Unaudited) (continued)
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, 2017 | 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, 2018 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at April 30, 2018 (b) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Electrical Components & Equipment | $ | 2,120,352 | $ | 2,232 | $ | 136 | $ | (7,709 | ) | $ | — | $ | (10,550 | ) | $ | — | $ | — | $ | 2,104,461 | $ | (7,709 | ) | |||||||||||||||||
Iron & Steel | 6,512,944 | (1,300 | ) | 11,927 | (59,110 | ) | — | (6,464,461 | ) | — | — | — | — | |||||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | 378,967 | — | — | 25,367 | — | (29,059 | ) | — | — | 375,275 | 21,083 | |||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Media | 8,143 | — | — | (711 | ) | — | — | — | — | 7,432 | (711 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 9,020,406 | $ | 932 | $ | 12,063 | $ | (42,163 | ) | $ | — | $ | (6,504,070 | ) | $ | — | $ | — | $ | 2,487,168 | $ | 12,663 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
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 Assets and Liabilities as of April 30, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 1,672,584,366 | ||
Cash collateral on deposit at broker for futures contracts | 18,682,460 | |||
Cash denominated in foreign currencies | 769,882 | |||
Receivables: | ||||
Dividends and interest | 10,860,051 | |||
Investment securities sold | 4,421,483 | |||
Fund shares sold | 3,623,514 | |||
Securities lending income | 43,740 | |||
Unrealized appreciation on foreign currency forward contracts | 8,584,028 | |||
Other assets | 109,119 | |||
|
| |||
Total assets | 1,719,678,643 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 2,713,949 | |||
Investment securities purchased | 2,400,729 | |||
Variation margin on futures contracts | 1,121,492 | |||
Manager (See Note 3) | 865,054 | |||
NYLIFE Distributors (See Note 3) | 382,733 | |||
Transfer agent (See Note 3) | 175,264 | |||
Shareholder communication | 88,846 | |||
Professional fees | 60,660 | |||
Custodian | 21,588 | |||
Trustees | 3,387 | |||
Unrealized depreciation on foreign currency forward contracts | 1,966,396 | |||
Dividend payable | 450,231 | |||
Interest expense and fees payable | 111,478 | |||
Accrued expenses | 23,589 | |||
|
| |||
Total liabilities | 10,385,396 | |||
|
| |||
Net assets | $ | 1,709,293,247 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 900,520 | ||
Additional paid-in capital | 1,655,796,211 | |||
|
| |||
1,656,696,731 | ||||
Undistributed net investment income | 4,057,045 | |||
Accumulated net realized gain (loss) on investments, futures transactions and foreign currency transactions | 10,172,320 | |||
Net unrealized appreciation (depreciation) on investments and futures contracts | 31,898,406 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | 6,468,745 | |||
|
| |||
Net assets | $ | 1,709,293,247 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 617,499,970 | ||
|
| |||
Shares of beneficial interest outstanding | 32,685,613 | |||
|
| |||
Net asset value per share outstanding | $ | 18.89 | ||
Maximum sales charge (5.50% of offering price) | 1.10 | |||
|
| |||
Maximum offering price per share outstanding | $ | 19.99 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 89,266,087 | ||
|
| |||
Shares of beneficial interest outstanding | 4,721,387 | |||
|
| |||
Net asset value per share outstanding | $ | 18.91 | ||
Maximum sales charge (5.50% of offering price) | 1.10 | |||
|
| |||
Maximum offering price per share outstanding | $ | 20.01 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 34,778,143 | ||
|
| |||
Shares of beneficial interest outstanding | 1,828,410 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.02 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 250,404,586 | ||
|
| |||
Shares of beneficial interest outstanding | 13,189,261 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.99 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 713,416,810 | ||
|
| |||
Shares of beneficial interest outstanding | 37,419,286 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 19.07 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 3,822,754 | ||
|
| |||
Shares of beneficial interest outstanding | 202,488 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.88 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 79,926 | ||
|
| |||
Shares of beneficial interest outstanding | 4,230 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.90 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 24,971 | ||
|
| |||
Shares of beneficial interest outstanding | 1,309.590 | |||
|
| |||
Net asset value and offering price per share | $ | 19.07 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Statement of Operations for the six months ended April 30, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 16,747,545 | ||
Dividends (a) | 15,435,597 | |||
Securities lending income | 79,807 | |||
Other income | 5,544 | |||
|
| |||
Total income | 32,268,493 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 5,430,079 | |||
Distribution/Service—Class A (See Note 3) | 795,635 | |||
Distribution/Service—Investor Class (See Note 3) | 112,854 | |||
Distribution/Service—Class B (See Note 3) | 185,337 | |||
Distribution/Service—Class C (See Note 3) | 1,302,443 | |||
Distribution/Service—Class R2 (See Note 3) | 5,161 | |||
Distribution/Service—Class R3 (See Note 3) | 370 | |||
Transfer agent (See Note 3) | 1,119,434 | |||
Shareholder communication | 95,383 | |||
Professional fees | 80,893 | |||
Registration | 74,272 | |||
Custodian | 41,495 | |||
Interest expense | 32,005 | |||
Trustees | 20,165 | |||
Shareholder service (See Note 3) | 2,138 | |||
Miscellaneous | 40,498 | |||
|
| |||
Total expenses before waiver/reimbursement | 9,338,162 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (17,186 | ) | ||
|
| |||
Net expenses | 9,320,976 | |||
|
| |||
Net investment income (loss) | 22,947,517 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 19,732,286 | |||
Futures transactions | 20,334,668 | |||
Foreign currency forward transactions | (10,760,929 | ) | ||
Foreign currency transactions | 497,554 | |||
|
| |||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | 29,803,579 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (69,628,843 | ) | ||
Futures contracts | (20,942,320 | ) | ||
Foreign currency forward contracts | 6,484,064 | |||
Translation of other assets and liabilities in foreign currencies | (131,211 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency transactions | (84,218,310 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments, futures transactions and foreign currency transactions | (54,414,731 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (31,467,214 | ) | |
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $1,009,703. |
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. |
Statements of Changes in Net Assets
for the six months ended April 30, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 22,947,517 | $ | 41,523,171 | ||||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | 29,803,579 | 73,361,541 | ||||||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency transactions | (84,218,310 | ) | 79,907,630 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (31,467,214 | ) | 194,792,342 | |||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (8,511,854 | ) | (16,659,348 | ) | ||||
Investor Class | (1,148,907 | ) | (4,037,985 | ) | ||||
Class B | (328,352 | ) | (791,063 | ) | ||||
Class C | (2,319,160 | ) | (4,923,638 | ) | ||||
Class I | (10,793,784 | ) | (20,353,145 | ) | ||||
Class R2 | (53,227 | ) | (86,627 | ) | ||||
Class R3 | (1,597 | ) | (3,011 | ) | ||||
Class R6 | (130 | ) | — | |||||
|
| |||||||
(23,157,011 | ) | (46,854,817 | ) | |||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | (15,915,967 | ) | — | |||||
Investor Class | (2,210,653 | ) | — | |||||
Class B | (923,440 | ) | — | |||||
Class C | (6,445,692 | ) | — | |||||
Class I | (18,695,164 | ) | — | |||||
Class R2 | (108,050 | ) | — | |||||
Class R3 | (4,953 | ) | — | |||||
|
| |||||||
(44,303,919 | ) | — | ||||||
|
| |||||||
Total dividends and distributions to shareholders | (67,460,930 | ) | (46,854,817 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 174,850,668 | 458,777,858 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 60,511,143 | 41,265,270 | ||||||
Cost of shares redeemed | (250,204,092 | ) | (392,215,949 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (14,842,281 | ) | 107,827,179 | |||||
|
| |||||||
Net increase (decrease) in net assets | (113,770,425 | ) | 255,764,704 |
2018 | 2017 | |||||||
Net Assets | ||||||||
Beginning of period | 1,823,063,672 | 1,567,298,968 | ||||||
|
| |||||||
End of period | $ | 1,709,293,247 | $ | 1,823,063,672 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 4,057,045 | $ | 4,266,539 | ||||
|
|
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 A | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 19.97 | $ | 18.30 | $ | 18.79 | $ | 20.51 | $ | 19.83 | $ | 17.46 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.25 | 0.48 | 0.58 | 0.68 | 0.82 | 0.69 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.54 | ) | 1.83 | (0.17 | ) | (0.98 | ) | 0.96 | 2.43 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.04 | ) | (0.09 | ) | 0.30 | 0.15 | 0.14 | (0.06 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.33 | ) | 2.22 | 0.71 | (0.15 | ) | 1.92 | 3.06 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.26 | ) | (0.55 | ) | (0.61 | ) | (0.70 | ) | (0.72 | ) | (0.69 | ) | ||||||||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.75 | ) | (0.55 | ) | (1.20 | ) | (1.57 | ) | (1.24 | ) | (0.69 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 18.89 | $ | 19.97 | $ | 18.30 | $ | 18.79 | $ | 20.51 | $ | 19.83 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | (1.76 | %) | 12.30 | % | 4.08 | % | (0.81 | %) | 10.08 | % | 17.90 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.63 | % †† | 2.52 | % | 3.21 | % | 3.49 | % | 4.06 | % | 3.71 | % | ||||||||||||||||
Net expenses | 1.00 | % †† | 1.01 | % | 1.02 | % | 1.02 | % | 1.01 | % | 1.04 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 29 | % | 27 | % | 30 | % | 15 | % | 31 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 617,500 | $ | 652,333 | $ | 574,390 | $ | 581,920 | $ | 497,591 | $ | 397,101 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 19.99 | $ | 18.31 | $ | 18.80 | $ | 20.52 | $ | 19.84 | $ | 17.46 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.24 | 0.47 | 0.56 | 0.65 | 0.78 | 0.64 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.53 | ) | 1.82 | (0.16 | ) | (0.99 | ) | 0.95 | 2.44 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.04 | ) | (0.09 | ) | 0.28 | 0.15 | 0.14 | (0.06 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.33 | ) | 2.20 | 0.68 | (0.19 | ) | 1.87 | 3.02 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.26 | ) | (0.52 | ) | (0.58 | ) | (0.66 | ) | (0.67 | ) | (0.64 | ) | ||||||||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | ||||||||||||||||||
|
| �� |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total dividends and distributions | (0.75 | ) | (0.52 | ) | (1.17 | ) | (1.53 | ) | (1.19 | ) | (0.64 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 18.91 | $ | 19.99 | $ | 18.31 | $ | 18.80 | $ | 20.52 | $ | 19.84 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | (1.82 | %) | 12.19 | % | 3.93 | % | (0.97 | %) | 9.83 | % | 17.62 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.51 | % †† | 2.45 | % | 3.09 | % | 3.34 | % | 3.89 | % | 3.46 | % | ||||||||||||||||
Net expenses | 1.13 | % †† | 1.14 | % | 1.16 | % | 1.18 | % | 1.23 | % | 1.32 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.14 | % †† | 1.14 | % | 1.16 | % | 1.18 | % | 1.23 | % | 1.32 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 29 | % | 27 | % | 30 | % | 15 | % | 31 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 89,266 | $ | 94,000 | $ | 153,137 | $ | 159,798 | $ | 165,088 | $ | 168,097 |
* | 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. For periods of less than one year, total 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 B | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 20.10 | $ | 18.40 | $ | 18.89 | $ | 20.61 | $ | 19.93 | $ | 17.54 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.17 | 0.32 | 0.42 | 0.51 | 0.63 | 0.51 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.55 | ) | 1.83 | (0.17 | ) | (0.99 | ) | 0.96 | 2.44 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.04 | ) | (0.09 | ) | 0.30 | 0.15 | 0.14 | (0.06 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.42 | ) | 2.06 | 0.55 | (0.33 | ) | 1.73 | 2.89 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.36 | ) | (0.45 | ) | (0.52 | ) | (0.53 | ) | (0.50 | ) | ||||||||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.66 | ) | (0.36 | ) | (1.04 | ) | (1.39 | ) | (1.05 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 19.02 | $ | 20.10 | $ | 18.40 | $ | 18.89 | $ | 20.61 | $ | 19.93 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | (2.17 | %) | 11.27 | % | 3.20 | % | (1.70 | %) | 8.99 | % | 16.74 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.76 | % †† | 1.67 | % | 2.34 | % | 2.60 | % | 3.14 | % | 2.73 | % | ||||||||||||||||
Net expenses | 1.88 | % †† | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | 2.07 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.89 | % †† | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | 2.07 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 29 | % | 27 | % | 30 | % | 15 | % | 31 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 34,778 | $ | 39,475 | $ | 42,253 | $ | 44,441 | $ | 49,283 | $ | 51,138 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 20.07 | $ | 18.37 | $ | 18.86 | $ | 20.58 | $ | 19.90 | $ | 17.52 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.17 | 0.32 | 0.42 | 0.50 | 0.60 | 0.49 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.55 | ) | 1.83 | (0.17 | ) | (0.98 | ) | 0.98 | 2.45 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.04 | ) | (0.09 | ) | 0.30 | 0.15 | 0.15 | (0.06 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.42 | ) | 2.06 | 0.55 | (0.33 | ) | 1.73 | 2.88 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.36 | ) | (0.45 | ) | (0.52 | ) | (0.53 | ) | (0.50 | ) | ||||||||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.66 | ) | (0.36 | ) | (1.04 | ) | (1.39 | ) | (1.05 | ) | (0.50 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 18.99 | $ | 20.07 | $ | 18.37 | $ | 18.86 | $ | 20.58 | $ | 19.90 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | (2.17 | %) | 11.35 | % | 3.15 | % | (1.70 | %) | 9.01 | % | 16.70 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.76 | % †† | 1.65 | % | 2.32 | % | 2.58 | % | 3.00 | % | 2.61 | % | ||||||||||||||||
Net expenses | 1.88 | % †† | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | 2.07 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.89 | % †† | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | 2.07 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 29 | % | 27 | % | 30 | % | 15 | % | 31 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 250,405 | $ | 266,592 | $ | 254,312 | $ | 235,811 | $ | 131,023 | $ | 55,889 |
* | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 33 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 20.15 | $ | 18.46 | $ | 18.95 | $ | 20.66 | $ | 19.97 | $ | 17.57 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.28 | 0.54 | 0.63 | 0.73 | 0.87 | 0.74 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.55 | ) | 1.84 | (0.16 | ) | (0.98 | ) | 0.96 | 2.46 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.04 | ) | (0.09 | ) | 0.28 | 0.15 | 0.15 | (0.06 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.31 | ) | 2.29 | 0.75 | (0.10 | ) | 1.98 | 3.14 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.28 | ) | (0.60 | ) | (0.65 | ) | (0.74 | ) | (0.77 | ) | (0.74 | ) | ||||||||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.77 | ) | (0.60 | ) | (1.24 | ) | (1.61 | ) | (1.29 | ) | (0.74 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 19.07 | $ | 20.15 | $ | 18.46 | $ | 18.95 | $ | 20.66 | $ | 19.97 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment | (1.62 | %) | 12.60 | % | 4.30 | % | (0.51 | %) | 10.33 | % | 18.25 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.88 | % †† | 2.77 | % | 3.44 | % | 3.75 | % | 4.29 | % | 3.97 | % | ||||||||||||||||
Net expenses | 0.75 | % †† | 0.76 | % | 0.77 | % | 0.77 | % | 0.76 | % | 0.79 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 29 | % | 27 | % | 30 | % | 15 | % | 31 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 713,417 | $ | 766,054 | $ | 542,330 | $ | 513,629 | $ | 430,408 | $ | 286,425 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | February 27, 2015** through October 31, | ||||||||||||||||||
Class R2 | 2018* | 2017 | 2016 | 2015 | ||||||||||||||||
Net asset value at beginning of period | $ | 19.96 | $ | 18.29 | $ | 18.78 | $ | 20.08 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.24 | 0.46 | 0.55 | 0.36 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.54 | ) | 1.83 | (0.19 | ) | (1.35 | ) | |||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.04 | ) | (0.09 | ) | 0.33 | 0.20 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | (0.34 | ) | 2.20 | 0.69 | (0.79 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.25 | ) | (0.53 | ) | (0.59 | ) | (0.51 | ) | ||||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total dividends and distributions | (0.74 | ) | (0.53 | ) | (1.18 | ) | (0.51 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 18.88 | $ | 19.96 | $ | 18.29 | $ | 18.78 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | (1.81 | %) | 12.20 | % | 3.99 | % | (3.92 | %) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.53 | % †† | 2.36 | % | 3.03 | % | 2.90 | % †† | ||||||||||||
Net expenses | 1.10 | % †† | 1.11 | % | 1.12 | % | 1.12 | % †† | ||||||||||||
Portfolio turnover rate | 15 | % | 29 | % | 27 | % | 30 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 3,823 | $ | 4,409 | $ | 838 | $ | 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. For periods of less than one year, total 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. |
Financial Highlights selected per share data and ratios
Class R3 | Six months ended April 30, 2018* | Year ended October 31, 2017 | February 29, October 31, 2016 | |||||||||
Net asset value at beginning of period | $ | 19.97 | $ | 18.30 | $ | 17.10 | ||||||
|
|
|
|
|
| |||||||
Net investment income (loss) (a) | 0.21 | 0.42 | 0.35 | |||||||||
Net realized and unrealized gain (loss) on investments | (0.53 | ) | 1.82 | (1.69 | ) | |||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.04 | ) | (0.09 | ) | 2.95 | |||||||
|
|
|
|
|
| |||||||
Total from investment operations | (0.36 | ) | 2.15 | 1.61 | ||||||||
|
|
|
|
|
| |||||||
Less dividends and distributions: | ||||||||||||
From net investment income | (0.22 | ) | (0.48 | ) | (0.41 | ) | ||||||
From net realized gain on investments | (0.49 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.71 | ) | (0.48 | ) | (0.41 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value at end of period | $ | 18.90 | $ | 19.97 | $ | 18.30 | ||||||
|
|
|
|
|
| |||||||
Total investment return (b) | (1.89 | %) | 11.89 | % | 9.42 | % | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 2.11 | % †† | 2.16 | % | 2.81 | %†† | ||||||
Net expenses | 1.35 | % †† | 1.36 | % | 1.36 | %†† | ||||||
Portfolio turnover rate | 15 | % | 29 | % | 27 | % | ||||||
Net assets at end of period (in 000’s) | $ | 80 | $ | 201 | $ | 39 |
* | 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. For periods of less than one year, total return is not annualized. |
Class R6 | February 28, 2018* through April 30, 2018** | |||||||
Net asset value at beginning of period | $ | 19.19 | ||||||
|
| |||||||
Net investment income (loss) (a) | 0.11 | |||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | ||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | ||||||
|
| |||||||
Total from investment operations | (0.02 | ) | ||||||
|
| |||||||
Less dividends: | ||||||||
From net investment income | (0.10 | ) | ||||||
|
| |||||||
Net asset value at end of period | $ | 19.07 | ||||||
|
| |||||||
Total investment return (b) | (0.10 | %) | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||
Net investment income (loss) | 3.41 | % †† | ||||||
Net expenses | 0.65 | % †† | ||||||
Expenses (before waiver/reimbursement) | 0.65 | % | ||||||
Portfolio turnover rate | 15 | % | ||||||
Net assets at end of period (in 000’s) | $ | 25 |
* | Inception date. |
** | 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 R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 35 |
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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the ‘‘1940 Act’’), as an open-end management investment company, and is comprised of 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 has nine classes of shares registered for sale. 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 R6 and Class T shares were registered for sale effective as of February 28, 2017. Class R6 shares commenced operations on February 28, 2018. As of April 30, 2018, Class T shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R2, Class R3 and Class R6 shares are offered at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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
36 | MainStay Income Builder Fund |
Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisors (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 the security’s 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, 2018, 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 the 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, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
37 |
Notes to Financial Statements (Unaudited) (continued)
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 NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisors conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee 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, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Equity securities 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 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 and 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.
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, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 portfolio 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 the 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 materially 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 the Subadvisors determine the liquidity of the Fund’s investments; in doing so, the Manager or the 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 are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2018 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.
(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 its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
38 | MainStay Income Builder Fund |
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 tax 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 reclaimable. The Fund will accrue such taxes and reclaims 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, 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, 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 determinations using 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 any 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. 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, to the extent the Fund held any such securities during the six-month period ended April 30, 2018, is accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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 all or a portion of any interest receivables when the collection of all or a portion of such 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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisors to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisors will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be
39 |
Notes to Financial Statements (Unaudited) (continued)
limited or subject to delay, 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 (“LIBOR”).
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 enter 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, 2018, 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 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 risks such as 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 may invest in 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 may also use equity index futures contracts to increase the equity sensitivity to the Fund. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of April 30, 2018, open futures contracts are shown in the Portfolio of Investments.
(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 instruments 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
40 | MainStay Income Builder 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 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. As of April 30, 2018, open foreign currency forward contracts are shown in the Portfolio of Investments.
(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) 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 (“SEC”). 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 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 U.S. Treasury
securities at least equal at all times to the market value of the securities loaned. 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. As of the six-month period ended April 30, 2018, the Fund had securities on loan with a value of $12,774,594 and had received non-cash collateral of $13,696,925. Income earned from securities lending activity is reflected in the Statement of Operations.
(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) Debt and Foreign Securities Risk. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region. Debt securities are also subject to the risks associated with changes in interest rates.
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. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. 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, among other things, 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
41 |
Notes to Financial Statements (Unaudited) (continued)
serious credit event, the value of these investments could decline significantly. As a result, the Fund’s NAVs could go down and you could lose money.
In addition, loans 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.
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
(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 entered into 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 entered into 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.
Fair value of derivative instruments as of April 30, 2018:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation on investments and futures contracts (a) | $ | — | $ | 7,875,167 | $ | 744,317 | $ | 8,619,484 | |||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | 8,584,028 | — | — | 8,584,028 | |||||||||||||
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Total Fair Value | $ | 8,584,028 | $ | 7,875,167 | $ | 744,317 | $ | 17,203,512 | ||||||||||
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Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized depreciation on investments and futures contracts (a) | $ | — | $ | (10,006,996 | ) | $ | (1,202,311 | ) | $ | (11,209,307 | ) | ||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | (1,966,396 | ) | — | — | (1,966,396 | ) | |||||||||||
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| |||||||||||||||||
Total Fair Value | $ | (1,966,396 | ) | $ | (10,006,996 | ) | $ | (1,202,311 | ) | $ | (13,175,703 | ) | ||||||
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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. |
42 | MainStay Income Builder Fund |
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2018:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate | Total | ||||||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | 26,434,934 | $ | (6,100,266 | ) | $ | 20,334,668 | ||||||||
Forward Contracts | Net realized gain (loss) on foreign currency forward transactions | (10,760,929 | ) | — | — | (10,760,929 | ) | |||||||||||
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| |||||||||||||||||
Total Realized Gain (Loss) | $ | (10,760,929 | ) | $ | 26,434,934 | $ | (6,100,266 | ) | $ | 9,573,739 | ||||||||
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Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate | Total | ||||||||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | — | $ | (22,472,670 | ) | $ | 1,530,350 | $ | (20,942,320 | ) | |||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | 6,484,064 | — | — | 6,484,064 | |||||||||||||
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| |||||||||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 6,484,064 | $ | (22,472,670 | ) | $ | 1,530,350 | $ | (14,458,256 | ) | ||||||||
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Average Notional Amount
Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate | Total | |||||||||||||||
Futures Contracts Long | $ | — | $ | 340,135,364 | $ | 216,272,340 | $ | 556,407,704 | ||||||||||
Futures Contracts Short | $ | — | $ | — | $ | (138,257,641 | ) | $ | (138,257,641 | ) | ||||||||
Forward Contracts Long (a) | $ | 135,261,342 | $ | — | $ | — | $ | 135,261,342 | ||||||||||
Forward Contracts Short | $ | (240,621,452 | ) | $ | — | $ | — | $ | (240,621,452 | ) | ||||||||
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(a) | Positions were open four 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 attributable to 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 a Subadvisor, pursuant to the terms of the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields 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 an 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. Asset allocation decisions for the Fund are made by a committee chaired by MacKay Shields in collaboration with New York Life Investments. New York Life Investments pays for the services of the Subadvisors.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the 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; 0.575% from $1 billion to $5 billion; and 0.565% 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%
43 |
Notes to Financial Statements (Unaudited) (continued)
in excess of $100 million. During the six-month period ended April 30, 2018, the effective management fee rate was 0.61%, 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 (excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 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.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $5,430,079 and waived its fees and/or reimbursed expenses in the amount of $17,186.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T 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 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 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 the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2018, shareholder service fees incurred by the Fund were as follows:
Class R2 | $ | 2,064 | ||
Class R3 | 74 |
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $91,079 and $19,667, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $4,216, $5, $20,833 and $12,074, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 307,560 | ||
Investor Class | 104,557 | |||
Class B | 42,919 | |||
Class C | 301,621 | |||
Class I | 360,716 | |||
Class R2 | 1,991 | |||
Class R3 | 70 |
(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.
44 | MainStay Income Builder Fund |
(F) Capital. As of April 30, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $ | 103,360,373 | 14.5 | % | ||||
Class R2 | 27,521 | 0.7 | ||||||
Class R3 | 30,031 | 37.6 | ||||||
Class R6 | 24,971 | 100.0 |
Note 4–Federal Income Tax
As of April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative con-
tracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 1,639,240,579 | $ | 89,857,605 | $ | (56,513,818 | ) | $ | 33,343,787 |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 46,854,817 |
Note 5–Restricted Securities
As of April 30, 2018, the Fund held the following restricted security:
Security | Date of Acquisition | Shares | Cost | 4/3018 Value | Percent of Net Assets | |||||||||||||||
ION Media Networks, Inc. | 3/11/14 | 12 | $ | 1 | $ | 7,432 | 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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of U.S. government securities were $3,754 and $1,934, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $249,591 and $256,058, respectively.
45 |
Notes to Financial Statements (Unaudited) (continued)
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 2,192,081 | $ | 42,944,755 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,201,808 | 23,471,863 | ||||||
Shares redeemed | (3,573,791 | ) | (69,602,602 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (179,902 | ) | (3,185,984 | ) | ||||
Shares converted into Class A (See Note 1) | 314,646 | 6,230,277 | ||||||
Shares converted from Class A (See Note 1) | (109,907 | ) | (2,049,727 | ) | ||||
|
| |||||||
Net increase (decrease) | 24,837 | $ | 994,566 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 5,445,293 | $ | 103,835,754 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions (a) | 806,758 | 15,419,170 | ||||||
Shares redeemed | (6,516,965 | ) | (124,496,614 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (264,914 | ) | (5,241,690 | ) | ||||
Shares converted into Class A (See Note 1) | 3,943,157 | 77,461,468 | ||||||
Shares converted from Class A (See Note 1) | (2,402,635 | ) | (45,034,019 | ) | ||||
|
| |||||||
Net increase (decrease) | 1,275,608 | $ | 27,185,759 | |||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 207,791 | $ | 4,043,335 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 171,147 | 3,345,983 | ||||||
Shares redeemed | (241,927 | ) | (4,716,036 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 137,011 | 2,673,282 | ||||||
Shares converted into Investor Class (See Note 1) | 147,285 | 2,782,602 | ||||||
Shares converted from Investor Class (See Note 1) | (265,896 | ) | (5,276,313 | ) | ||||
|
| |||||||
Net increase (decrease) | 18,400 | $ | 179,571 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 561,270 | $ | 10,722,478 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 210,412 | 4,014,072 | ||||||
Shares redeemed | (836,015 | ) | (15,946,984 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (64,333 | ) | (1,210,434 | ) | ||||
Shares converted into Investor Class (See Note 1) | 256,990 | 4,920,385 | ||||||
Shares converted from Investor Class (See Note 1) | (3,853,417 | ) | (75,785,243 | ) | ||||
|
| |||||||
Net increase (decrease) | (3,660,760 | ) | $ | (72,075,292 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 26,198 | $ | 515,079 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 56,217 | 1,107,018 | ||||||
Shares redeemed | (131,941 | ) | (2,586,640 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (49,526 | ) | (964,543 | ) | ||||
Shares converted from Class B (See Note 1) | (85,615 | ) | (1,688,124 | ) | ||||
|
| |||||||
Net increase (decrease) | (135,141 | ) | $ | (2,652,667 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 178,134 | $ | 3,338,656 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 36,233 | 695,672 | ||||||
Shares redeemed | (284,695 | ) | (5,465,607 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (70,328 | ) | (1,431,279 | ) | ||||
Shares converted from Class B (See Note 1) | (261,858 | ) | (5,030,161 | ) | ||||
|
| |||||||
Net increase (decrease) | (332,186 | ) | $ | (6,461,440 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 1,139,536 | $ | 22,450,277 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 396,960 | 7,799,840 | ||||||
Shares redeemed | (1,631,931 | ) | (31,846,480 | ) | ||||
|
| |||||||
Net increase (decrease) | (95,435 | ) | $ | (1,596,363 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 3,255,990 | $ | 62,351,105 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 214,045 | 4,107,924 | ||||||
Shares redeemed | (4,026,686 | ) | (77,004,231 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (556,651 | ) | (10,545,202 | ) | ||||
Shares converted from Class C (See Note 1) | (1,336 | ) | (25,920 | ) | ||||
|
| |||||||
Net increase (decrease) | (557,987 | ) | $ | (10,571,122 | ) | |||
|
| |||||||
46 | MainStay Income Builder Fund |
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 5,300,019 | $ | 104,644,216 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,254,187 | 24,718,716 | ||||||
Shares redeemed | (7,154,105 | ) | (140,686,467 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (599,899 | ) | (11,323,535 | ) | ||||
Shares converted into Class I (See Note 1) | 64 | 1,285 | ||||||
|
| |||||||
Net increase (decrease) | (599,835 | ) | $ | (11,322,250 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 14,212,267 | $ | 274,097,860 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 879,241 | 16,984,704 | ||||||
Shares redeemed | (8,753,443 | ) | (168,302,487 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 6,338,065 | 122,780,077 | ||||||
Shares converted into Class I (See Note 1) | 2,303,694 | 43,510,391 | ||||||
|
| |||||||
Net increase (decrease) | 8,641,759 | $ | 166,290,468 | |||||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 11,709 | $ | 226,916 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,295 | 64,338 | ||||||
Shares redeemed | (33,428 | ) | (649,978 | ) | ||||
|
| |||||||
Net increase (decrease) | (18,424 | ) | $ | (358,724 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 225,540 | $ | 4,278,601 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,226 | 42,495 | ||||||
Shares redeemed | (51,821 | ) | (995,471 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 175,945 | 3,325,625 | ||||||
Shares converted from Class R2 (See Note 1) | (862 | ) | (16,901 | ) | ||||
|
| |||||||
Net increase (decrease) | 175,083 | $ | 3,308,724 | |||||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 54 | $ | 1,090 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 166 | 3,255 | ||||||
Shares redeemed | (6,077 | ) | (115,889 | ) | ||||
|
| |||||||
Net increase (decrease) | (5,857 | ) | $ | (111,544 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 8,110 | $ | 153,404 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 64 | 1,233 | ||||||
Shares redeemed | (241 | ) | (4,555 | ) | ||||
|
| |||||||
Net increase (decrease) | 7,933 | $ | 150,082 | |||||
|
| |||||||
Class R6 | Shares | Amount | ||||||
Period ended April 30, 2018 (a): | ||||||||
Shares sold | 1,302.761 | $ | 25,000 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6.829 | 130 | ||||||
|
| |||||||
Net increase (decrease) | 1,309.590 | $ | 25,130 | |||||
|
| |||||||
(a) Inception date was February 28, 2018. |
|
Note 11–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 12–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, 2018, events and transactions subsequent to April 30, 2018, 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.
47 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of 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 each of Epoch Investment Partners, Inc. (“Epoch”) and MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 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, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as a subadvisor to the Fund, and Epoch together with responses from New York Life Investments, Epoch and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments, Epoch and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments, Epoch and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments, Epoch and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in
48 | MainStay Income Builder Fund |
prior years and the Board’s regular review of Fund performance and operations throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments, Epoch and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of Epoch and MacKay Shields and continuous analysis of, and interactions with, Epoch and MacKay Shields with respect to, among other things, Fund investment performance and risk as well as Epoch’s and MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and 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 environment, resources and history. The Board considered that New York Life Investments’, Epoch’s and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed New York Epoch’s and MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those
49 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements (Unaudited) (continued)
actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
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 seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, 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 addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 evaluating the costs of the services provided by New York Life Investments, Epoch and MacKay Shields 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized 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, including reputational and other indirect benefits. 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 observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive. 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.
50 | MainStay Income Builder Fund |
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to Epoch and MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board noted that, following discussions with the Board, New York Life Investments had proposed an additional management fee breakpoint for the Fund, effective February 28, 2018.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay
51 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreements (Unaudited) (continued)
Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of the Agreements.
52 | MainStay Income Builder 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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).
53 |
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MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1738551 MS126-18 | MSIB10-06/18 (NYLIM) NL014 |
MainStay Large Cap Growth Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 nylinvestments.com/funds.
(With sales charges)
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years or Since Inception | Ten Years | Gross Expense Ratio2 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 7/1/1995 | | 3.72 9.76 | %
| | 17.24 24.06 | %
| | 13.54 14.83 | %
| | 9.23 9.85 | %
| | 1.00 1.00 | %
| ||||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | 3.64 9.67 |
| | 17.05 23.86 |
| | 13.48 14.77 | | | 9.12 9.74 | | | 1.07 1.07 |
| ||||||||||
Class B Shares3 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 4/1/2005 | | | 4.74 9.26 |
| | 17.95 22.95 |
| | 13.69 13.92 | | | 8.93 8.93 | | | 1.82 1.82 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 4/1/2005 | | | 8.36 9.26 |
| | 21.99 22.99 |
| | 13.92 13.92 | | | 8.91 8.91 | | | 1.82 1.82 |
| ||||||||
Class I Shares | No Sales Charge | 4/1/2005 | 9.80 | 24.30 | 15.11 | 10.13 | 0.75 | |||||||||||||||||||||
Class R1 Shares | No Sales Charge | 4/1/2005 | 9.77 | 24.22 | 15.02 | 10.02 | 0.85 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 4/1/2005 | 9.68 | 23.88 | 14.72 | 9.74 | 1.10 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | 9.59 | 23.61 | 14.44 | 9.48 | 1.35 | |||||||||||||||||||||
Class R6 Shares | No Sales Charge | 6/17/2013 | 9.89 | 24.43 | 15.13 | N/A | 0.63 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, 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 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. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
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 Index4 | 5.68 | % | 18.96 | % | 15.13 | % | 10.81 | % | ||||||||
S&P 500® Index5 | 3.82 | 13.27 | 12.96 | 9.02 | ||||||||||||
Morningstar Large Growth Category Average6 | 6.13 | 18.28 | 13.61 | 9.29 |
4. | The Russell 1000® Growth Index is the Fund’s primary broad-based securities market index for comparison purposes. 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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The S&P 500® Index is the Fund’s secondary benchmark. “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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Growth Category Average is representative of funds that invest primarily in big U.S. companies that are projected to grow faster than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. Growth is defined based on fast growth and high valuations. Most of these portfolios focus on companies in rapidly expanding industries. Results are based on average total returns of similar funds 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 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account on Hypothetical | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,097.60 | $ | 5.10 | $ | 1,019.90 | $ | 4.91 | 0.98% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,096.70 | $ | 5.51 | $ | 1,019.50 | $ | 5.31 | 1.06% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,092.60 | $ | 9.39 | $ | 1,015.80 | $ | 9.05 | 1.81% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,092.60 | $ | 9.39 | $ | 1,015.80 | $ | 9.05 | 1.81% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,098.00 | $ | 3.80 | $ | 1,021.20 | $ | 3.66 | 0.73% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,097.70 | $ | 4.32 | $ | 1,020.70 | $ | 4.16 | 0.83% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,096.80 | $ | 5.61 | $ | 1,019.40 | $ | 5.41 | 1.08% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,095.90 | $ | 6.91 | $ | 1,018.20 | $ | 6.66 | 1.33% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,098.90 | $ | 3.28 | $ | 1,021.70 | $ | 3.16 | 0.63% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of April 30, 2018 (Unaudited)
Software | 17.1 | % | ||
IT Services | 13.3 | |||
Internet Software & Services | 12.4 | |||
Internet & Direct Marketing Retail | 10.1 | |||
Health Care Equipment & Supplies | 5.5 | |||
Aerospace & Defense | 5.4 | |||
Semiconductors & Semiconductor Equipment | 4.6 | |||
Health Care Providers & Services | 3.5 | |||
Life Sciences Tools & Services | 3.1 | |||
Capital Markets | 2.9 | |||
Chemicals | 2.7 | |||
Hotels, Restaurants & Leisure | 2.5 | |||
Banks | 1.7 | |||
Equity Real Estate Investment Trusts | 1.7 |
Specialty Retail | 1.7 | % | ||
Textiles, Apparel & Luxury Goods | 1.7 | |||
Air Freight & Logistics | 1.6 | |||
Industrial Conglomerates | 1.6 | |||
Road & Rail | 1.5 | |||
Pharmaceuticals | 1.3 | |||
Professional Services | 1.2 | |||
Machinery | 1.1 | |||
Automobiles | 1.0 | |||
Short-Term Investment | 0.4 | |||
Other Assets, Less Liabilities | 0.4 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of April 30, 2018 (excluding short-term investment) (Unaudited)
1. | Amazon.com, Inc. |
2. | Microsoft Corp. |
3. | Alphabet, Inc. |
4. | Visa, Inc., Class A |
5. | Facebook, Inc., Class A |
6. salesforce.com, Inc.
7. | UnitedHealth Group, Inc. |
8. | Mastercard, Inc., Class A |
9. | Adobe Systems, Inc. |
10. | Alibaba Group Holding, Ltd., Sponsored ADR |
8 | MainStay Large Cap Growth Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers 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, 2018?
Excluding all sales charges, MainStay Large Cap Growth Fund returned 9.76% for Class A shares, 9.67% for Investor Class shares and 9.26% for Class B and Class C shares for the six months ended April 30, 2018. Over the same period, the Fund returned 9.80% for Class I shares, 9.77% for Class R1 shares, 9.68% for Class R2 shares, 9.59% for Class R3 shares and 9.89% for Class R6 shares. For the six months ended April 30, 2018, all share classes outperformed the 5.68% return of the Russell 1000® Growth Index,1 which is the Fund’s primary benchmark; the 3.82% return of the S&P 500® Index,1 which is the Fund’s secondary benchmark; and the 6.13% return of the Morningstar Large Growth 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 Russell 1000® Growth Index was very strong and marked a continuation of robust alpha3 generation in the Fund since year-end 2016, which brought the end of global quantitative easing. The Fund’s returns remained highly consistent with our modeling. With interest rates rising modestly on a global basis, previous headwinds to active growth management have become meaningful tailwinds for fundamental stock pickers. We continue to model technology-driven disruption in nearly every industry. Cloud computing, data mining, e-commerce and mobile connectivity are influencing the earnings growth and long-term values of many businesses. This differentiation in potential outcomes for stock prices provides a market that we see as ripe for active management. Based on our research, we believe that this environment is poised to continue for several years.
During the reporting period, which sectors were the strongest contributors to the Fund’s relative performance and which sectors were particularly weak?
With the exception of the very small energy sector, each sector in the Fund contributed positively to performance relative to the Russell 1000® Growth Index during the reporting period. (Contributions take weightings and total returns into account.) During the reporting period, stock selection was a particularly strong contributor to relative performance in the information technology and health care sectors, even though these sectors lagged the overall return of the benchmark.
During the reporting period, which individual stocks made the strongest contributions to the Fund’s absolute performance and which stocks detracted the most?
During the reporting period, the strongest positive contributions to the Fund’s absolute performance came from Splunk, Amazon.com, and Salesforce.com. Software companies Splunk and Salesforce.com both have compelling and differentiated product offerings and benefited from the strongest spending environment for technology in nearly 15 years. Amazon.com is growing at one of the fastest rates in the large-cap growth universe (both retail gross merchandise value and cloud revenues) and, in our opinion, is facing the least amount of long-term disruption risk. We believe that Amazon.com’s investments in Whole Foods, Prime Video, Alexa/Echo, India, fulfillment center build outs, and new Amazon Web Service regions could drive the company’s future growth.
Among the Fund’s worst-performing stocks on an absolute basis during the reporting period were Expedia, Alibaba and Charter Communications. While we remain confident in Expedia and Alibaba, the Fund’s position in Charter Communications has been sold. Online travel provider Expedia lost its chief executive officer, Dara Khosrowshahi, to Uber, which unsettled investors during the reporting period. We continue to model strong returns for Expedia given its attractive valuation, and we have confidence that Expedia’s other long-time management professionals will deliver on the company’s growth targets going forward. The stock of Alibaba, which is one of the largest e-commerce companies in China, performed poorly, in part because of U.S.-China trade-war headlines. Charter Communications’ net broadband additions slowed, and investors worried about ongoing integration issues with the company’s recently acquired Time Warner Cable properties.
Did the Fund make any significant purchases or sales during the reporting period?
The Fund’s largest new purchases during the reporting period were GoDaddy, Boeing and Cognizant. GoDaddy is the world’s largest cloud platform dedicated to enabling small- and medium-sized businesses to establish a web presence and social media footprint and to enhance related operational infrastructure capabilities. Our research indicated that the company’s new product offerings in the company’s GoCentral feature set could lead to significant future sales to existing customers (higher “attach rates”) and to success in landing new users. Boeing continues to execute well and has benefited from a strong aerospace cycle and from production efficiencies in its 787 program. Cognizant is a leading provider of consulting
1. | See footnote on page 6 for more information on this index. |
2. | See footnote on page 6 for more information on the Morningstar Large Growth Category Average. |
3. | Alpha measures the relationship between a mutual fund’s return and its beta over a three-year period. Often, alpha is viewed as the excess return (positive or negative) or the value added by the portfolio manager. 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 |
business-process outsourcing services, with key businesses in financial services, health care, manufacturing, and retail and logistics. We believe that the company’s margins are poised to expand.
The Fund’s most significant sales during the reporting period included Apple, Boston Scientific and Broadcom. Apple was sold because our research pointed to below-consensus demand for the new iPhones. The company’s balance sheet remained the best in the world, but anemic growth prospects made Apple less attractive than other technology investments. Boston Scientific experienced manufacturing issues and lowered expectations for its transcatheter heart valve. The Trump administration rejected Broadcom’s proposed acquisition of Qualcomm, and we modeled incremental weakness for Broadcom’s smartphone end markets, which reduced our confidence in the company’s future growth potential.
How did the Fund’s sector weightings change during the reporting period?
The Fund’s performance remained consistent with our expectations, and we continued to have lower-than-average turnover. As a result, sector weightings saw little change over the reporting period. We modestly reduced the Fund’s weighting relative to the Russell 1000® Growth Index in the health care sector through reductions in exposure to pharmaceutical and biopharmaceutical holdings. Several of these companies faced
incremental competitive pressures for their pipelines. Over the same period, we modestly increased the Fund’s weighting in the industrials sector, noting strong anticipated global growth and increased expectations for spending in the aerospace & defense sector.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund’s most substantially overweight position relative to the Russell 1000® Growth Index was in the information technology sector. The Fund’s information technology holdings remained well diversified, including rapid growers (digital marketers, semiconductor companies) and more stable growers (electronic payment processors).
As of April 30, 2018, the Fund’s most substantially underweight sector positions relative to the Russell 1000® Growth Index were in interest rate–related sectors: consumer staples, telecommunication services and utilities. Each of these sectors had benefited from low interest rates during the era of quantitative easing. Competition from money market fund yields, which may approach 2% in coming months, is undermining the relative attractiveness of these holdings. The Fund also holds an underweight position relative to the Russell 1000® Growth Index in the energy sector, as our modeling points to range-bound oil and natural gas prices because of incremental supply.
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, 2018 (Unaudited)
Shares | Value | |||||||
Common Stocks 99.2%† | ||||||||
Aerospace & Defense 5.4% |
| |||||||
Boeing Co. | 469,750 | $ | 156,689,810 | |||||
General Dynamics Corp. | 632,550 | 127,338,641 | ||||||
Northrop Grumman Corp. | 488,400 | 157,284,336 | ||||||
Raytheon Co. | 995,600 | 204,038,264 | ||||||
|
| |||||||
645,351,051 | ||||||||
|
| |||||||
Air Freight & Logistics 1.6% |
| |||||||
FedEx Corp. | 779,350 | 192,655,320 | ||||||
|
| |||||||
Automobiles 1.0% |
| |||||||
Ferrari N.V. | 950,200 | 116,570,536 | ||||||
|
| |||||||
Banks 1.7% |
| |||||||
JPMorgan Chase & Co. | 1,878,100 | 204,299,718 | ||||||
|
| |||||||
Capital Markets 2.9% |
| |||||||
Intercontinental Exchange, Inc. | 2,503,600 | 181,410,856 | ||||||
Moody’s Corp. | 1,066,550 | 172,994,410 | ||||||
|
| |||||||
354,405,266 | ||||||||
|
| |||||||
Chemicals 2.7% |
| |||||||
Ecolab, Inc. | 1,083,650 | 156,880,011 | ||||||
Sherwin-Williams Co. | 455,275 | 167,386,406 | ||||||
|
| |||||||
324,266,417 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts 1.7% |
| |||||||
American Tower Corp. | 1,500,050 | 204,546,818 | ||||||
|
| |||||||
Health Care Equipment & Supplies 5.5% |
| |||||||
ABIOMED, Inc. (a) | 507,100 | 152,611,745 | ||||||
Baxter International, Inc. | 1,713,500 | 119,088,250 | ||||||
Becton Dickinson & Co. | 619,250 | 143,585,497 | ||||||
Edwards Lifesciences Corp. (a) | 1,294,200 | 164,829,312 | ||||||
Stryker Corp. | 479,100 | 81,169,122 | ||||||
|
| |||||||
661,283,926 | ||||||||
|
| |||||||
Health Care Providers & Services 3.5% |
| |||||||
¨UnitedHealth Group, Inc. | 1,774,950 | 419,598,180 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure 2.5% |
| |||||||
Hilton Worldwide Holdings, Inc. | 2,279,550 | 179,719,722 | ||||||
Wynn Resorts, Ltd. | 672,600 | 125,231,394 | ||||||
|
| |||||||
304,951,116 | ||||||||
|
| |||||||
Industrial Conglomerates 1.6% |
| |||||||
Honeywell International, Inc. | 1,366,550 | 197,712,454 | ||||||
|
|
Shares | Value | |||||||
Internet & Direct Marketing Retail 10.1% |
| |||||||
¨Amazon.com, Inc. (a) | 479,940 | $ | 751,648,432 | |||||
Booking Holdings, Inc. (a) | 65,140 | 141,874,920 | ||||||
Expedia Group, Inc. | 1,243,500 | 143,176,590 | ||||||
Netflix, Inc. (a) | 587,200 | 183,476,512 | ||||||
|
| |||||||
1,220,176,454 | ||||||||
|
| |||||||
Internet Software & Services 12.4% |
| |||||||
¨Alibaba Group Holding, Ltd., Sponsored ADR (a) | 1,451,950 | 259,231,153 | ||||||
¨Alphabet, Inc. (a) |
| |||||||
Class A | 269,010 | 274,008,206 | ||||||
Class C | 294,431 | 299,533,489 | ||||||
¨Facebook, Inc., Class A (a) | 2,795,750 | 480,869,000 | ||||||
GoDaddy, Inc., Class A (a) | 2,770,500 | 178,863,480 | ||||||
|
| |||||||
1,492,505,328 | ||||||||
|
| |||||||
IT Services 13.3% |
| |||||||
Automatic Data Processing, Inc. | 1,006,200 | 118,812,096 | ||||||
Cognizant Technology Solutions Corp., Class A | 1,900,400 | 155,490,728 | ||||||
Fidelity National Information Services, Inc. | 1,254,450 | 119,135,117 | ||||||
Fiserv, Inc. (a) | 2,322,100 | 164,544,006 | ||||||
¨Mastercard, Inc., Class A | 1,668,150 | 297,381,100 | ||||||
PayPal Holdings, Inc. (a) | 2,605,050 | 194,362,780 | ||||||
¨Visa, Inc., Class A | 4,334,550 | 549,967,704 | ||||||
|
| |||||||
1,599,693,531 | ||||||||
|
| |||||||
Life Sciences Tools & Services 3.1% |
| |||||||
Illumina, Inc. (a) | 603,200 | 145,328,976 | ||||||
Thermo Fisher Scientific, Inc. | 1,083,650 | 227,945,778 | ||||||
|
| |||||||
373,274,754 | ||||||||
|
| |||||||
Machinery 1.1% |
| |||||||
Fortive Corp. | 1,962,300 | 137,969,313 | ||||||
|
| |||||||
Pharmaceuticals 1.3% |
| |||||||
Zoetis, Inc. | 1,921,700 | 160,423,516 | ||||||
|
| |||||||
Professional Services 1.2% |
| |||||||
CoStar Group, Inc. (a) | 410,210 | 150,407,599 | ||||||
|
| |||||||
Road & Rail 1.5% |
| |||||||
Union Pacific Corp. | 1,306,700 | 174,614,321 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 4.6% |
| |||||||
Applied Materials, Inc. | 2,178,000 | 108,181,260 | ||||||
ASML Holding N.V., Registered | 1,222,400 | 230,361,280 | ||||||
NVIDIA Corp. | 931,500 | 209,494,350 | ||||||
|
| |||||||
548,036,890 | ||||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund's 10 largest holdings, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Software 17.1% |
| |||||||
¨Adobe Systems, Inc. (a) | 1,315,900 | $ | 291,603,440 | |||||
Electronic Arts, Inc. (a) | 1,585,450 | 187,051,391 | ||||||
Intuit, Inc. | 902,150 | 166,708,298 | ||||||
¨Microsoft Corp. | 7,356,000 | 687,933,120 | ||||||
¨salesforce.com, Inc. (a) | 3,779,450 | 457,275,655 | ||||||
ServiceNow, Inc. (a) | 832,750 | 138,353,085 | ||||||
Splunk, Inc. (a) | 1,275,850 | 130,966,003 | ||||||
|
| |||||||
2,059,890,992 | ||||||||
|
| |||||||
Specialty Retail 1.7% |
| |||||||
Home Depot, Inc. | 1,089,000 | 201,247,200 | ||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 1.7% |
| |||||||
NIKE, Inc., Class B | 3,069,400 | 209,916,266 | ||||||
|
| |||||||
Total Common Stocks | 11,953,796,966 | |||||||
|
|
Principal Amount | Value | |||||||
Short-Term Investment 0.4% | ||||||||
Repurchase Agreement 0.4% |
| |||||||
Fixed Income Clearing Corp. 0.74%, dated 4/30/18 | $ | 46,753,973 | $ | 46,753,973 | ||||
|
| |||||||
Total Short-Term Investment | 46,753,973 | |||||||
|
| |||||||
Total Investments | 99.6 | % | 12,000,550,939 | |||||
Other Assets, Less Liabilities | 0.4 | 44,150,982 | ||||||
Net Assets | 100.0 | % | $ | 12,044,701,921 |
(a) | Non-income producing security. |
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, 2018, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 11,953,796,966 | $ | — | $ | — | $ | 11,953,796,966 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 46,753,973 | — | 46,753,973 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 11,953,796,966 | $ | 46,753,973 | $ | — | $ | 12,000,550,939 | ||||||||
|
|
|
|
|
|
|
|
(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, 2018, the Fund did not have any transfers among levels. (See Note 2)
As of April 30, 2018, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
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. |
Statement of Assets and Liabilities as of April 30, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 12,000,550,939 | ||
Receivables: | ||||
Investment securities sold | 77,450,605 | |||
Fund shares sold | 14,625,382 | |||
Dividends and interest | 4,613,151 | |||
Other assets | 205,504 | |||
|
| |||
Total assets | 12,097,445,581 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 30,387,324 | |||
Fund shares redeemed | 14,319,866 | |||
Manager (See Note 3) | 6,256,726 | |||
Transfer agent (See Note 3) | 866,766 | |||
NYLIFE Distributors (See Note 3) | 468,829 | |||
Shareholder communication | 209,236 | |||
Professional fees | 127,451 | |||
Trustees | 17,020 | |||
Custodian | 14,161 | |||
Accrued expenses | 76,281 | |||
|
| |||
Total liabilities | 52,743,660 | |||
|
| |||
Net assets | $ | 12,044,701,921 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 11,731,896 | ||
Additional paid-in capital | 5,745,182,356 | |||
|
| |||
5,756,914,252 | ||||
Undistributed net investment income | 865,566 | |||
Accumulated net realized gain (loss) on investments | 998,881,293 | |||
Net unrealized appreciation (depreciation) on investments | 5,288,040,810 | |||
|
| |||
Net assets | $ | 12,044,701,921 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 822,208,432 | ||
|
| |||
Shares of beneficial interest outstanding | 84,626,177 | |||
|
| |||
Net asset value per share outstanding | $ | 9.72 | ||
Maximum sales charge (5.50% of offering price) | 0.57 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.29 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 107,302,102 | ||
|
| |||
Shares of beneficial interest outstanding | 11,192,283 | |||
|
| |||
Net asset value per share outstanding | $ | 9.59 | ||
Maximum sales charge (5.50% of offering price) | 0.56 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.15 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 29,169,763 | ||
|
| |||
Shares of beneficial interest outstanding | 3,598,623 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.11 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 209,749,358 | ||
|
| |||
Shares of beneficial interest outstanding | 25,926,218 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.09 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 6,606,062,610 | ||
|
| |||
Shares of beneficial interest outstanding | 633,275,248 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.43 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 1,565,402,787 | ||
|
| |||
Shares of beneficial interest outstanding | 153,800,051 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.18 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 264,044,583 | ||
|
| |||
Shares of beneficial interest outstanding | 27,280,465 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.68 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 64,127,618 | ||
|
| |||
Shares of beneficial interest outstanding | 6,966,024 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.21 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 2,376,634,668 | ||
|
| |||
Shares of beneficial interest outstanding | 226,524,474 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.49 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statement of Operations for the six months ended April 30, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends | $ | 47,908,110 | ||
Interest | 191,993 | |||
Other income | 38,590 | |||
|
| |||
Total income | 48,138,693 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 37,598,059 | |||
Transfer agent (See Note 3) | 4,797,730 | |||
Distribution/Service—Class A (See Note 3) | 1,070,957 | |||
Distribution/Service—Investor Class (See Note 3) | 136,364 | |||
Distribution/Service—Class B (See Note 3) | 153,908 | |||
Distribution/Service—Class C (See Note 3) | 1,095,608 | |||
Distribution/Service—Class R2 (See Note 3) | 363,473 | |||
Distribution/Service—Class R3 (See Note 3) | 173,825 | |||
Shareholder service (See Note 3) | 969,165 | |||
Professional fees | 309,695 | |||
Shareholder communication | 258,819 | |||
Trustees | 133,314 | |||
Registration | 104,158 | |||
Custodian | 64,630 | |||
Miscellaneous | 208,872 | |||
|
| |||
Total expenses before waiver/reimbursement | 47,438,577 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (166,763 | ) | ||
|
| |||
Net expenses | 47,271,814 | |||
|
| |||
Net investment income (loss) | 866,879 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 1,024,616,244 | |||
Net change in unrealized appreciation (depreciation) on investments | 114,731,680 | |||
|
| |||
Net realized and unrealized gain (loss) on investments | 1,139,347,924 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 1,140,214,803 | ||
|
|
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. |
Statements of Changes in Net Assets
for the six months ended April 30, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 866,879 | $ | 7,219,818 | ||||
Net realized gain (loss) on investments | 1,024,616,244 | 2,125,171,899 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 114,731,680 | 1,093,100,385 | ||||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 1,140,214,803 | 3,225,492,102 | ||||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (1,018 | ) | — | |||||
Class I | (3,830,314 | ) | — | |||||
Class R6 | (3,613,022 | ) | — | |||||
|
| |||||||
(7,444,354 | ) | — | ||||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | (129,537,096 | ) | (97,685,398 | ) | ||||
Investor Class | (16,388,257 | ) | (19,306,165 | ) | ||||
Class B | (5,472,550 | ) | (4,699,003 | ) | ||||
Class C | (38,578,584 | ) | (37,641,042 | ) | ||||
Class I | (944,402,537 | ) | (952,688,820 | ) | ||||
Class R1 | (224,360,524 | ) | (180,061,866 | ) | ||||
Class R2 | (45,003,587 | ) | (43,793,657 | ) | ||||
Class R3 | (12,069,586 | ) | (10,344,534 | ) | ||||
Class R6 | (290,621,460 | ) | (180,099,811 | ) | ||||
|
| |||||||
(1,706,434,181 | ) | (1,526,320,296 | ) | |||||
|
| |||||||
Total dividends and distributions to shareholders | (1,713,878,535 | ) | (1,526,320,296 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 1,320,414,283 | 2,399,225,432 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 1,568,091,452 | 1,231,556,918 | ||||||
Cost of shares redeemed | (2,452,851,185 | ) | (7,343,872,524 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 435,654,550 | (3,713,090,174 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | (138,009,182 | ) | (2,013,918,368 | ) | ||||
Net Assets | ||||||||
Beginning of period | 12,182,711,103 | 14,196,629,471 | ||||||
|
| |||||||
End of period | $ | 12,044,701,921 | $ | 12,182,711,103 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 865,566 | $ | 7,443,041 | ||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.41 | $ | 9.17 | $ | 10.68 | $ | 10.91 | $ | 9.98 | $ | 7.55 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.02 | ) | 0.01 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.88 | 2.31 | (0.23 | ) | 0.85 | 1.45 | 2.42 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.87 | 2.30 | (0.24 | ) | 0.83 | 1.43 | 2.43 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.00 | )‡ | — | — | — | — | (0.00 | )‡ | ||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total distributions | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 9.72 | $ | 10.41 | $ | 9.17 | $ | 10.68 | $ | 10.91 | $ | 9.98 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 9.76 | % | 28.54 | % | (2.44 | %) | 8.10 | % | 14.95 | % | 32.09 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.18 | %)†† | (0.15 | %) | (0.13 | %) | (0.23 | %) | (0.22 | %) | 0.17 | % | ||||||||||||||||
Net expenses | 0.98 | % †† | 1.00 | % | 0.99 | % | 0.99 | % | 0.99 | % | 1.02 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.98 | % †† | 1.00 | % | 1.00 | % | 0.99 | % | 0.99 | % | 1.02 | % | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 822,208 | $ | 960,123 | $ | 882,021 | $ | 1,202,852 | $ | 1,304,641 | $ | 1,615,768 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.30 | $ | 9.09 | $ | 10.61 | $ | 10.84 | $ | 9.93 | $ | 7.52 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | 0.01 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.86 | 2.29 | (0.23 | ) | 0.86 | 1.44 | 2.40 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.85 | 2.27 | (0.25 | ) | 0.83 | 1.41 | 2.41 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.00 | )‡ | |||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 9.59 | $ | 10.30 | $ | 9.09 | $ | 10.61 | $ | 10.84 | $ | 9.93 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 9.67 | % | 28.45 | % | (2.57 | %) | 8.16 | % | 14.82 | % | 32.13 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.27 | %)†† | (0.19 | %) | (0.19 | %) | (0.28 | %) | (0.28 | %) | 0.09 | % | ||||||||||||||||
Net expenses | 1.06 | % †† | 1.07 | % | 1.05 | % | 1.04 | % | 1.04 | % | 1.08 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.07 | % †† | 1.07 | % | 1.06 | % | 1.04 | % | 1.04 | % | 1.08 | % | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 107,302 | $ | 108,078 | $ | 167,631 | $ | 180,154 | $ | 199,826 | $ | 211,111 |
* | 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. For periods of less than one year, total return is not annualized. |
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 B | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.98 | $ | 8.11 | $ | 9.67 | $ | 10.04 | $ | 9.29 | $ | 7.09 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.04 | ) | (0.08 | ) | (0.08 | ) | (0.10 | ) | (0.10 | ) | (0.05 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.73 | 2.01 | (0.21 | ) | 0.79 | 1.35 | 2.25 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.69 | 1.93 | (0.29 | ) | 0.69 | 1.25 | 2.20 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.00 | )‡ | |||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total distributions | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.11 | $ | 8.98 | $ | 8.11 | $ | 9.67 | $ | 10.04 | $ | 9.29 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 9.26 | % | 27.61 | % | (3.32 | %) | 7.34 | % | 14.08 | % | 30.93 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (1.02 | %)†† | (0.96 | %) | (0.94 | %) | (1.03 | %) | (1.02 | %) | (0.65 | %) | ||||||||||||||||
Net expenses | 1.81 | % †† | 1.82 | % | 1.80 | % | 1.79 | % | 1.79 | % | 1.83 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.82 | % †† | 1.82 | % | 1.81 | % | 1.79 | % | 1.79 | % | 1.83 | % | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 29,170 | $ | 31,793 | $ | 36,549 | $ | 47,779 | $ | 52,737 | $ | 59,671 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.96 | $ | 8.10 | $ | 9.66 | $ | 10.03 | $ | 9.29 | $ | 7.09 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.04 | ) | (0.08 | ) | (0.08 | ) | (0.10 | ) | (0.10 | ) | (0.05 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.73 | 2.00 | (0.21 | ) | 0.79 | 1.34 | 2.25 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.69 | 1.92 | (0.29 | ) | 0.69 | 1.24 | 2.20 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.00 | )‡ | |||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total distributions | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.09 | $ | 8.96 | $ | 8.10 | $ | 9.66 | $ | 10.03 | $ | 9.29 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 9.26 | % | 27.51 | % | (3.31 | %) | 7.35 | % | 13.96 | % | 31.12 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | �� | |||||||||||||||||||||||||||
Net investment income (loss) | (1.02 | %)†† | (0.96 | %) | (0.94 | %) | (1.04 | %) | (1.02 | %) | (0.66 | %) | ||||||||||||||||
Net expenses | 1.81 | % †† | 1.82 | % | 1.80 | % | 1.79 | % | 1.79 | % | 1.83 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.82 | % †† | 1.82 | % | 1.81 | % | 1.79 | % | 1.79 | % | 1.83 | % | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 209,749 | $ | 229,283 | $ | 306,409 | $ | 408,078 | $ | 402,714 | $ | 403,968 |
* | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 11.06 | $ | 9.65 | $ | 11.15 | $ | 11.32 | $ | 10.31 | $ | 7.80 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.00 | ‡ | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.03 | |||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.94 | 2.46 | (0.24 | ) | 0.89 | 1.51 | 2.50 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.94 | 2.47 | (0.23 | ) | 0.89 | 1.51 | 2.53 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.01 | ) | — | — | — | — | (0.02 | ) | ||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.57 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.02 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.43 | $ | 11.06 | $ | 9.65 | $ | 11.15 | $ | 11.32 | $ | 10.31 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 9.80 | % | 28.92 | % | (2.23 | %) | 8.36 | % | 15.26 | % | 32.41 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.06 | %†† | 0.12 | % | 0.12 | % | 0.02 | % | 0.02 | % | 0.38 | % | ||||||||||||||||
Net expenses | 0.73 | %†† | 0.75 | % | 0.74 | % | 0.74 | % | 0.74 | % | 0.77 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.73 | %†† | 0.75 | % | 0.75 | % | 0.74 | % | 0.74 | % | 0.77 | % | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 6,606,063 | $ | 6,752,754 | $ | 8,994,997 | $ | 12,150,253 | $ | 14,361,006 | $ | 13,254,459 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R1 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.83 | $ | 9.48 | $ | 10.99 | $ | 11.17 | $ | 10.19 | $ | 7.72 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | 0.02 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.91 | 2.41 | (0.24 | ) | 0.89 | 1.49 | 2.47 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.91 | 2.41 | (0.24 | ) | 0.88 | 1.48 | 2.49 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.02 | ) | |||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total distributions | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.02 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.18 | $ | 10.83 | $ | 9.48 | $ | 10.99 | $ | 11.17 | $ | 10.19 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 9.77 | % | 28.79 | % | (2.37 | %) | 8.39 | % | 15.14 | % | 32.27 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.03 | %)†† | 0.01 | % | 0.02 | % | (0.08 | %) | (0.08 | %) | 0.28 | % | ||||||||||||||||
Net expenses | 0.83 | % †† | 0.85 | % | 0.84 | % | 0.84 | % | 0.84 | % | 0.87 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.83 | % †† | 0.85 | % | 0.85 | % | 0.84 | % | 0.84 | % | 0.87 | % | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 1,565,403 | $ | 1,596,638 | $ | 1,636,560 | $ | 1,952,248 | $ | 2,225,940 | $ | 2,287,242 |
* | 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. For periods of less than one year, total return is not annualized. |
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 R2 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.38 | $ | 9.15 | $ | 10.68 | $ | 10.92 | $ | 9.99 | $ | 7.57 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | 0.00 | ‡ | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.87 | 2.31 | (0.24 | ) | 0.85 | 1.46 | 2.42 | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.86 | 2.29 | (0.26 | ) | 0.82 | 1.43 | 2.42 | |||||||||||||||||||||
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|
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| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.00 | )‡ | |||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
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| |||||||||||||||||
Total distributions | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | ||||||||||||||||
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|
|
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| |||||||||||||||||
Net asset value at end of period | $ | 9.68 | $ | 10.38 | $ | 9.15 | $ | 10.68 | $ | 10.92 | $ | 9.99 | ||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 9.68 | % | 28.49 | % | (2.66 | %) | 8.00 | % | 14.93 | % | 31.88 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.28 | %)†† | (0.24 | %) | (0.23 | %) | (0.32 | %) | (0.33 | %) | 0.03 | % | ||||||||||||||||
Net expenses | 1.08 | % †† | 1.10 | % | 1.09 | % | 1.09 | % | 1.09 | % | 1.12 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.08 | % †† | 1.10 | % | 1.10 | % | 1.09 | % | 1.09 | % | 1.12 | % | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 264,045 | $ | 303,192 | $ | 391,535 | $ | 674,630 | $ | 984,295 | $ | 1,014,655 |
* | Unaudited. |
†† | Annualized. |
‡ | Less than one-tenth of a percent. |
(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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R3 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 9.96 | $ | 8.85 | $ | 10.39 | $ | 10.67 | $ | 9.80 | $ | 7.45 | ||||||||||||||||
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|
|
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|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.02 | ) | (0.04 | ) | (0.04 | ) | (0.06 | ) | (0.06 | ) | (0.02 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.83 | 2.21 | (0.23 | ) | 0.84 | 1.43 | 2.37 | |||||||||||||||||||||
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| |||||||||||||||||
Total from investment operations | 0.81 | 2.17 | (0.27 | ) | 0.78 | 1.37 | 2.35 | |||||||||||||||||||||
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| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | — | — | — | — | (0.00 | )‡ | |||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
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|
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|
|
|
|
|
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| |||||||||||||||||
Total dividends and distributions | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | (0.00 | )‡ | ||||||||||||||||
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| |||||||||||||||||
Net asset value at end of period | $ | 9.21 | $ | 9.96 | $ | 8.85 | $ | 10.39 | $ | 10.67 | $ | 9.80 | ||||||||||||||||
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| |||||||||||||||||
Total investment return (b) | 9.59 | % | 28.05 | % | (2.83 | %) | 7.79 | % | 14.59 | % | 31.63 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.52 | %)†† | (0.49 | %) | (0.48 | %) | (0.57 | %) | (0.57 | %) | (0.20 | %) | ||||||||||||||||
Net expenses | 1.33 | % †† | 1.35 | % | 1.34 | % | 1.34 | % | 1.34 | % | 1.37 | % | ||||||||||||||||
Expenses (before reimbursement/waiver) | 1.33 | % †† | 1.35 | % | 1.35 | % | 1.34 | % | 1.34 | % | 1.37 | % | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 64,128 | $ | 78,634 | $ | 87,060 | $ | 114,118 | $ | 158,222 | $ | 219,158 |
* | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 11.12 | $ | 9.69 | $ | 11.18 | $ | 11.33 | $ | 10.31 | $ | 9.02 | ||||||||||||||||
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|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.01 | 0.02 | 0.02 | 0.01 | 0.01 | 0.00‡ | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.94 | 2.47 | (0.24 | ) | 0.90 | 1.51 | 1.29 | |||||||||||||||||||||
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|
|
|
|
|
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|
|
| |||||||||||||||||
Total from investment operations | 0.95 | 2.49 | (0.22 | ) | 0.91 | 1.52 | 1.29 | |||||||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.02 | ) | — | — | — | — | — | |||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | — | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.58 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | 0.00 | |||||||||||||||||
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| |||||||||||||||||
Net asset value at end of period | $ | 10.49 | $ | 11.12 | $ | 9.69 | $ | 11.18 | $ | 11.33 | $ | 10.31 | ||||||||||||||||
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| |||||||||||||||||
Total investment return (b) | 9.89 | % | 29.02 | % | (2.12 | %) | 8.55 | % | 15.36 | % | 14.30 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.16 | %†† | 0.21 | % | 0.23 | % | 0.11 | % | 0.10 | % | 0.04 | %†† | ||||||||||||||||
Net expenses | 0.63 | %†† | 0.63 | % | 0.62 | % | 0.62 | % | 0.62 | % | 0.62 | %†† | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.64 | %†† | 0.63 | % | 0.63 | % | 0.62 | % | 0.62 | % | 0.62 | %†† | ||||||||||||||||
Portfolio turnover rate | 21 | % | 61 | % | 84 | % | 66 | % | 67 | % | 74 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,376,635 | $ | 2,122,217 | $ | 1,693,868 | $ | 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. For periods of less than one year, total return is not annualized. |
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. |
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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of 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 has ten classes of shares registered for sale. 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 T shares were registered for sale effective as of February 28, 2017. As of April 30, 2018, Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R1, Class R2, Class R3 and Class R6 shares are offered
at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. 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, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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 assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to
21 |
Notes to Financial Statements (Unaudited) (continued)
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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • 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 the security’s 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, 2018, 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 the 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, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities 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
22 | MainStay Large Cap Growth Fund |
taken from the principal market in which each security trades. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired 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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 its 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 tax 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 determinations using 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.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be limited or subject to delay, 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
23 |
Notes to Financial Statements (Unaudited) (continued)
forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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, 2018, 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.
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 attributable to the Fund. Winslow Capital Management, LLC. (“Winslow” or the “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 the services performed and the 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 February 28, 2019 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 (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class I shares do not exceed 0.88% of the Fund’s average daily net assets. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2019, 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 (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and expenses) do not exceed 0.95% of its average daily net assets. This voluntary waiver or reimbursement may be discontinued at any time without notice.
During the six-month period ended April 30, 2018, the effective management fee rate was 0.62%, exclusive of any applicable waivers/reimbursements.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $37,598,059 and waived its fees and/or reimbursed expenses in the amount of $166,763.
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.
24 | MainStay Large Cap Growth Fund |
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T 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 the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2018, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 789,011 | ||
Class R2 | 145,389 | |||
Class R3 | 34,765 |
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $66,639 and $29,491, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $2,428, $3, $15,976 and $3,886, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 398,974 | ||
Investor Class | 101,591 | |||
Class B | 28,660 | |||
Class C | 204,049 | |||
Class I | 3,162,002 | |||
Class R1 | 734,696 | |||
Class R2 | 135,372 | |||
Class R3 | 32,386 |
(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 April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 6,738,235,502 | $ | 5,320,072,704 | $ | (57,757,267 | ) | $ | 5,262,315,437 |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Long-Term Capital Gain | $ | 1,526,320,296 |
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.
25 |
Notes to Financial Statements (Unaudited) (continued)
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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $2,505,336 and $3,787,439, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 8,384,999 | $ | 79,958,063 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 12,586,885 | 111,645,664 | ||||||
Shares redeemed | (24,274,478 | ) | (238,401,737 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (3,302,594 | ) | (46,798,010 | ) | ||||
Shares converted into Class A (See Note 1) | 1,597,903 | 15,359,215 | ||||||
Shares converted from Class A (See Note 1) | (5,893,568 | ) | (57,419,703 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (7,598,259 | ) | $ | (88,858,498 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 15,446,601 | $ | 140,733,350 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,359,228 | 83,081,012 | ||||||
Shares redeemed | (36,765,480 | ) | (333,076,055 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (10,959,651 | ) | (109,261,693 | ) | ||||
Shares converted into Class A (See Note 1) | 7,863,468 | 78,150,962 | ||||||
Shares converted from Class A (See Note 1) | (882,285 | ) | (7,803,931 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (3,978,468 | ) | $ | (38,914,662 | ) | |||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 980,514 | $ | 9,445,273 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,870,749 | 16,369,056 | ||||||
Shares redeemed | (892,405 | ) | (8,454,820 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 1,958,858 | 17,359,509 | ||||||
Shares converted into Investor Class (See Note 1) | 203,593 | 1,934,245 | ||||||
Shares converted from Investor Class (See Note 1) | (1,465,511 | ) | (13,898,288 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 696,940 | $ | 5,395,466 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,884,557 | $ | 17,119,999 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,417,746 | 19,196,902 | ||||||
Shares redeemed | (5,070,285 | ) | (45,794,027 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (767,982 | ) | (9,477,126 | ) | ||||
Shares converted into Investor Class (See Note 1) | 612,058 | 5,503,551 | ||||||
Shares converted from Investor Class (See Note 1) | (7,793,359 | ) | (76,793,949 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (7,949,283 | ) | $ | (80,767,524 | ) | |||
|
|
|
| |||||
26 | MainStay Large Cap Growth Fund |
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 129,283 | $ | 1,033,669 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 692,472 | 5,138,144 | ||||||
Shares redeemed | (461,266 | ) | (3,729,062 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 360,489 | 2,442,751 | ||||||
Shares converted from Class B (See Note 1) | (303,732 | ) | (2,418,554 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 56,757 | $ | 24,197 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 371,089 | $ | 2,812,224 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 610,879 | 4,251,717 | ||||||
Shares redeemed | (1,218,915 | ) | (9,643,234 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (236,947 | ) | (2,579,293 | ) | ||||
Shares converted from Class B (See Note 1) | (727,212 | ) | (5,746,670 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (964,159 | ) | $ | (8,325,963 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 2,581,962 | $ | 19,668,372 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,165,875 | 23,459,136 | ||||||
Shares redeemed | (5,407,809 | ) | (43,818,914 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 340,028 | $ | (691,406 | ) | ||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 4,144,043 | $ | 30,206,204 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,605,366 | 18,107,292 | ||||||
Shares redeemed | (18,993,151 | ) | (148,598,246 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (12,243,742 | ) | $ | (100,284,750 | ) | |||
|
|
|
|
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 65,188,655 | $ | 673,831,958 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 90,493,251 | 860,590,813 | ||||||
Shares redeemed | (129,770,423 | ) | (1,344,806,438 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 25,911,483 | 189,616,333 | ||||||
Shares converted into Class I (See Note 1) | 5,398,550 | 56,475,835 | ||||||
Shares converted from Class I (See Note 1) | (8,691,745 | ) | (91,176,410 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 22,618,288 | $ | 154,915,758 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 144,324,904 | $ | 1,375,970,528 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 83,715,425 | 711,581,117 | ||||||
Shares redeemed | (548,671,760 | ) | (5,264,114,395 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (320,631,431 | ) | (3,176,562,750 | ) | ||||
Shares converted into Class I (See Note 1) | 723,030 | 6,750,849 | ||||||
Shares converted from Class I (See Note 1) | (1,561,675 | ) | (13,815,350 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (321,470,076 | ) | $ | (3,183,627,251 | ) | |||
|
|
|
| |||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 8,973,972 | $ | 91,298,705 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 24,175,895 | 224,352,308 | ||||||
Shares redeemed | (26,822,185 | ) | (269,909,211 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 6,327,682 | 45,741,802 | ||||||
Shares converted from Class R1 (See Note 1) | (3,154 | ) | (32,750 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 6,324,528 | $ | 45,709,052 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 16,132,262 | $ | 153,665,919 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 21,611,091 | 180,020,387 | ||||||
Shares redeemed | (62,925,774 | ) | (603,693,599 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (25,182,421 | ) | $ | (270,007,293 | ) | |||
|
|
|
| |||||
27 |
Notes to Financial Statements (Unaudited) (continued)
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 4,356,694 | $ | 40,536,111 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,351,675 | 29,628,809 | ||||||
Shares redeemed | (9,632,968 | ) | (92,299,134 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,924,599 | ) | $ | (22,134,214 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 7,846,870 | $ | 69,445,168 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,348,441 | 26,787,527 | ||||||
Shares redeemed | (24,664,053 | ) | (220,343,413 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (13,468,742 | ) | (124,110,718 | ) | ||||
Shares converted from Class R2 (See Note 1) | (97,467 | ) | (792,409 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (13,566,209 | ) | $ | (124,903,127 | ) | |||
|
|
|
| |||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 699,295 | $ | 6,329,716 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,273,708 | 10,711,886 | ||||||
Shares redeemed | (2,900,509 | ) | (26,033,146 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (927,506 | ) | $ | (8,991,544 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,561,683 | $ | 13,649,413 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,215,950 | 9,362,814 | ||||||
Shares redeemed | (4,725,243 | ) | (40,638,685 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,947,610 | ) | $ | (17,626,458 | ) | |||
|
|
|
| |||||
Class R6 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 38,241,643 | $ | 398,312,416 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 29,936,782 | 286,195,636 | ||||||
Shares redeemed | (41,104,426 | ) | (425,398,723 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 27,073,999 | 259,109,329 | ||||||
Shares converted into Class R6 (See Note 1) | 8,642,314 | 91,176,410 | ||||||
|
|
|
| |||||
Net increase (decrease) | 35,716,313 | $ | 350,285,739 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 61,869,744 | $ | 595,622,627 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 20,979,877 | 179,168,150 | ||||||
Shares redeemed | (68,492,947 | ) | (677,970,870 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 14,356,674 | 96,819,907 | ||||||
Shares converted into Class R6 (See Note 1) | 1,638,521 | 14,546,947 | ||||||
|
|
|
| |||||
Net increase (decrease) | 15,995,195 | $ | 111,366,854 | |||||
|
|
|
|
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 Large Cap Growth Fund, the MainStay High Yield Corporate Bond Fund and another fund previously managed by New York Life Investments 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.
Discovery in the case has been concluded. New York Life Investments filed its motion for summary judgment on December 15, 2017.
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, 2018, events and transactions subsequent to April 30, 2018, 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 (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of 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 decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and Winslow Capital (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates and Winslow Capital together with responses from New York Life Investments and Winslow Capital to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and Winslow Capital personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or Winslow Capital. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and Winslow Capital. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and Winslow Capital resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and Winslow Capital
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of Winslow Capital and continuous analysis of, and interactions with, Winslow Capital with respect to, among other things, Fund investment performance and risk as well as Winslow Capital’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and 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, resources and history. The Board considered that New York Life Investments’ and Winslow Capital’s policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed Winslow Capital’s ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
30 | MainStay Large Cap Growth Fund |
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 seek to enhance investment returns, supported a determination to approve the continuation of 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 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 addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized 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, including reputational and other indirect benefits. 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 observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive. 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.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to Winslow Capital are paid by New York Life Investments, not
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
32 | MainStay Large Cap Growth Fund |
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 continuation of 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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 Large Cap Growth Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1737112 MS126-18 | MSLG10-06/18 (NYLIM) NL031 |
MainStay MacKay Common Stock Fund (Formerly known as MainStay Common Stock Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years or Since Inception | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 6/1/1998 | | | –1.17 4.58 | %
| | 9.28 15.64 | %
| | 11.53 12.80 | %
| | 7.38 7.99 | %
| | 0.97 0.97 | %
| ||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –1.28 4.46 |
| | 8.98 15.32 | | | 11.23 12.50 | | | 6.95 7.56 | | | 1.23 1.23 |
| ||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 6/1/1998 | | | –0.90 4.10 |
| | 9.50 14.50 | | | 11.40 11.66 | | | 6.77 6.77 | | | 1.98 1.98 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | 3.05 4.05 | | | 13.45 14.45 | | | 11.66 11.66 | | | 6.75 6.75 | | | 1.98 1.98 |
| ||||||||
Class I Shares | No Sales Charge | 12/28/2004 | 4.71 | 15.89 | 13.07 | 8.26 | 0.72 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | 4.37 | 15.19 | 16.74 | N/A | 1.32 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
S&P 500® Index4 | 3.82 % | 13.27% | 12.96 | % | 9.02 | % | ||||||||||
Russell 1000® Index5 | 3.83 | 13.17 | 12.84 | 9.10 | ||||||||||||
Morningstar Large Blend Category Average6 | 3.48 | 11.94 | 11.42 | 8.10 |
4. | The S&P 500® Index is the Fund’s primary broad-based securities market index for comparison purposes. “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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Russell 1000® Index is the Fund’s secondary benchmark. 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. Results assume |
reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Blend Category Average is representative of funds that represent the overall US stock market in size, growth rates and price. Stocks in the top 70% of the capitalization of the US equity market are defined as large cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios tend to invest across the spectrum of US industries, and owing to their broad exposure, the portfolios’ returns are often similar to those of the S&P 500 Index. Results are based on average total returns of similar funds 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 MacKay Common Stock Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,045.80 | $ | 4.82 | $ | 1,020.10 | $ | 4.76 | 0.95% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,044.60 | $ | 6.08 | $ | 1,018.80 | $ | 6.01 | 1.20% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,041.00 | $ | 9.87 | $ | 1,015.10 | $ | 9.74 | 1.95% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,040.50 | $ | 9.87 | $ | 1,015.10 | $ | 9.74 | 1.95% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,047.10 | $ | 3.55 | $ | 1,021.30 | $ | 3.51 | 0.70% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,043.70 | $ | 6.59 | $ | 1,018.30 | $ | 6.51 | 1.30% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Exchange-Traded Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of April 30, 2018 (Unaudited)
Oil, Gas & Consumable Fuels | 7.9 | % | ||
Banks | 6.5 | |||
Technology Hardware, Storage & Peripherals | 6.2 | |||
Health Care Providers & Services | 5.9 | |||
Internet Software & Services | 5.4 | |||
Semiconductors & Semiconductor Equipment | 5.0 | |||
Software | 4.9 | |||
IT Services | 4.3 | |||
Internet & Direct Marketing Retail | 4.0 | |||
Hotels, Restaurants & Leisure | 3.7 | |||
Pharmaceuticals | 3.7 | |||
Aerospace & Defense | 3.4 | |||
Specialty Retail | 3.3 | |||
Insurance | 3.0 | |||
Exchange-Traded Funds | 2.8 | |||
Food & Staples Retailing | 2.4 | |||
Multiline Retail | 2.2 | |||
Capital Markets | 2.1 | |||
Biotechnology | 2.0 | |||
Diversified Telecommunication Services | 1.7 | |||
Beverages | 1.5 | |||
Chemicals | 1.5 | |||
Diversified Financial Services | 1.4 | |||
Textiles, Apparel & Luxury Goods | 1.4 | |||
Trading Companies & Distributors | 1.3 | |||
Health Care Equipment & Supplies | 1.2 |
Independent Power & Renewable Electricity Producers | 1.2 | % | ||
Metals & Mining | 1.2 | |||
Equity Real Estate Investment Trusts | 1.1 | |||
Household Products | 0.9 | |||
Food Products | 0.8 | |||
Personal Products | 0.8 | |||
Machinery | 0.7 | |||
Professional Services | 0.7 | |||
Electronic Equipment, Instruments & Components | 0.6 | |||
Real Estate Management & Development | 0.6 | |||
Communications Equipment | 0.4 | |||
Leisure Products | 0.4 | |||
Media | 0.4 | |||
Tobacco | 0.4 | |||
Construction & Engineering | 0.3 | |||
Energy Equipment & Services | 0.3 | |||
Industrial Conglomerates | 0.3 | |||
Auto Components | 0.1 | |||
Consumer Finance | 0.1 | |||
Airlines | 0.0 | ‡ | ||
Household Durables | 0.0 | ‡ | ||
Short-Term Investment | 0.2 | |||
Other Assets, Less Liabilities | –0.2 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 10 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings or Issuers as of April 30, 2018 (excluding short-term investment) (Unaudited)
1. | Microsoft Corp. |
2. | Apple, Inc. |
3. | SPDR S&P 500 ETF Trust |
4. | Amazon.com, Inc. |
5. | JPMorgan Chase & Co. |
6. | Facebook, Inc., Class A |
7. | Exxon Mobil Corp. |
8. | Alphabet, Inc. |
9. | Johnson & Johnson |
10. | Chevron Corp. |
8 | MainStay MacKay Common Stock Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by Migene Kim, CFA, Andrew Ver Planck, CFA, and Mona Patni of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Common Stock Fund perform relative to its benchmarks and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MacKay Common Stock Fund returned 4.58% for Class A shares, 4.46% for Investor Class shares, 4.10% for Class B shares and 4.05% for Class C shares for the six months ended April 30, 2018. Over the same period, the Fund’s Class I shares returned 4.71% and Class R3 shares returned 4.37%. For the six months ended April 30, 2018, all share classes outperformed the 3.82% return of the S&P 500® Index,1 which is the Fund’s primary benchmark; the 3.83% return of the Russell 1000® Index,1 which is the Fund’s secondary benchmark; and the 3.48% return of the Morningstar Large Blend Category Average.2 See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective January 1, 2018, MacKay Shields assumed subadvisory responsibilities for the Fund and the portfolio managers from Cornerstone Capital Management Holdings LLC transitioned to MacKay Shields. Effective February 28, 2018, the Fund was renamed MainStay MacKay Common Stock Fund. For more information on these changes, please refer to the supplements dated September 28, 2017, and December 15, 2017.
What factors affected the Fund’s relative performance during the reporting period?
Stock selection was the main driver of the Fund’s outperformance relative to the S&P 500® Index during the reporting period, particularly in the energy, industrials and health care sectors. The Fund’s sector allocations also added to the Fund’s relative performance.
Which sectors were the strongest contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the sectors that made the strongest contributions to the Fund’s performance relative to the S&P 500® Index were energy, industrials and health care. (Contributions take weightings and total returns into account.) Over the same period, the sectors that made the weakest contributions to the Fund’s relative performance were information technology, financials and telecommunication services.
During the reporting period, which individual stocks made the strongest contributions to the Fund’s absolute performance and which stocks detracted the most?
During the reporting period, the stocks that made the strongest contributions to the Fund’s absolute performance were e-commerce company Amazon, software company Microsoft and petroleum refiner Holly Frontier. The stocks that made the weakest contributions to the Fund’s absolute performance were semiconductor manufacturer Applied Materials, consumer products company Procter & Gamble and tobacco holding company Philip Morris International.
Did the Fund make any significant purchases or sales during the reporting period?
The Fund initiated a long position in an oil & gas exploration company ConocoPhillips in November 2017, based on an attractive valuation, and the Fund accumulated more shares as the company’s momentum and sentiment scores improved. The Fund also purchased shares of defense contractor Lockheed Martin throughout the reporting period on the basis of the stock’s strength in price trends and its reasonable valuation. The Fund moved from an underweight position relative to the S&P 500® Index to an overweight position in the stock.
During the reporting period, the Fund reduced its position in machinery and mining equipment manufacturer Caterpillar, as the stock’s return prospect deteriorated in terms of valuation and momentum. The Fund also reduced its position in tobacco company Philip Morris International starting in November 2017. The position became underweight relative to the benchmark in March 2018. Philip Morris International’s return prospect, as measured by most of our metrics, deteriorated while the stock remained median-ranked in terms of valuation.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the most substantial increases in the Fund’s sector weightings relative to the S&P 500® Index were in energy and telecommunication services. Over the same period, the most substantial decreases in the Fund’s sector weights relative to the benchmark were in utilities and energy.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund held overweight positions relative to the S&P 500® Index in the consumer discretionary and information technology sectors. As of the same date, the Fund held underweight sector positions in industrials and utilities.
1. | See footnote on page 6 for more information about this index. |
2. | See footnote on page 6 for more information on the Morningstar Large Blend Category Average. |
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, 2018 (Unaudited)
Shares | Value | |||||||
Common Stocks 97.2%† | ||||||||
Aerospace & Defense 3.4% |
| |||||||
Boeing Co. | 7,830 | $ | 2,611,775 | |||||
Curtiss-Wright Corp. | 2,869 | 367,347 | ||||||
General Dynamics Corp. | 2,517 | 506,697 | ||||||
Huntington Ingalls Industries, Inc. | 4,249 | 1,033,399 | ||||||
Lockheed Martin Corp. | 5,329 | 1,709,757 | ||||||
|
| |||||||
6,228,975 | ||||||||
|
| |||||||
Airlines 0.0%‡ |
| |||||||
Southwest Airlines Co. | 150 | 7,925 | ||||||
|
| |||||||
Auto Components 0.1% |
| |||||||
Aptiv PLC | 1,081 | 91,431 | ||||||
|
| |||||||
Banks 6.5% |
| |||||||
Bank of America Corp. | 82,859 | 2,479,141 | ||||||
Citigroup, Inc. | 36,550 | 2,495,268 | ||||||
¨JPMorgan Chase & Co. | 37,369 | 4,065,000 | ||||||
Wells Fargo & Co. | 53,830 | 2,797,007 | ||||||
|
| |||||||
11,836,416 | ||||||||
|
| |||||||
Beverages 1.5% |
| |||||||
Coca-Cola Co. | 12,477 | 539,131 | ||||||
PepsiCo., Inc. | 21,958 | 2,216,441 | ||||||
|
| |||||||
2,755,572 | ||||||||
|
| |||||||
Biotechnology 2.0% |
| |||||||
AbbVie, Inc. | 16,447 | 1,587,958 | ||||||
Amgen, Inc. | 1,251 | 218,274 | ||||||
Gilead Sciences, Inc. | 25,676 | 1,854,578 | ||||||
|
| |||||||
3,660,810 | ||||||||
|
| |||||||
Capital Markets 2.1% |
| |||||||
Ameriprise Financial, Inc. | 5,671 | 795,131 | ||||||
CME Group, Inc. | 1,730 | 272,786 | ||||||
Intercontinental Exchange, Inc. | 3,034 | 219,844 | ||||||
Janus Henderson Group PLC | 16,892 | 533,618 | ||||||
State Street Corp. | 8,851 | 883,153 | ||||||
Stifel Financial Corp. | 16,265 | 947,924 | ||||||
T. Rowe Price Group, Inc. | 1,791 | 203,852 | ||||||
|
| |||||||
3,856,308 | ||||||||
|
| |||||||
Chemicals 1.5% |
| |||||||
CF Industries Holdings, Inc. | 32,506 | 1,261,233 | ||||||
DowDuPont, Inc. | 698 | 44,141 | ||||||
LyondellBasell Industries N.V., Class A | 13,655 | 1,443,743 | ||||||
|
| |||||||
2,749,117 | ||||||||
|
| |||||||
Communications Equipment 0.4% |
| |||||||
Cisco Systems, Inc. | 11,357 | 503,001 | ||||||
F5 Networks, Inc. (a) | 1,488 | 242,678 | ||||||
|
| |||||||
745,679 | ||||||||
|
|
Shares | Value | |||||||
Construction & Engineering 0.3% |
| |||||||
Fluor Corp. | 10,169 | $ | 599,463 | |||||
|
| |||||||
Consumer Finance 0.1% |
| |||||||
Synchrony Financial | 3,654 | 121,203 | ||||||
|
| |||||||
Diversified Financial Services 1.4% |
| |||||||
Berkshire Hathaway, Inc., Class B (a) | 13,169 | 2,551,230 | ||||||
|
| |||||||
Diversified Telecommunication Services 1.7% |
| |||||||
AT&T, Inc. | 81,487 | 2,664,625 | ||||||
Verizon Communications, Inc. | 8,337 | 411,431 | ||||||
|
| |||||||
3,076,056 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components 0.6% |
| |||||||
Jabil, Inc. | 40,038 | 1,065,011 | ||||||
|
| |||||||
Energy Equipment & Services 0.3% |
| |||||||
Transocean, Ltd. (a) | 44,430 | 549,599 | ||||||
|
| |||||||
Equity Real Estate Investment Trusts 1.1% |
| |||||||
Host Hotels & Resorts, Inc. | 62,364 | 1,219,840 | ||||||
Public Storage | 3,592 | 724,794 | ||||||
|
| |||||||
1,944,634 | ||||||||
|
| |||||||
Food & Staples Retailing 2.4% |
| |||||||
Costco Wholesale Corp. | 6,832 | 1,346,997 | ||||||
Sysco Corp. | 11,976 | 748,979 | ||||||
Walmart, Inc. | 24,835 | 2,196,904 | ||||||
|
| |||||||
4,292,880 | ||||||||
|
| |||||||
Food Products 0.8% |
| |||||||
Archer-Daniels-Midland Co. | 30,724 | 1,394,255 | ||||||
|
| |||||||
Health Care Equipment & Supplies 1.2% |
| |||||||
Abbott Laboratories | 13,921 | 809,228 | ||||||
Baxter International, Inc. | 1,496 | 103,972 | ||||||
Becton Dickinson & Co. | 1,446 | 335,284 | ||||||
Intuitive Surgical, Inc. (a) | 882 | 388,768 | ||||||
Varian Medical Systems, Inc. (a) | 5,312 | 614,014 | ||||||
|
| |||||||
2,251,266 | ||||||||
|
| |||||||
Health Care Providers & Services 5.9% |
| |||||||
AmerisourceBergen Corp. | 7,232 | 655,075 | ||||||
Anthem, Inc. | 528 | 124,603 | ||||||
Centene Corp. (a) | 8,201 | 890,465 | ||||||
Cigna Corp. | 3,840 | 659,789 | ||||||
Encompass Health Corp. | 175 | 10,643 | ||||||
Express Scripts Holding Co. (a) | 20,625 | 1,561,312 | ||||||
HCA Healthcare, Inc. | 14,118 | 1,351,657 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings, as of April 30, 2018, excluding short-term investment. May be subject to change daily. |
10 | MainStay MacKay 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) | ||||||||
Health Care Providers & Services (continued) |
| |||||||
Humana, Inc. | 5,270 | $ | 1,550,329 | |||||
UnitedHealth Group, Inc. | 11,396 | 2,694,014 | ||||||
WellCare Health Plans, Inc. (a) | 5,889 | 1,208,187 | ||||||
|
| |||||||
10,706,074 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure 3.7% |
| |||||||
Carnival Corp. | 15,606 | 984,114 | ||||||
Darden Restaurants, Inc. | 14,471 | 1,343,777 | ||||||
Marriott International, Inc., Class A | 888 | 121,372 | ||||||
MGM Resorts International | 31,057 | 975,811 | ||||||
Royal Caribbean Cruises, Ltd. | 11,239 | 1,215,948 | ||||||
Starbucks Corp. | 6,616 | 380,883 | ||||||
Wyndham Worldwide Corp. | 3,375 | 385,459 | ||||||
Wynn Resorts, Ltd. | 7,028 | 1,308,543 | ||||||
|
| |||||||
6,715,907 | ||||||||
|
| |||||||
Household Durables 0.0%‡ |
| |||||||
Whirlpool Corp. | 181 | 28,046 | ||||||
|
| |||||||
Household Products 0.9% |
| |||||||
Procter & Gamble Co. | 23,917 | 1,730,156 | ||||||
|
| |||||||
Independent Power & Renewable Electricity Producers 1.2% |
| |||||||
AES Corp. | 71,855 | 879,505 | ||||||
NRG Energy, Inc. | 40,773 | 1,263,963 | ||||||
|
| |||||||
2,143,468 | ||||||||
|
| |||||||
Industrial Conglomerates 0.3% |
| |||||||
3M Co. | 1,384 | 269,036 | ||||||
Honeywell International, Inc. | 2,505 | 362,423 | ||||||
|
| |||||||
631,459 | ||||||||
|
| |||||||
Insurance 3.0% |
| |||||||
Aflac, Inc. | 19,398 | 883,967 | ||||||
Allstate Corp. | 14,586 | 1,426,803 | ||||||
Lincoln National Corp. | 2,149 | 151,805 | ||||||
MetLife, Inc. | 8,153 | 388,654 | ||||||
Old Republic International Corp. | 8,336 | 170,054 | ||||||
Progressive Corp. | 21,905 | 1,320,653 | ||||||
Prudential Financial, Inc. | 1,595 | 169,580 | ||||||
Travelers Cos., Inc. | 7,397 | 973,445 | ||||||
|
| |||||||
5,484,961 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail 4.0% |
| |||||||
¨Amazon.com, Inc. (a) | 3,239 | 5,072,695 | ||||||
Booking Holdings, Inc. (a) | 80 | 174,240 | ||||||
Expedia Group, Inc. | 8,649 | 995,846 | ||||||
Netflix, Inc. (a) | 3,413 | 1,066,426 | ||||||
|
| |||||||
7,309,207 | ||||||||
|
| |||||||
Internet Software & Services 5.4% |
| |||||||
Akamai Technologies, Inc. (a) | 14,959 | 1,071,812 |
Shares | Value | |||||||
Internet Software & Services (continued) |
| |||||||
¨Alphabet, Inc. (a) |
| |||||||
Class A | 1,779 | $ | 1,812,054 | |||||
Class C | 1,849 | 1,881,043 | ||||||
eBay, Inc. (a) | 32,896 | 1,246,101 | ||||||
¨Facebook, Inc., Class A (a) | 22,859 | 3,931,748 | ||||||
|
| |||||||
9,942,758 | ||||||||
|
| |||||||
IT Services 4.3% |
| |||||||
DXC Technology Co. | 13,400 | 1,381,004 | ||||||
International Business Machines Corp. | 8,187 | 1,186,787 | ||||||
Mastercard, Inc., Class A | 7,262 | 1,294,597 | ||||||
MAXIMUS, Inc. | 7,247 | 490,115 | ||||||
PayPal Holdings, Inc. (a) | 8,872 | 661,940 | ||||||
Sabre Corp. | 37,572 | 775,486 | ||||||
Teradata Corp. (a) | 5,253 | 214,953 | ||||||
Visa, Inc., Class A | 14,176 | 1,798,651 | ||||||
|
| |||||||
7,803,533 | ||||||||
|
| |||||||
Leisure Products 0.4% |
| |||||||
Polaris Industries, Inc. | 6,806 | 713,405 | ||||||
|
| |||||||
Machinery 0.7% |
| |||||||
Caterpillar, Inc. | 12 | 1,732 | ||||||
Cummins, Inc. | 8,417 | 1,345,542 | ||||||
|
| |||||||
1,347,274 | ||||||||
|
| |||||||
Media 0.4% |
| |||||||
Comcast Corp., Class A | 3,296 | 103,461 | ||||||
Discovery, Inc. (a) |
| |||||||
Class A | 1,188 | 28,096 | ||||||
Class C | 17,089 | 379,718 | ||||||
Live Nation Entertainment, Inc. (a) | 3,136 | 123,778 | ||||||
Walt Disney Co. | 314 | 31,504 | ||||||
|
| |||||||
666,557 | ||||||||
|
| |||||||
Metals & Mining 1.2% |
| |||||||
Freeport-McMoRan, Inc. | 75,738 | 1,151,975 | ||||||
United States Steel Corp. | 32,529 | 1,100,456 | ||||||
|
| |||||||
2,252,431 | ||||||||
|
| |||||||
Multiline Retail 2.2% |
| |||||||
Kohl’s Corp. | 19,610 | 1,218,173 | ||||||
Macy’s, Inc. | 21,928 | 681,303 | ||||||
Nordstrom, Inc. | 13,053 | 659,960 | ||||||
Target Corp. | 20,521 | 1,489,824 | ||||||
|
| |||||||
4,049,260 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels 7.9% |
| |||||||
Andeavor | 138 | 19,088 | ||||||
¨Chevron Corp. | 24,909 | 3,116,365 | ||||||
ConocoPhillips | 28,191 | 1,846,510 | ||||||
¨Exxon Mobil Corp. | 48,658 | 3,783,159 | ||||||
HollyFrontier Corp. | 22,411 | 1,360,124 | ||||||
Marathon Petroleum Corp. | 15,168 | 1,136,235 | ||||||
Murphy Oil Corp. | 19,073 | 574,288 |
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, 2018 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Oil, Gas & Consumable Fuels (continued) |
| |||||||
PBF Energy, Inc., Class A | 16,926 | $ | 648,774 | |||||
Phillips 66 | 2,490 | 277,162 | ||||||
Valero Energy Corp. | 15,312 | 1,698,560 | ||||||
|
| |||||||
14,460,265 | ||||||||
|
| |||||||
Personal Products 0.8% |
| |||||||
Estee Lauder Cos., Inc., Class A | 9,503 | 1,407,299 | ||||||
|
| |||||||
Pharmaceuticals 3.7% |
| |||||||
Bristol-Myers Squibb Co. | 1,318 | 68,707 | ||||||
Eli Lilly & Co. | 21,133 | 1,713,252 | ||||||
¨Johnson & Johnson | 29,167 | 3,689,334 | ||||||
Merck & Co., Inc. | 388 | 22,842 | ||||||
Pfizer, Inc. | 35,485 | 1,299,106 | ||||||
|
| |||||||
6,793,241 | ||||||||
|
| |||||||
Professional Services 0.7% |
| |||||||
Robert Half International, Inc. | 20,207 | 1,227,575 | ||||||
|
| |||||||
Real Estate Management & Development 0.6% |
| |||||||
Jones Lang LaSalle, Inc. | 6,596 | 1,118,088 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 5.0% |
| |||||||
Applied Materials, Inc. | 28,459 | 1,413,559 | ||||||
Broadcom, Inc. | 846 | 194,089 | ||||||
First Solar, Inc. (a) | 15,981 | 1,133,213 | ||||||
Intel Corp. | 58,856 | 3,038,147 | ||||||
Micron Technology, Inc. (a) | 30,581 | 1,406,114 | ||||||
NVIDIA Corp. | 4,757 | 1,069,849 | ||||||
QUALCOMM, Inc. | 3,948 | 201,388 | ||||||
Skyworks Solutions, Inc. | 6,894 | 598,123 | ||||||
|
| |||||||
9,054,482 | ||||||||
|
| |||||||
Software 4.9% |
| |||||||
Adobe Systems, Inc. (a) | 1,321 | 292,734 | ||||||
Fortinet, Inc. (a) | 4,814 | 266,503 | ||||||
¨Microsoft Corp. | 65,523 | 6,127,711 | ||||||
Oracle Corp. | 48,890 | 2,232,806 | ||||||
|
| |||||||
8,919,754 | ||||||||
|
| |||||||
Specialty Retail 3.3% |
| |||||||
Foot Locker, Inc. | 26,385 | 1,136,666 | ||||||
Gap, Inc. | 39,361 | 1,150,916 | ||||||
Home Depot, Inc. | 8,081 | 1,493,369 | ||||||
Lowe’s Cos., Inc. | 15,434 | 1,272,224 | ||||||
Tractor Supply Co. | 10,480 | 712,640 | ||||||
Williams-Sonoma, Inc. | 3,472 | 165,961 | ||||||
|
| |||||||
5,931,776 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals 6.2% |
| |||||||
¨Apple, Inc. | 36,706 | 6,066,033 | ||||||
Hewlett Packard Enterprise Co. | 12,295 | 209,630 | ||||||
HP, Inc. | 56,501 | 1,214,206 |
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals (continued) |
| |||||||
NetApp, Inc. | 19,551 | $ | 1,301,706 | |||||
Seagate Technology PLC | 21,885 | 1,266,923 | ||||||
Western Digital Corp. | 14,909 | 1,174,680 | ||||||
|
| |||||||
11,233,178 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 1.4% |
| |||||||
Carter’s, Inc. | 7,063 | 708,560 | ||||||
Michael Kors Holdings, Ltd. (a) | 19,193 | 1,313,185 | ||||||
Ralph Lauren Corp. | 5,594 | 614,501 | ||||||
|
| |||||||
2,636,246 | ||||||||
|
| |||||||
Tobacco 0.4% |
| |||||||
Philip Morris International, Inc. | 9,214 | 755,548 | ||||||
|
| |||||||
Trading Companies & Distributors 1.3% |
| |||||||
United Rentals, Inc. (a) | 7,164 | 1,074,600 | ||||||
W.W. Grainger, Inc. | 4,537 | 1,276,485 | ||||||
|
| |||||||
2,351,085 | ||||||||
|
| |||||||
Total Common Stocks | 177,190,863 | |||||||
|
| |||||||
Exchange-Traded Funds 2.8% | ||||||||
¨SPDR S&P 500 ETF Trust | 19,372 | 5,124,088 | ||||||
|
| |||||||
Total Exchange-Traded Funds | 5,124,088 | |||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 0.2% | ||||||||
Repurchase Agreement 0.2% |
| |||||||
Fixed Income Clearing Corp. | $ | 411,131 | 411,131 | |||||
|
| |||||||
Total Short-Term Investment | 411,131 | |||||||
|
| |||||||
Total Investments | 100.2 | % | 182,726,082 | |||||
Other Assets, Less Liabilities | (0.2 | ) | (300,331 | ) | ||||
Net Assets | 100.0 | % | $ | 182,425,751 |
‡ | Less than one-tenth of a percent. |
(a) | Non-income producing security. |
The following abbreviations are used in the preceding pages:
ETF—Exchange-Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
12 | MainStay MacKay Common Stock 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, 2018, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 177,190,863 | $ | — | $ | — | $ | 177,190,863 | ||||||||
Exchange-Traded Funds | 5,124,088 | — | — | 5,124,088 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 411,131 | — | 411,131 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 182,314,951 | $ | 411,131 | $ | — | $ | 182,726,082 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The Fund recognizes transfers between the levels as of the beginning of the period.
For the period ended April 30, 2018, the Fund did not have any transfers among levels. (See Note 2)
As of April 30, 2018, 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, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 182,726,082 | ||
Receivables: | ||||
Fund shares sold | 245,829 | |||
Dividends and interest | 144,442 | |||
Securities lending income | 277 | |||
Other assets | 60,747 | |||
|
| |||
Total assets | 183,177,377 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 553,673 | |||
Manager (See Note 3) | 82,349 | |||
NYLIFE Distributors (See Note 3) | 33,366 | |||
Professional fees | 31,026 | |||
Shareholder communication | 18,269 | |||
Transfer agent (See Note 3) | 14,472 | |||
Fund shares redeemed | 9,686 | |||
Custodian | 7,685 | |||
Trustees | 338 | |||
Accrued expenses | 762 | |||
|
| |||
Total liabilities | 751,626 | |||
|
| |||
Net assets | $ | 182,425,751 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 72,283 | ||
Additional paid-in capital | 143,357,067 | |||
|
| |||
143,429,350 | ||||
Undistributed net investment income | 729,666 | |||
Accumulated net realized gain (loss) on investments | 13,761,865 | |||
Net unrealized appreciation (depreciation) on investments | 24,504,870 | |||
|
| |||
Net assets | $ | 182,425,751 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 59,587,584 | ||
|
| |||
Shares of beneficial interest outstanding | 2,340,124 | |||
|
| |||
Net asset value per share outstanding | $ | 25.46 | ||
Maximum sales charge (5.50% of offering price) | 1.48 | |||
|
| |||
Maximum offering price per share outstanding | $ | 26.94 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 16,782,923 | ||
|
| |||
Shares of beneficial interest outstanding | 658,920 | |||
|
| |||
Net asset value per share outstanding | $ | 25.47 | ||
Maximum sales charge (5.50% of offering price) | 1.48 | |||
|
| |||
Maximum offering price per share outstanding | $ | 26.95 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 6,103,940 | ||
|
| |||
Shares of beneficial interest outstanding | 261,073 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 23.38 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 15,417,032 | ||
|
| |||
Shares of beneficial interest outstanding | 659,929 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 23.36 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 84,426,950 | ||
|
| |||
Shares of beneficial interest outstanding | 3,303,980 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 25.55 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 107,322 | ||
|
| |||
Shares of beneficial interest outstanding | 4,231 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 25.37 | ||
|
|
14 | MainStay MacKay 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 Operations for the six months ended April 30, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends | $ | 1,804,437 | ||
Interest | 451 | |||
Securities lending income | 447 | |||
Other income | 601 | |||
|
| |||
Total income | 1,805,936 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 519,874 | |||
Distribution/Service—Class A (See Note 3) | 71,852 | |||
Distribution/Service—Investor Class (See Note 3) | 21,369 | |||
Distribution/Service—Class B (See Note 3) | 32,435 | |||
Distribution/Service—Class C (See Note 3) | 79,518 | |||
Distribution/Service—Class R3 (See Note 3) | 244 | |||
Transfer agent (See Note 3) | 93,216 | |||
Registration | 48,041 | |||
Professional fees | 30,555 | |||
Shareholder communication | 12,841 | |||
Custodian | 2,539 | |||
Trustees | 2,127 | |||
Shareholder service (See Note 3) | 49 | |||
Miscellaneous | 7,568 | |||
|
| |||
Total expenses | 922,228 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (4,434 | ) | ||
|
| |||
Net expenses | 917,794 | |||
|
| |||
Net investment income (loss) | 888,142 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 14,174,622 | |||
Net change in unrealized appreciation (depreciation) on investments | (6,056,800 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | 8,117,822 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 9,005,964 | ||
|
|
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, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 888,142 | $ | 1,918,011 | ||||
Net realized gain (loss) on investments | 14,174,622 | 16,992,315 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (6,056,800 | ) | 21,674,644 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 9,005,964 | 40,584,970 | ||||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (504,517 | ) | (566,825 | ) | ||||
Investor Class | (109,255 | ) | (220,201 | ) | ||||
Class B | — | (13,572 | ) | |||||
Class C | — | (33,607 | ) | |||||
Class I | (1,062,640 | ) | (1,365,744 | ) | ||||
Class R3 | (647 | ) | (287 | ) | ||||
|
| |||||||
Total dividends to shareholders | (1,677,059 | ) | (2,200,236 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 17,417,317 | 24,691,224 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 1,632,738 | 2,141,327 | ||||||
Cost of shares redeemed | (33,699,154 | ) | (51,194,803 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (14,649,099 | ) | (24,362,252 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (7,320,194 | ) | 14,022,482 | |||||
Net Assets | ||||||||
Beginning of period | 189,745,945 | 175,723,463 | ||||||
|
| |||||||
End of period | $ | 182,425,751 | $ | 189,745,945 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 729,666 | $ | 1,518,583 | ||||
|
|
16 | MainStay MacKay 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 A | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 24.56 | $ | 19.95 | $ | 20.20 | $ | 19.39 | $ | 16.59 | $ | 12.90 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.12 | 0.23 | 0.25 | 0.20 | 0.18 | 0.16 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.01 | 4.63 | (0.28 | ) | 0.76 | 2.83 | 3.71 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.13 | 4.86 | (0.03 | ) | 0.96 | 3.01 | 3.87 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.25 | ) | (0.22 | ) | (0.15 | ) | (0.21 | ) | (0.18 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 25.46 | $ | 24.56 | $ | 19.95 | $ | 20.20 | $ | 19.39 | $ | 16.59 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 4.58 | % | 24.59 | % | (0.13 | %) | 4.95 | % | 18.30 | % | 30.35 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.94 | %†† | 1.05 | % | 1.29 | % (c) | 1.01 | % | 0.98 | % | 1.11 | % | ||||||||||||
Net expenses | 0.95 | %†† | 0.96 | % | 0.95 | % (d) | 0.96 | % | 1.00 | % | 1.05 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 134 | % | 164 | % | 158 | % | 165 | % | 150 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 59,588 | $ | 53,909 | $ | 42,928 | $ | 52,985 | $ | 34,139 | $ | 19,011 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.28%. |
(d) | Without the custody fee reimbursement, net expenses would have been 0.96%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 24.53 | $ | 19.93 | $ | 20.19 | $ | 19.38 | $ | 16.58 | $ | 12.89 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | 0.09 | 0.18 | 0.21 | 0.16 | 0.13 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.01 | 4.62 | (0.29 | ) | 0.76 | 2.82 | 3.70 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 1.10 | 4.80 | (0.08 | ) | 0.92 | 2.95 | 3.80 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.20 | ) | (0.18 | ) | (0.11 | ) | (0.15 | ) | (0.11 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 25.47 | $ | 24.53 | $ | 19.93 | $ | 20.19 | $ | 19.38 | $ | 16.58 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (b) | 4.46 | % | 24.25 | % | (0.39 | %) | 4.77 | % | 17.94 | % | 29.75 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 0.72 | %†† | 0.83 | % | 1.05 | % (c) | 0.82 | % | 0.71 | % | 0.72 | % | ||||||||||||
Net expenses | 1.20 | %†† | 1.22 | % | 1.20 | % (d) | 1.17 | % | 1.28 | % | 1.46 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.22 | %†† | 1.22 | % | 1.20 | % | 1.17 | % | 1.28 | % | 1.46 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 134 | % | 164 | % | 158 | % | 165 | % | 150 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 16,783 | $ | 17,216 | $ | 21,880 | $ | 22,939 | $ | 20,856 | $ | 18,436 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.04%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.21%. |
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 22.46 | $ | 18.25 | $ | 18.49 | $ | 17.81 | $ | 15.27 | $ | 11.87 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | 0.01 | 0.05 | 0.02 | (0.00 | )‡ | (0.00 | )‡ | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.92 | 4.24 | (0.26 | ) | 0.69 | 2.59 | 3.42 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.92 | 4.25 | (0.21 | ) | 0.71 | 2.59 | 3.42 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | (0.02 | ) | |||||||||||||
|
|
|
|
|
|
|
|
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Net asset value at end of period | $ | 23.38 | $ | 22.46 | $ | 18.25 | $ | 18.49 | $ | 17.81 | $ | 15.27 | ||||||||||||
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Total investment return (b) | 4.10 | % | 23.31 | % | (1.12 | %) | 4.01 | % | 17.00 | % | 28.87 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.03 | %)†† | 0.06 | % | 0.30 | % (c) | 0.09 | % | (0.03 | %) | (0.03 | %) | ||||||||||||
Net expenses | 1.95 | % †† | 1.97 | % | 1.95 | % (d) | 1.95 | % | 2.03 | % | 2.21 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.97 | % †† | 1.97 | % | 1.95 | % | 1.95 | % | 2.03 | % | 2.21 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 134 | % | 164 | % | 158 | % | 165 | % | 150 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 6,104 | $ | 6,635 | $ | 6,604 | $ | 6,816 | $ | 7,240 | $ | 6,760 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.29%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.96%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 22.45 | $ | 18.24 | $ | 18.48 | $ | 17.80 | $ | 15.26 | $ | 11.87 | ||||||||||||
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Net investment income (loss) (a) | (0.01 | ) | 0.01 | 0.06 | 0.01 | (0.02 | ) | (0.01 | ) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.92 | 4.24 | (0.27 | ) | 0.70 | 2.61 | 3.42 | |||||||||||||||||
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Total from investment operations | 0.91 | 4.25 | (0.21 | ) | 0.71 | 2.59 | 3.41 | |||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||
From net investment income | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | (0.02 | ) | |||||||||||||
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Net asset value at end of period | $ | 23.36 | $ | 22.45 | $ | 18.24 | $ | 18.48 | $ | 17.80 | $ | 15.26 | ||||||||||||
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Total investment return (b) | 4.05 | % | 23.33 | % | (1.12 | %) | 4.01 | % | 17.01 | % | 28.78 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | (0.05 | %)†† | 0.06 | % | 0.34 | % (c) | 0.06 | % | (0.10 | %) | (0.10 | %) | ||||||||||||
Net expenses | 1.95 | % †† | 1.97 | % | 1.95 | % (d) | 1.92 | % | 2.03 | % | 2.21 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.97 | % †† | 1.97 | % | 1.95 | % | 1.92 | % | 2.03 | % | 2.21 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 134 | % | 164 | % | 158 | % | 165 | % | 150 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 15,417 | $ | 15,459 | $ | 16,509 | $ | 25,775 | $ | 16,536 | $ | 3,441 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.33%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.96%. |
18 | MainStay MacKay 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 I | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 24.67 | $ | 20.04 | $ | 20.29 | $ | 19.45 | $ | 16.64 | $ | 12.94 | ||||||||||||
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Net investment income (loss) (a) | 0.16 | 0.29 | 0.31 | 0.26 | 0.22 | 0.20 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.00 | 4.65 | (0.29 | ) | 0.76 | 2.83 | 3.71 | |||||||||||||||||
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Total from investment operations | 1.16 | 4.94 | 0.02 | 1.02 | 3.05 | 3.91 | ||||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.28 | ) | (0.31 | ) | (0.27 | ) | (0.18 | ) | (0.24 | ) | (0.21 | ) | ||||||||||||
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Net asset value at end of period | $ | 25.55 | $ | 24.67 | $ | 20.04 | $ | 20.29 | $ | 19.45 | $ | 16.64 | ||||||||||||
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Total investment return (b) | 4.71 | % | 24.89 | % | 0.12 | % | 5.26 | % | 18.55 | % | 30.65 | % | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 1.22 | %†† | 1.31 | % | 1.55 | %(c) | 1.30 | % | 1.24 | % | 1.40 | % | ||||||||||||
Net expenses | 0.70 | %†† | 0.71 | % | 0.70 | %(d) | 0.71 | % | 0.75 | % | 0.80 | % | ||||||||||||
Portfolio turnover rate | 60 | % | 134 | % | 164 | % | 158 | % | 165 | % | 150 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 84,427 | $ | 96,441 | $ | 87,774 | $ | 91,561 | $ | 108,343 | $ | 77,476 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.54%. |
(d) | Without the custody fee reimbursement, net expenses would have been 0.71%. |
Class R3 | Six months ended April 30, 2018* | Year ended October 31, 2017 | February 29, 2016 ** through October 31, 2016 | |||||||||
Net asset value at beginning of period | $ | 24.48 | $ | 19.90 | $ | 18.44 | ||||||
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| |||||||
Net investment income (loss) (a) | 0.07 | 0.13 | 0.10 | |||||||||
Net realized and unrealized gain (loss) on investments | 1.00 | 4.65 | 1.36 | |||||||||
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| |||||||
Total from investment operations | 1.07 | 4.78 | 1.46 | |||||||||
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| |||||||
Less dividends: | ||||||||||||
From net investment income | (0.18 | ) | (0.20 | ) | — | |||||||
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| |||||||
Net asset value at end of period | $ | 25.37 | $ | 24.48 | $ | 19.90 | ||||||
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| |||||||
Total investment return (b) | 4.37 | % | 24.17 | % | 7.92 | %(c) | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 0.58 | %†† | 0.60 | % | 0.74 | %††(d) | ||||||
Net expenses | 1.30 | %†† | 1.31 | % | 1.31 | %††(e) | ||||||
Portfolio turnover rate | 60 | % | 134 | % | 164 | % | ||||||
Net assets at end of period (in 000’s) | $ | 107 | $ | 86 | $ | 29 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | Without the custody fee reimbursement, net investment income (loss) would have been 0.73%. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.32%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and Notes relate to the MainStay MacKay Common Stock Fund (formerly known as 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 has nine classes of shares registered for sale. 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, Class R6 and Class T shares were registered for sale effective as of December 14, 2007 (for Class R2 shares) and February 28, 2017 (for Class R6 and Class T shares). As of April 30, 2018, Class R2, Class R6 and Class T shares were not yet offered for sale. Investor Class shares commenced operations on February 28, 2008. Class R3 shares commenced operations on February 29, 2016. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I and Class R3 shares are offered at NAV without a sales charge. Class R2 and Class R6 shares are currently expected to be offered at NAV without 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, as disclosed in the Funds’ prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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
20 | MainStay MacKay Common Stock Fund |
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 assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • 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 the security’s 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, 2018, 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 the 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, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities, including 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
21 |
Notes to Financial Statements (Unaudited) (continued)
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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 its 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 tax 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 determinations using 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.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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.
Additionally, the Fund may invest in ETFs or mutual funds, which are subject to management fees and other fees that may increase the costs of investing in ETFs or mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of ETFs or mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government
22 | MainStay MacKay Common Stock Fund |
securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be limited or subject to delay, 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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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. Income earned from securities lending activity is reflected in the Statement of Operations. As of the six-month period ended April 30, 2018, the Fund did not have any portfolio securities on loan. Income earned from securities lending activity is reflected in the Statement of Operations.
(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.
(J) Large Transaction Risks. From time to time, the Fund may receive large purchase or redemption orders from affiliated or unaffiliated mutual funds or other investors. Such large transactions could have adverse effects on the Fund’s performance if the Fund were required to sell securities or invest cash at times when it otherwise would not do so. This activity could also accelerate the realization of capital gains and increase the Fund’s transaction costs. The Fund has adopted procedures designed to mitigate the negative impacts of such
large transactions, but there can be no assurance that these procedures will be effective.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life 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 attributable to the Fund. The Fund’s subadvisor changed effective January 1, 2018 due to an organizational restructuring whereby all investment personnel of Cornerstone Capital Management Holdings LLC, the former subadvisor, transitioned to MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life. MacKay Shields is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an 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 the 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, 2018, the effective management fee rate was 0.55%.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019, 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 agreed to voluntarily waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and 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 without notice.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $519,874 and waived its fees and/or reimbursed expenses in the amount of $4,434.
23 |
Notes to Financial Statements (Unaudited) (continued)
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T 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 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 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 the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2018, shareholder service fees incurred by the Fund were as follows:
Class R3 | $ | 49 |
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $9,826 and $7,075, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $395, $4,777 and $839, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 12,164 | ||
Investor Class | 26,710 | |||
Class B | 10,134 | |||
Class C | 24,833 | |||
Class I | 19,354 | |||
Class R3 | 21 |
(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, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class R3 | $ | 34,963 | 32.6% |
Note 4–Federal Income Tax
As of April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 158,633,969 | $ | 27,897,148 | $ | (3,805,035 | ) | $ | 24,092,113 |
24 | MainStay MacKay Common Stock Fund |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 2,200,236 |
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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $114,499 and $130,156, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 370,001 | $ | 9,561,770 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 19,112 | 488,895 | ||||||
Shares redeemed | (322,642 | ) | (8,289,937 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 66,471 | 1,760,728 | ||||||
Shares converted into Class A (See Note 1) | 87,821 | 2,262,644 | ||||||
Shares converted from Class A (See Note 1) | (9,194 | ) | (234,917 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 145,098 | $ | 3,788,455 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 393,517 | $ | 8,513,051 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 25,363 | 534,139 | ||||||
Shares redeemed | (717,930 | ) | (15,610,015 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (299,050 | ) | (6,562,825 | ) | ||||
Shares converted into Class A (See Note 1) | 456,429 | 10,647,626 | ||||||
Shares converted from Class A (See Note 1) | (113,732 | ) | (2,425,120 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 43,647 | $ | 1,659,681 | |||||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 54,207 | $ | 1,404,045 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,927 | 100,577 | ||||||
Shares redeemed | (36,557 | ) | (942,389 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 21,577 | 562,233 | ||||||
Shares converted into Investor Class (See Note 1) | 16,978 | 435,178 | ||||||
Shares converted from Investor Class (See Note 1) | (81,451 | ) | (2,098,493 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (42,896 | ) | $ | (1,101,082 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 110,568 | $ | 2,444,395 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,399 | 219,211 | ||||||
Shares redeemed | (116,386 | ) | (2,567,501 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 4,581 | 96,105 | ||||||
Shares converted into Investor Class (See Note 1) | 50,589 | 1,124,737 | ||||||
Shares converted from Investor Class (See Note 1) | (451,184 | ) | (10,522,222 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (396,014 | ) | $ | (9,301,380 | ) | |||
|
|
|
| |||||
25 |
Notes to Financial Statements (Unaudited) (continued)
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 4,756 | $ | 114,056 | |||||
Shares redeemed | (23,702 | ) | (558,187 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (18,946 | ) | (444,131 | ) | ||||
Shares converted from Class B (See Note 1) | (15,362 | ) | (364,412 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (34,308 | ) | $ | (808,543 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 42,927 | $ | 843,620 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 670 | 13,018 | ||||||
Shares redeemed | (60,581 | ) | (1,223,993 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (16,984 | ) | (367,355 | ) | ||||
Shares converted from Class B (See Note 1) | (49,518 | ) | (1,012,159 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (66,502 | ) | $ | (1,379,514 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 64,565 | $ | 1,526,270 | |||||
Shares redeemed | (93,314 | ) | (2,223,895 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (28,749 | ) | $ | (697,625 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 128,887 | $ | 2,555,519 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,201 | 23,317 | ||||||
Shares redeemed | (346,562 | ) | (6,966,498 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (216,474 | ) | $ | (4,387,662 | ) | |||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 185,701 | $ | 4,793,219 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 40,660 | 1,042,924 | ||||||
Shares redeemed | (831,208 | ) | (21,684,746 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (604,847 | ) | $ | (15,848,603 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 469,078 | $ | 10,275,846 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 64,045 | 1,351,355 | ||||||
Shares redeemed | (1,106,144 | ) | (24,817,068 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (573,021 | ) | (13,189,867 | ) | ||||
Shares converted into Class I (See Note 1) | 102,691 | 2,187,138 | ||||||
|
|
|
| |||||
Net increase (decrease) | (470,330 | ) | $ | (11,002,729 | ) | |||
|
|
|
| |||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 707 | $ | 17,957 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 14 | 342 | ||||||
|
|
|
| |||||
Net increase (decrease) | 721 | $ | 18,299 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 2,509 | $ | 58,793 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13 | 287 | ||||||
Shares redeemed | (445 | ) | (9,728 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 2,077 | $ | 49,352 | |||||
|
|
|
|
Note 10–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 Fund 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 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 Circuit Court of Appeals held an oral argument on appeal. On March 29, 2016, the United States Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc
26 | MainStay MacKay Common Stock Fund |
before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. Certain shareholder defendants filed a joint brief in opposition to the petition for certiorari on October 24, 2016. The plaintiffs filed a reply in support of the petition on November 4, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed a response to plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.”
On August 2, 2013, the plaintiff in the FitzSimons action filed a Fifth Amended Complaint. 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. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The Court’s order is not immediately appealable, but the plaintiff has asked the Court to direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating
that it intends to permit an interlocutory appeal of the dismissal order, but will wait to do so until it has resolved outstanding motions to dismiss filed by other defendants. Accordingly, the timing of the appeal is uncertain.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management. The shareholder defendants opposed that request. The District Court has not yet ruled on that request.
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 MacKay 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 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, 2018, events and transactions subsequent to April 30, 2018, 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 (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay Common Stock Fund (now known as MainStay MacKay 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 MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, together with responses from New York Life Investments and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
28 | MainStay MacKay Common Stock Fund |
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of MacKay Shields and continuous analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and MacKay Shields’ track record 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, resources and history. The Board considered that New York Life Investments’ and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized 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, including reputational and other indirect benefits. The Board recognized, for example, the benefits to MacKay Shields from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to MacKay Shields in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment
30 | MainStay MacKay Common Stock Fund |
strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the
per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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 MacKay Common Stock Fund |
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MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1737426 MS126-18 | MSCS10-06/18 (NYLIM) NL021 |
MainStay MacKay Convertible Fund (Formerly known as MainStay Convertible Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years or Since Inception | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –1.88 3.83 | %
| | 2.77 8.75 | %
| | 8.11 9.34 | %
| | 6.49 7.09 | %
| | 0.99 0.99 | %
| ||||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –2.01 3.69 |
| | 2.60 8.58 | | | 7.92 9.15 | | | 6.29 6.89 | | | 1.15 1.15 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 5/1/1986 | | –1.48 3.37 |
| | 2.79 7.79 | | | 8.05 8.34 | | | 6.09 6.09 | | | 1.90 1.90 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | 2.40 3.38 |
| | 6.80 7.80 | | | 8.34 8.34 | | | 6.10 6.10 | | | 1.90 1.90 |
| ||||||||||
Class I Shares | No Sales Charge | 11/28/2008 | 3.97 | 9.14 | 9.64 | 13.11 | 0.61 |
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, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
ICE BofA Merrill Lynch U.S. Convertible Index4 | 2.11 | % | 9.14 | % | 9.24 | % | 7.66 | % | ||||||||
Morningstar Convertibles Category Average5 | 1.92 | 8.36 | 7.31 | 6.17 |
4. | The ICE BofA Merrill Lynch U.S. Convertible Index is the Fund’s primary broad-based securities market index for comparison purposes. The ICE BofA Merrill Lynch U.S. Convertible 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. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Convertibles Category Average is representative of funds that are designed to offer some of the capital-appreciation potential of stock portfolios while also supplying some of the safety and yield of bond portfolios. Results are based on average total returns of similar funds 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 MacKay Convertible Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account on Hypothetical | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,038.30 | $ | 4.95 | $ | 1,019.90 | $ | 4.91 | 0.98% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,036.90 | $ | 5.71 | $ | 1,019.20 | $ | 5.66 | 1.13% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,033.70 | $ | 9.48 | $ | 1,015.50 | $ | 9.39 | 1.88% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,033.80 | $ | 9.48 | $ | 1,015.50 | $ | 9.39 | 1.88% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,039.70 | $ | 3.08 | $ | 1,021.80 | $ | 3.06 | 0.61% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2018 (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, 2018 (excluding short-term investment) (Unaudited)
1. | Microchip Technology, Inc., 1.625%, due 2/15/25–2/15/27 |
2. | Danaher Corp., (zero coupon), due 1/22/21 |
3. | Lam Research Corp., 1.25%, due 5/15/18 |
4. | Bank of America Corp. |
5. | Red Hat, Inc., 0.25%, due 10/1/19 |
6. | NICE Systems, Inc., 1.25%, due 1/15/24 |
7. | DISH Network Corp., 3.375%, due 8/15/26 |
8. | Weatherford International, Ltd., 5.875%, due 7/1/21 |
9. | Booking Holdings, Inc., 0.90%, due 9/15/21 |
10. | Anthem, Inc., 2.75%, due 10/15/42 |
8 | MainStay MacKay 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 MacKay Convertible Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MacKay Convertible Fund returned 3.83% for Class A shares, 3.69% for Investor Class shares, 3.37% for Class B shares and 3.38% for Class C shares for the six months ended April 30, 2018. Over the same period, Class I shares returned 3.97%. During the reporting period, all share classes outperformed the 2.11% return of the ICE BofA Merrill Lynch U.S. Convertible Index,1 which is the Fund’s broad-based securities-market index. During the six months ended April 30, 2018, all share classes also outperformed the 1.92% return of the Morningstar Convertibles Category Average.2 See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Convertible Fund was renamed MainStay MacKay Convertible Fund. For more information on this change, please refer to the supplement dated December 15, 2017.
What factors affected the Fund’s relative performance during the reporting period?
The Fund outperformed the ICE BofA Merrill Lynch U.S. Convertible Index during the reporting period. The Fund’s relative performance resulted from several large holdings such as XPO Logistics, Mercadolibre, Danaher and LendingTree, which were strong performers during the reporting period. Securities of these companies have very small weightings in the ICE BofA Merrill Lynch U.S. Convertible Index and tend not to be owned by competing funds.
What was the Fund’s duration3 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 4.64 years.
During the reporting period, which sectors and securities were the strongest contributors to the Fund’s absolute performance and which were particularly weak?
The strongest contributions to absolute performance came from the information technology, transportation and energy sectors.
(Contributions take weightings and total returns into account.) In the information technology sector, the Fund experienced large gains in several software holdings. The Fund’s best performer was a convertible bond position in Red Hat, which sells the Linux operating system. Other strong software performers included ServiceNow, Salesforce.com and NICE Systems. Within the transportation sector, the common stock of logistics and trucking company XPO Logistics was the Fund’s second-best performing holding during the reporting period. XPO Logistics was a standout performer after the company’s financial results allayed investor fears that the company was making too many acquisitions and taking on too much debt. The company released quarterly results during the reporting period showing that the company was generating free cash flow, selling less desirable operations and paying down debt. In addition, a strengthening economy during the reporting period has led to increased demand for trucking services. In the energy sector, the Fund benefited from its holdings in several exploration & production (E&P) companies. Convertible preferred shares of Hess constituted the Fund’s third best-performing position during the reporting period, as the company rebounded largely in sync with the rise in the price of crude oil, which is Hess’s primary source of revenue. The company also reported a large offshore discovery near Guyana, which may be a source of continuing profit once the field is brought to production.
The most substantial detractors from the Fund’s absolute performance came from the information technology, communications and health care sectors. In the information technology sector, several of the Fund’s semiconductor convertible bond holdings, such as Microchip and Lam Research, were poor performers. Even though both companies reported solid quarterly earnings, their convertible bonds declined because investors questioned whether the strong market for semiconductors might be close to peaking. In the communications sector, the Fund’s cable television exposure detracted from the Fund’s absolute performance. The weakness was driven by DISH Networks, one of the Fund’s largest holdings, which was also the Fund’s worst-performing position during the reporting period. The company’s convertible bonds fell because investors were disappointed by the ongoing erosion of the DISH Networks’ core satellite television business as television customers continued to switch from satellite and cable services to cheaper streaming competitors such as Hulu and Roku. Investors were also disappointed that DISH Networks has not yet monetized its large holding of wireless spectrum assets. The convertible securities of several health care companies were also poor performers during the reporting period. Convertible preferred shares of Allergan PLC and Teva Pharmaceutical both declined, and were sold during the reporting period. Allergan’s convertible
1. | See footnote on page 6 for more information on the ICE BofA Merrill Lynch U.S. Convertible Index. |
2. | See footnote on page 6 for more information on the Morningstar Convertibles 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. |
9 |
preferred shares fell because investors were concerned about generic competition for Restasis, one of Allergan’s best-selling drugs. Teva Pharmaceutical declined because of generic competition for the multiple sclerosis drug Copaxone, the company’s best-selling product. The Fund continues to hold the above mentioned positions with the exception of Teva Pharamaceutical, which was sold during the reporting period, and Allergan, whose bonds were converted during the reporting period.
Did the Fund make any significant purchases or sales during the reporting period?
During the reporting period, noteworthy purchases included convertible bonds of oil & gas equipment & services company Oil States International following the bonds’ initial public offering. Oil States International has a strong balance sheet, generates free cash flow and, in our opinion, could see increased orders for its products should crude oil prices reach multiyear highs. The Fund also initiated a large position in convertible bonds of mobile-home products manufacturer Patrick Industries, following the bonds’ initial public offering. The company has generated free cash flow and has a history of successfully acquiring and integrating complementary businesses. We believed that Patrick Industries should also benefit because the environment for recreational vehicle sales remained generally favorable.
Meaningful sales during the reporting period included convertible preferred shares of Southwestern Energy and Hologic as shares matured or were called by the issuer, and the common stock of XPO Logistics. The Fund sold its holdings of convertible
bonds and convertible preferred shares of Teva Pharmaceutical. We were concerned about the worsening environment for generic drug manufacturers and the company’s large debt burden.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund decreased its weightings in the health care and real estate sectors. The decrease in health care was primarily driven by the sale of Teva Pharmaceutical. The Fund increased its weightings in the industrials and information technology sectors during the reporting period. The increase in industrials was largely driven by adding to the Fund’s position in Stanley Black & Decker. The increase in information technology resulted from the appreciation in value of many of the Fund’s software holdings, as well as the purchase of numerous new issues, such as Nutanix, Coupa Software and RingCentral.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund held overweight positions relative to the ICE BofA Merrill Lynch U.S. Convertible Index in the energy, industrials and information technology sectors. As of the same date, the Fund held underweight positions relative to the Index in the consumer discretionary, health care, financial, utilities and real estate sectors. As of April 30, 2018, the Fund held neutrally weighted positions in consumer staples, materials and telecommunication services.
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 MacKay Convertible Fund |
Portfolio of Investments April 30, 2018 (Unaudited)
Principal Amount | Value | |||||||
Convertible Securities 88.8%† Convertible Bonds 79.8% |
| |||||||
Aerospace & Defense 0.6% |
| |||||||
Aerojet Rocketdyne Holdings, Inc. | $ | 5,624,000 | $ | 7,141,355 | ||||
|
| |||||||
Auto Manufacturers 0.8% |
| |||||||
Wabash National Corp. | 5,555,000 | 9,549,045 | ||||||
|
| |||||||
Biotechnology 4.7% |
| |||||||
BioMarin Pharmaceutical, Inc. | 15,340,000 | 14,792,807 | ||||||
Exact Sciences Corp. | 4,021,000 | 3,930,528 | ||||||
Illumina, Inc. | 4,300,000 | 4,789,817 | ||||||
0.50%, due 6/15/21 (a) | 6,977,000 | 8,746,221 | ||||||
Intercept Pharmaceuticals, Inc. | 6,684,000 | 5,507,034 | ||||||
Ionis Pharmaceuticals, Inc. | 10,659,000 | 10,660,290 | ||||||
Medicines Co. | 7,416,000 | 6,895,300 | ||||||
Radius Health, Inc. | 660,000 | 620,537 | ||||||
|
| |||||||
55,942,534 | ||||||||
|
| |||||||
Building Materials 1.0% |
| |||||||
Patrick Industries, Inc. | 11,792,000 | 11,368,030 | ||||||
|
| |||||||
Commercial Services 2.9% |
| |||||||
Carriage Services, Inc. | 10,674,000 | 13,400,193 | ||||||
Macquarie Infrastructure Corp. | 20,595,000 | 20,543,410 | ||||||
|
| |||||||
33,943,603 | ||||||||
|
| |||||||
Computers 3.9% |
| |||||||
Lumentum Holdings, Inc. | 17,615,000 | 19,667,148 | ||||||
Nutanix, Inc. | 8,548,000 | 10,602,939 | ||||||
Pure Storage, Inc. | 8,164,000 | 8,480,249 | ||||||
Western Digital Corp. | 6,616,000 | 6,920,263 | ||||||
|
| |||||||
45,670,599 | ||||||||
|
|
Principal Amount | Value | |||||||
Diversified Financial Services 3.3% |
| |||||||
Air Lease Corp. | $ | 15,781,000 | $ | 22,978,193 | ||||
Blackhawk Network Holdings, Inc. | 13,870,000 | 15,390,055 | ||||||
|
| |||||||
38,368,248 | ||||||||
|
| |||||||
Entertainment 0.2% |
| |||||||
Live Nation Entertainment, Inc. | 2,074,000 | 2,052,244 | ||||||
|
| |||||||
Health Care—Products 3.3% |
| |||||||
¨Danaher Corp. | 8,558,000 | 32,913,897 | ||||||
NuVasive, Inc. | 4,938,000 | 5,459,576 | ||||||
|
| |||||||
38,373,473 | ||||||||
|
| |||||||
Health Care—Services 2.6% |
| |||||||
¨Anthem, Inc. | 7,160,000 | 23,202,875 | ||||||
Molina Healthcare, Inc. | 3,805,000 | 7,945,327 | ||||||
|
| |||||||
31,148,202 | ||||||||
|
| |||||||
Internet 12.0% |
| |||||||
¨Booking Holdings, Inc. | 19,156,000 | 24,257,243 | ||||||
Etsy, Inc. | 5,836,000 | 6,357,593 | ||||||
IAC FinanceCo, Inc. | 14,542,000 | 17,843,281 | ||||||
Liberty Expedia Holdings, Inc. | 11,074,000 | 10,859,441 | ||||||
MercadoLibre, Inc. | 4,485,000 | 12,083,039 | ||||||
Okta, Inc. | 6,056,000 | 6,958,501 | ||||||
Palo Alto Networks, Inc. | 4,967,000 | 8,721,322 | ||||||
Proofpoint, Inc. | 8,653,000 | 13,098,790 | ||||||
Quotient Technology, Inc. | 8,787,000 | 9,271,761 | ||||||
RingCentral, Inc. | 6,951,000 | 7,270,746 | ||||||
Twitter, Inc. | 9,161,000 | 8,790,886 | ||||||
VeriSign, Inc. | 582,000 | 1,991,340 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund's 10 largest holdings or issuers held, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Convertible Bonds (continued) | ||||||||
Internet (continued) |
| |||||||
Zendesk, Inc. | $ | 2,074,000 | $ | 2,152,605 | ||||
Zillow Group, Inc. | 10,139,000 | 11,815,311 | ||||||
|
| |||||||
141,471,859 | ||||||||
|
| |||||||
Iron & Steel 0.3% |
| |||||||
Cleveland-Cliffs, Inc. | 2,878,000 | 3,242,274 | ||||||
|
| |||||||
Lodging 0.6% |
| |||||||
Caesars Entertainment Corp. | 3,741,000 | 6,579,671 | ||||||
|
| |||||||
Machinery—Diversified 1.0% |
| |||||||
Chart Industries, Inc. | 10,094,000 | 11,668,513 | ||||||
|
| |||||||
Media 4.1% |
| |||||||
¨DISH Network Corp. | 28,598,000 | 26,024,781 | ||||||
Liberty Media Corp-Liberty Formula One | 9,441,000 | 9,852,363 | ||||||
Liberty Media Corp. | 11,345,000 | 13,070,574 | ||||||
|
| |||||||
48,947,718 | ||||||||
|
| |||||||
Oil & Gas 1.9% |
| |||||||
Ensco Jersey Finance, Ltd. | 8,306,000 | 7,082,917 | ||||||
Oasis Petroleum, Inc. | 13,092,000 | 15,451,178 | ||||||
|
| |||||||
22,534,095 | ||||||||
|
| |||||||
Oil & Gas Services 5.0% |
| |||||||
Helix Energy Solutions Group, Inc. | 13,111,000 | 13,471,841 | ||||||
Newpark Resources, Inc. | 6,326,000 | 8,660,630 | ||||||
Oil States International, Inc. | 11,398,000 | 12,680,275 | ||||||
¨Weatherford International, Ltd. | 25,561,000 | 24,353,038 | ||||||
|
| |||||||
59,165,784 | ||||||||
|
| |||||||
Pharmaceuticals 1.8% |
| |||||||
Herbalife Nutrition, Ltd. | 9,443,000 | 9,976,879 | ||||||
Neurocrine Biosciences, Inc. | 5,309,000 | 6,877,778 |
Principal Amount | Value | |||||||
Pharmaceuticals (continued) | ||||||||
Pacira Pharmaceuticals, Inc. | $ | 5,218,000 | $ | 4,927,686 | ||||
|
| |||||||
21,782,343 | ||||||||
|
| |||||||
Semiconductors 13.7% |
| |||||||
Cypress Semiconductor Co. | 6,094,000 | 6,309,514 | ||||||
Inphi Corp. | 14,512,000 | 14,929,220 | ||||||
Intel Corp. | 5,613,000 | 13,954,058 | ||||||
¨Lam Research Corp. | 8,824,000 | 27,538,513 | ||||||
¨Microchip Technology, Inc. | 17,553,000 | 28,597,242 | ||||||
1.625%, due 2/15/27 | 7,129,000 | 8,057,909 | ||||||
Micron Technology, Inc. | 12,588,000 | 19,990,587 | ||||||
ON Semiconductor Corp. | 12,331,000 | 16,367,738 | ||||||
Rambus, Inc. | 9,996,000 | 9,963,513 | ||||||
Silicon Laboratories, Inc. | 13,815,000 | 16,405,313 | ||||||
|
| |||||||
162,113,607 | ||||||||
|
| |||||||
Software 11.7% |
| |||||||
Atlassian, Inc. | 7,719,000 | 7,749,876 | ||||||
Citrix Systems, Inc. | 5,188,000 | 7,460,302 | ||||||
Coupa Software, Inc. | 5,960,000 | 7,270,199 | ||||||
¨NICE Systems, Inc. | 20,782,000 | 26,108,323 | ||||||
Nuance Communications, Inc. | 11,278,000 | 11,138,142 | ||||||
RealPage, Inc. | 4,220,000 | 5,913,275 | ||||||
¨Red Hat, Inc. | 12,045,000 | 26,732,444 | ||||||
ServiceNow, Inc. | 8,807,000 | 11,838,369 | ||||||
Verint Systems, Inc. | 17,084,000 | 16,629,549 | ||||||
Workday, Inc. | 15,957,000 | 17,257,495 | ||||||
|
| |||||||
138,097,974 | ||||||||
|
| |||||||
Telecommunications 2.0% |
| |||||||
Finisar Corp. | 9,521,000 | 8,592,055 |
12 | MainStay MacKay Convertible 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 | |||||||
Convertible Bonds (continued) | ||||||||
Telecommunications (continued) | ||||||||
Viavi Solutions Inc. | $ | 14,679,000 | $ | 14,767,955 | ||||
|
| |||||||
23,360,010 | ||||||||
|
| |||||||
Transportation 2.4% |
| |||||||
Atlas Air Worldwide Holdings, Inc. | 16,161,000 | 18,988,626 | ||||||
Echo Global Logistics, Inc. | 8,755,000 | 8,943,521 | ||||||
|
| |||||||
27,932,147 | ||||||||
|
| |||||||
Total Convertible Bonds | 940,453,328 | |||||||
|
| |||||||
Shares | ||||||||
Convertible Preferred Stocks 9.0% | ||||||||
Banks 2.6% |
| |||||||
¨Bank of America Corp. | 12,072 | 15,367,656 | ||||||
Wells Fargo & Co. | 11,552 | 14,793,607 | ||||||
|
| |||||||
30,161,263 | ||||||||
|
| |||||||
Chemicals 0.5% |
| |||||||
A. Schulman, Inc. | 5,832 | 5,989,434 | ||||||
|
| |||||||
Food 1.0% |
| |||||||
Post Holdings, Inc. | 76,604 | 11,573,807 | ||||||
|
| |||||||
Hand & Machine Tools 1.0% |
| |||||||
Stanley Black & Decker, Inc. | 105,261 | 11,315,558 | ||||||
|
| |||||||
Health Care—Products 0.8% |
| |||||||
Becton Dickinson & Co. | 159,841 | 9,646,404 | ||||||
|
| |||||||
Metal Fabricate & Hardware 0.5% |
| |||||||
Rexnord Corp. | 108,438 | 6,495,978 | ||||||
|
| |||||||
Oil & Gas 1.6% |
| |||||||
Hess Corp. | 293,774 | 19,101,186 | ||||||
|
|
Shares | Value | |||||||
Real Estate Investment Trusts 1.0% |
| |||||||
Crown Castle International Corp. | 8,856 | $ | 8,905,372 | |||||
Welltower, Inc. | 47,800 | 2,675,844 | ||||||
|
| |||||||
11,581,216 | ||||||||
|
| |||||||
Total Convertible Preferred Stocks | 105,864,846 | |||||||
|
| |||||||
Total Convertible Securities | 1,046,318,174 | |||||||
|
| |||||||
Common Stocks 6.0% | ||||||||
Aerospace & Defense 0.5% |
| |||||||
United Technologies Corp. | 53,105 | 6,380,566 | ||||||
|
| |||||||
Air Freight & Logistics 1.0% |
| |||||||
XPO Logistics, Inc. (c) | 122,563 | 11,908,221 | ||||||
|
| |||||||
Airlines 1.0% |
| |||||||
Delta Air Lines, Inc. | 227,309 | 11,870,076 | ||||||
|
| |||||||
Banks 1.0% |
| |||||||
¨Bank of America Corp. | 398,621 | 11,926,740 | ||||||
|
| |||||||
Energy Equipment & Services 0.7% |
| |||||||
Baker Hughes, a GE Co. | 51,357 | 1,854,501 | ||||||
Halliburton Co. | 113,326 | 6,005,145 | ||||||
|
| |||||||
7,859,646 | ||||||||
|
| |||||||
Health Care Equipment & Supplies 1.1% |
| |||||||
Teleflex, Inc. | 49,763 | 13,330,513 | ||||||
|
| |||||||
Software 0.7% |
| |||||||
salesforce.com, Inc. (c) | 62,769 | 7,594,421 | ||||||
|
| |||||||
Total Common Stocks | 70,870,183 | |||||||
|
| |||||||
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Short-Term Investments 4.8% | ||||||||
Repurchase Agreements 4.8% |
| |||||||
Fixed Income Clearing Corp. | $ | 56,997,848 | $ | 56,997,848 | ||||
|
| |||||||
Total Short-Term Investment | 56,997,848 | |||||||
|
| |||||||
Total Investments | 99.6 | % | 1,174,186,205 | |||||
Other Assets, Less Liabilities | 0.4 | 4,569,908 | ||||||
Net Assets | 100.0 | % | $ | 1,178,756,113 |
(a) | All or a portion of this security was held on loan. As of April 30, 2018, the market value of securities loaned was $26,076,564 and the Fund received non-cash collateral in the amount of $26,580,690 (See Note 2(H)). |
(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) | Non-income producing security. |
The following is a summary of the fair valuations according to the inputs used as of April 30, 2018, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Convertible Securities | ||||||||||||||||
Convertible Bonds | $ | — | $ | 940,453,328 | $ | — | $ | 940,453,328 | ||||||||
Convertible Preferred Stocks (b) | 88,301,605 | 17,563,241 | — | 105,864,846 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Convertible Securities | 88,301,605 | 958,016,569 | — | 1,046,318,174 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks | 70,870,183 | — | — | 70,870,183 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 56,997,848 | — | 56,997,848 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 159,171,788 | $ | 1,015,014,417 | $ | — | $ | 1,174,186,205 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 2 securities valued at $5,989,434 and $11,573,807 are held in Chemicals and Food, 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, 2018, the Fund did not have any transfers among levels. (See Note 2)
As of April 30, 2018, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
14 | MainStay MacKay 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, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value (identified cost $1,041,147,387) including securities on loan of $26,076,564 | $ | 1,174,186,205 | ||
Cash | 52,306 | |||
Receivables: | ||||
Dividends and interest | 4,776,038 | |||
Fund shares sold | 1,704,198 | |||
Securities lending income | 41,547 | |||
Other assets | 84,839 | |||
|
| |||
Total assets | 1,180,845,133 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 1,142,713 | |||
Manager (See Note 3) | 507,595 | |||
NYLIFE Distributors (See Note 3) | 193,336 | |||
Transfer agent (See Note 3) | 146,179 | |||
Professional fees | 49,453 | |||
Shareholder communication | 39,238 | |||
Custodian | 3,408 | |||
Trustees | 1,779 | |||
Accrued expenses | 5,319 | |||
|
| |||
Total liabilities | 2,089,020 | |||
|
| |||
Net assets | $ | 1,178,756,113 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 683,988 | ||
Additional paid-in capital | 1,034,833,636 | |||
|
| |||
1,035,517,624 | ||||
Distributions in excess of net investment income | (12,421,636 | ) | ||
Accumulated net realized gain (loss) on investments | 22,621,307 | |||
Net unrealized appreciation (depreciation) on investments | 133,038,818 | |||
|
| |||
Net assets | $ | 1,178,756,113 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 493,094,664 | ||
|
| |||
Shares of beneficial interest outstanding | 28,624,380 | |||
|
| |||
Net asset value per share outstanding | $ | 17.23 | ||
Maximum sales charge (5.50% of offering price) | 1.00 | |||
|
| |||
Maximum offering price per share outstanding | $ | 18.23 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 53,884,598 | ||
|
| |||
Shares of beneficial interest outstanding | 3,128,853 | |||
|
| |||
Net asset value per share outstanding | $ | 17.22 | ||
Maximum sales charge (5.50% of offering price) | 1.00 | |||
|
| |||
Maximum offering price per share outstanding | $ | 18.22 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 17,055,494 | ||
|
| |||
Shares of beneficial interest outstanding | 994,672 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.15 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 80,061,040 | ||
|
| |||
Shares of beneficial interest outstanding | 4,674,811 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.13 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 534,660,317 | ||
|
| |||
Shares of beneficial interest outstanding | 30,976,038 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.26 | ||
|
|
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, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 6,487,333 | ||
Dividends | 4,101,055 | |||
Securities lending income | 175,278 | |||
Other income | 3,528 | |||
|
| |||
Total income | 10,767,194 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 3,332,287 | |||
Distribution/Service—Class A (See Note 3) | 606,096 | |||
Distribution/Service—Investor Class (See Note 3) | 68,896 | |||
Distribution/Service—Class B (See Note 3) | 90,912 | |||
Distribution/Service—Class C (See Note 3) | 404,787 | |||
Transfer agent (See Note 3) | 859,932 | |||
Registration | 63,448 | |||
Professional fees | 60,119 | |||
Shareholder communication | 51,778 | |||
Trustees | 12,764 | |||
Custodian | 2,878 | |||
Miscellaneous | 26,071 | |||
|
| |||
Total expenses before waiver/reimbursement | 5,579,968 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (365,690 | ) | ||
|
| |||
Net expenses | 5,214,278 | |||
|
| |||
Net investment income (loss) | 5,552,916 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 22,694,637 | |||
Net change in unrealized appreciation (depreciation) on investments | 13,228,653 | |||
|
| |||
Net realized and unrealized gain (loss) on investments | 35,923,290 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 41,476,206 | ||
|
|
16 | MainStay MacKay 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, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 5,552,916 | $ | 11,959,710 | ||||
Net realized gain (loss) on investments | 22,694,637 | 67,286,271 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 13,228,653 | 66,696,846 | ||||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 41,476,206 | 145,942,827 | ||||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (3,968,119 | ) | (5,915,050 | ) | ||||
Investor Class | (412,019 | ) | (959,734 | ) | ||||
Class B | (67,803 | ) | (111,244 | ) | ||||
Class C | (297,399 | ) | (412,759 | ) | ||||
Class I | (5,107,381 | ) | (6,945,027 | ) | ||||
|
| |||||||
(9,852,721 | ) | (14,343,814 | ) | |||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | (27,407,047 | ) | (6,089,507 | ) | ||||
Investor Class | (3,225,509 | ) | (1,306,245 | ) | ||||
Class B | (1,077,788 | ) | (339,058 | ) | ||||
Class C | (4,640,000 | ) | (1,228,067 | ) | ||||
Class I | (28,376,970 | ) | (4,515,780 | ) | ||||
|
| |||||||
(64,727,314 | ) | (13,478,657 | ) | |||||
|
| |||||||
Total dividends and distributions to shareholders | (74,580,035 | ) | (27,822,471 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 180,016,603 | 540,443,512 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 65,653,228 | 23,898,379 | ||||||
Cost of shares redeemed | (236,590,746 | ) | (278,484,613 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 9,079,085 | 285,857,278 | ||||||
|
| |||||||
Net increase (decrease) in net assets | (24,024,744 | ) | 403,977,634 | |||||
Net Assets | ||||||||
Beginning of period | 1,202,780,857 | 798,803,223 | ||||||
|
| |||||||
End of period | $ | 1,178,756,113 | $ | 1,202,780,857 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (12,421,636 | ) | $ | (8,121,831 | ) | ||
|
|
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 17.75 | $ | 15.72 | $ | 16.51 | $ | 18.33 | $ | 17.33 | $ | 14.79 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.08 | 0.19 | 0.20 | 0.11 | 0.15 | 0.18 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.55 | 2.34 | 0.35 | (0.00 | )‡ | 1.59 | 3.29 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.63 | 2.53 | 0.55 | 0.11 | 1.74 | 3.47 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.24 | ) | (0.64 | ) | (0.47 | ) | (0.51 | ) | (0.31 | ) | ||||||||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.15 | ) | (0.50 | ) | (1.34 | ) | (1.93 | ) | (0.74 | ) | (0.93 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 17.23 | $ | 17.75 | $ | 15.72 | $ | 16.51 | $ | 18.33 | $ | 17.33 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 3.83 | % | 16.30 | % | 3.71 | % | 0.58 | % | 10.42 | % | 24.78 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.88 | %†† | 1.12 | % | 1.31 | % | 0.62 | % | 0.86 | % | 1.13 | % | ||||||||||||||||
Net expenses | 0.99 | %†† | 0.98 | % | 1.01 | % | 0.99 | % | 0.97 | % | 0.99 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.99 | %†† | 0.99 | % | 1.01 | % | 0.99 | % | 0.97 | % | 0.99 | % | ||||||||||||||||
Portfolio turnover rate | 26 | % | 38 | % | 24 | % | 60 | % | 59 | % | 77 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 493,095 | $ | 482,341 | $ | 368,583 | $ | 408,067 | $ | 384,987 | $ | 391,577 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 17.75 | $ | 15.72 | $ | 16.50 | $ | 18.33 | $ | 17.32 | $ | 14.79 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.06 | 0.16 | 0.18 | 0.08 | 0.12 | 0.15 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.55 | 2.34 | 0.36 | (0.01 | ) | 1.60 | 3.28 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.61 | 2.50 | 0.54 | 0.07 | 1.72 | 3.43 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.21 | ) | (0.62 | ) | (0.44 | ) | (0.48 | ) | (0.28 | ) | ||||||||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.14 | ) | (0.47 | ) | (1.32 | ) | (1.90 | ) | (0.71 | ) | (0.90 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 17.22 | $ | 17.75 | $ | 15.72 | $ | 16.50 | $ | 18.33 | $ | 17.32 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 3.69 | % | 16.11 | % | 3.60 | % | 0.40 | % | 10.21 | % | 24.42 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.73 | %†† | 0.95 | % | 1.14 | % | 0.45 | % | 0.67 | % | 0.93 | % | ||||||||||||||||
Net expenses | 1.13 | %†† | 1.14 | % | 1.18 | % | 1.15 | % | 1.16 | % | 1.22 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.15 | %†† | 1.15 | % | 1.18 | % | 1.15 | % | 1.16 | % | 1.22 | % | ||||||||||||||||
Portfolio turnover rate | 26 | % | 38 | % | 24 | % | 60 | % | 59 | % | 77 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 53,885 | $ | 56,289 | $ | 79,430 | $ | 82,052 | $ | 85,850 | $ | 86,136 |
* | 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. For periods of less than one year, total return is not annualized. |
18 | MainStay MacKay 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 17.67 | $ | 15.66 | $ | 16.45 | $ | 18.30 | $ | 17.37 | $ | 14.84 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | 0.04 | 0.06 | (0.05 | ) | (0.01 | ) | 0.03 | |||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.55 | 2.32 | 0.35 | 0.01 | 1.59 | 3.29 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.55 | 2.36 | 0.41 | (0.04 | ) | 1.58 | 3.32 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.09 | ) | (0.50 | ) | (0.35 | ) | (0.42 | ) | (0.17 | ) | ||||||||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.07 | ) | (0.35 | ) | (1.20 | ) | (1.81 | ) | (0.65 | ) | (0.79 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 17.15 | $ | 17.67 | $ | 15.66 | $ | 16.45 | $ | 18.30 | $ | 17.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 3.37 | % | 15.21 | % | 2.83 | % | (0.36 | %) | 9.41 | % | 23.50 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.02 | %)†† | 0.21 | % | 0.39 | % | (0.30 | %) | (0.08 | %) | 0.19 | % | ||||||||||||||||
Net expenses | 1.88 | % †† | 1.89 | % | 1.93 | % | 1.90 | % | 1.91 | % | 1.97 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.90 | % †† | 1.90 | % | 1.93 | % | 1.90 | % | 1.91 | % | 1.97 | % | ||||||||||||||||
Portfolio turnover rate | 26 | % | 38 | % | 24 | % | 60 | % | 59 | % | 77 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 17,055 | $ | 19,290 | $ | 21,436 | $ | 26,537 | $ | 29,765 | $ | 32,629 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 17.65 | $ | 15.64 | $ | 16.43 | $ | 18.29 | $ | 17.36 | $ | 14.82 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | 0.04 | 0.06 | (0.05 | ) | (0.01 | ) | 0.03 | |||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.55 | 2.32 | 0.35 | (0.00 | )‡ | 1.59 | 3.30 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.55 | 2.36 | 0.41 | (0.05 | ) | 1.58 | 3.33 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.09 | ) | (0.50 | ) | (0.35 | ) | (0.42 | ) | (0.17 | ) | ||||||||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (1.07 | ) | (0.35 | ) | (1.20 | ) | (1.81 | ) | (0.65 | ) | (0.79 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 17.13 | $ | 17.65 | $ | 15.64 | $ | 16.43 | $ | 18.29 | $ | 17.36 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 3.38 | % | 15.23 | % | 2.77 | % | (0.30 | %) | 9.35 | % | 23.60 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.02 | %)†† | 0.21 | % | 0.39 | % | (0.30 | %) | (0.08 | %) | 0.19 | % | ||||||||||||||||
Net expenses | 1.88 | % †† | 1.89 | % | 1.93 | % | 1.90 | % | 1.91 | % | 1.97 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.90 | % †† | 1.90 | % | 1.93 | % | 1.90 | % | 1.91 | % | 1.97 | % | ||||||||||||||||
Portfolio turnover rate | 26 | % | 38 | % | 24 | % | 60 | % | 59 | % | 77 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 80,061 | $ | 82,335 | $ | 76,501 | $ | 91,833 | $ | 92,118 | $ | 78,135 |
* | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 17.79 | $ | 15.75 | $ | 16.54 | $ | 18.36 | $ | 17.35 | $ | 14.81 | ||||||||||||||||
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Net investment income (loss) (a) | 0.11 | 0.25 | 0.24 | 0.15 | 0.20 | 0.22 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.55 | 2.34 | 0.35 | (0.00 | )‡ | 1.60 | 3.29 | |||||||||||||||||||||
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Total from investment operations | 0.66 | 2.59 | 0.59 | 0.15 | 1.80 | 3.51 | ||||||||||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.29 | ) | (0.68 | ) | (0.51 | ) | (0.56 | ) | (0.35 | ) | ||||||||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | (0.62 | ) | ||||||||||||||||
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Total dividends and distributions | (1.19 | ) | (0.55 | ) | (1.38 | ) | (1.97 | ) | (0.79 | ) | (0.97 | ) | ||||||||||||||||
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Net asset value at end of period | $ | 17.26 | $ | 17.79 | $ | 15.75 | $ | 16.54 | $ | 18.36 | $ | 17.35 | ||||||||||||||||
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Total investment return (b) | 3.97 | % | 16.69 | % | 3.96 | % | 0.84 | % | 10.74 | % | 25.05 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.25 | %†† | 1.45 | % | 1.56 | % | 0.87 | % | 1.11 | % | 1.37 | % | ||||||||||||||||
Net expenses | 0.61 | %†† | 0.64 | % | 0.76 | % | 0.74 | % | 0.72 | % | 0.74 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.74 | %†† | 0.74 | % | 0.76 | % | 0.74 | % | 0.72 | % | 0.74 | % | ||||||||||||||||
Portfolio turnover rate | 26 | % | 38 | % | 24 | % | 60 | % | 59 | % | 77 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 534,660 | $ | 562,526 | $ | 252,852 | $ | 298,015 | $ | 313,955 | $ | 258,279 |
* | 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. For periods of less than one year, total return is not annualized. |
20 | MainStay MacKay 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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and Notes relate to the MainStay MacKay Convertible Fund (formerly known as 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 has seven classes of shares registered for sale. 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 R6 and Class T shares were registered for sale effective as of February 28, 2017. As of April 30, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares
are currently expected to be offered at NAV plus an initial sales charge. Class I shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class T shares. Class I and Class R6 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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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)).
21 |
Notes to Financial Statements (Unaudited) (continued)
To assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 the security’s 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, 2018, 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 the 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, 2018, there were no securities held by the Fund that were fair valued in such a manner.
22 | MainStay MacKay Convertible Fund |
Equity securities 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 and 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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 its 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 tax 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 determinations using 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. 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.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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 all or a portion of any interest receivables when the collection of all or a portion of such 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.
23 |
Notes to Financial Statements (Unaudited) (continued)
(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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be limited or subject to delay, 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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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. As of the six-month period ended April 30, 2018, the Fund had securities on loan with a value of $26,076,564 and had received non-cash collateral of $26,580,690. Income earned from securities lending activity is reflected in the Statement of Operations.
(I) Convertible Securities 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, are 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.
(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 attributable to 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 an 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 the services performed and the 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, 2018, the effective management fee rate (exclusive of any applicable waivers/
24 | MainStay MacKay Convertible Fund |
reimbursements) was 0.58%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
Effective February 28, 2018, New York Life Investments has contractually agreed to waive fees and/or reimburse expenses (excluding 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) of Class I shares so that Total Annual Fund Operating Expenses of Class I shares do not exceed 0.61% 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 (excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019, 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.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $3,332,287 and waived fees/reimbursed expenses in the amount of $365,690.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Investor Class and Class T Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class T shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class T 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 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.
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $58,887 and $16,879, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $59, $5, $7,277 and $6,600, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 308,201 | ||
Investor Class | 79,998 | |||
Class B | 26,401 | |||
Class C | 117,498 | |||
Class I | 327,834 |
(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 April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 1,054,867,421 | $ | 157,782,034 | $ | (38,463,250 | ) | $ | 119,318,784 |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 14,271,729 | ||
Long-Term Capital Gain | 13,550,742 | |||
Total | $ | 27,822,471 |
25 |
Notes to Financial Statements (Unaudited) (continued)
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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $281,433 and $281,376, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 2,473,325 | $ | 42,882,295 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,836,770 | 30,607,955 | ||||||
Shares redeemed | (3,210,517 | ) | (55,384,322 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 1,099,578 | 18,105,928 | ||||||
Shares converted into Class A (See Note 1) | 396,804 | 6,874,563 | ||||||
Shares converted from Class A (See Note 1) | (42,955 | ) | (749,875 | ) | ||||
|
| |||||||
Net increase (decrease) | 1,453,427 | $ | 24,230,616 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 7,047,066 | $ | 119,088,807 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 693,680 | 11,565,480 | ||||||
Shares redeemed | (5,380,336 | ) | (90,991,876 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 2,360,410 | 39,662,411 | ||||||
Shares converted into Class A (See Note 1) | 2,256,234 | 39,055,267 | ||||||
Shares converted from Class A (See Note 1) | (886,885 | ) | (15,116,071 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 3,729,759 | $ | 63,601,607 | |||||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 211,267 | $ | 3,652,281 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 217,414 | 3,622,032 | ||||||
Shares redeemed | (180,597 | ) | (3,118,317 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 248,084 | 4,155,996 | ||||||
Shares converted into Investor Class (See Note 1) | 78,467 | 1,373,767 | ||||||
Shares converted from Investor Class (See Note 1) | (369,574 | ) | (6,401,697 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (43,023 | ) | $ | (871,934 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 517,721 | $ | 8,778,329 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 135,820 | 2,252,806 | ||||||
Shares redeemed | (506,890 | ) | (8,576,771 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 146,651 | 2,454,364 | ||||||
Shares converted into Investor Class (See Note 1) | 188,275 | 3,200,427 | ||||||
Shares converted from Investor Class (See Note 1) | (2,216,858 | ) | (38,363,861 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,881,932 | ) | $ | (32,709,070 | ) | |||
|
|
|
| |||||
26 | MainStay MacKay Convertible Fund |
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 21,588 | $ | 371,763 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 62,726 | 1,040,344 | ||||||
Shares redeemed | (115,444 | ) | (1,987,563 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (31,130 | ) | (575,456 | ) | ||||
Shares converted from Class B (See Note 1) | (65,710 | ) | (1,142,178 | ) | ||||
|
| |||||||
Net increase (decrease) | (96,840 | ) | $ | (1,717,634 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 123,659 | $ | 2,058,626 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 24,550 | 403,492 | ||||||
Shares redeemed | (274,643 | ) | (4,623,932 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (126,434 | ) | (2,161,814 | ) | ||||
Shares converted from Class B (See Note 1) | (151,045 | ) | (2,562,426 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (277,479 | ) | $ | (4,724,240 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 312,258 | $ | 5,322,233 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 251,596 | 4,167,959 | ||||||
Shares redeemed | (553,386 | ) | (9,506,130 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 10,468 | $ | (15,938 | ) | ||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,179,483 | $ | 19,833,250 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 81,268 | 1,334,519 | ||||||
Shares redeemed | (1,487,251 | ) | (24,998,988 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (226,500 | ) | (3,831,219 | ) | ||||
Shares converted from Class C (See Note 1) | (706 | ) | (11,550 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (227,206 | ) | $ | (3,842,769 | ) | |||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 7,347,916 | $ | 127,788,031 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,570,526 | 26,214,938 | ||||||
Shares redeemed | (9,572,354 | ) | (166,594,414 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (653,912 | ) | (12,591,445 | ) | ||||
Shares converted into Class I (See Note 1) | 2,553 | 45,420 | ||||||
|
|
|
| |||||
Net increase (decrease) | (651,359 | ) | $ | (12,546,025 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 23,037,821 | $ | 390,684,500 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 495,163 | 8,342,082 | ||||||
Shares redeemed | (8,767,214 | ) | (149,293,046 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 14,765,770 | 249,733,536 | ||||||
Shares converted into Class I (See Note 1) | 807,465 | 13,798,214 | ||||||
|
|
|
| |||||
Net increase (decrease) | 15,573,235 | $ | 263,531,750 | |||||
|
|
|
|
Note 10–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
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, 2018, events and transactions subsequent to April 30, 2018, 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 (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay Convertible Fund (now known as the MainStay MacKay 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 decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, together with responses from New York Life Investments and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
28 | MainStay MacKay Convertible Fund |
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of MacKay Shields and continuous analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and MacKay Shields’ track record 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, resources and history. The Board considered that New York Life Investments’ and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager and the method for compensating the portfolio manager.
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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice
and likely to produce reasonable profitability estimates. Although the Board recognized 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, including reputational and other indirect benefits.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life
30 | MainStay MacKay Convertible Fund |
Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also
considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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 MacKay Convertible Fund |
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MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1737258 MS126-18 | MSC10-06/18 (NYLIM) NL005 |
MainStay MacKay Emerging Markets Debt Fund
(Formerly known as MainStay Emerging Markets Debt Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six | One Year | Five Years | Ten | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 6/1/1998 | | | –7.71 –3.36 | %
| | –3.38 1.17 | %
| | 1.15 2.09 | %
| | 5.46 5.95 | %
| | 1.22 1.22 | %
| ||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –7.87 –3.53 |
| | –3.69 0.85 | | | 0.95 1.88 | | | 5.29 5.77 | | | 1.42 1.42 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 6/1/1998 | | –8.63 –3.89 |
| | –4.65 0.21 | | | 0.83 1.15 | | | 4.99 4.99 | | | 2.17 2.17 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | –4.83 –3.89 |
| | –0.76 0.21 | | | 1.14 1.14 | | | 4.99 4.99 | | | 2.17 2.17 |
| ||||||||||
Class I Shares | No Sales Charge | 8/31/2007 | –3.33 | 1.42 | 2.34 | 6.21 | 0.97 |
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, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
JPMorgan EMBI Global Diversified Index4 | –2.41 | % | 1.27 | % | 3.78 | % | 6.78 | % | ||||||||
Morningstar Emerging Markets Bond Category Average5 | –0.88 | 2.62 | 2.02 | 5.98 |
4. | The JPMorgan EMBI Global Diversified Index is the Fund’s primary broad-based securities market index for comparison purposes. 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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Emerging Markets Bond Category Average is representative of funds that invest more than 65% of their assets in foreign bonds from developing countries. The largest portion of the emerging-markets bond market comes from Latin America, followed by Eastern Europe. Africa, the Middle East, and Asia make up the rest. Results are based on average total returns of similar funds 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 MacKay Emerging Markets Debt Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Emerging Markets Debt Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from November 1, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 966.40 | $ | 6.05 | $ | 1,018.60 | $ | 6.21 | 1.24% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 964.70 | $ | 7.06 | $ | 1,017.60 | $ | 7.25 | 1.45% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 961.10 | $ | 10.70 | $ | 1,013.90 | $ | 10.99 | 2.20% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 961.10 | $ | 10.70 | $ | 1,013.90 | $ | 10.99 | 2.20% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 966.70 | $ | 4.78 | $ | 1,019.90 | $ | 4.91 | 0.98% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Country Composition as of April 30, 2018 (Unaudited)
Brazil | 8.2 | % | ||
Mexico | 7.8 | |||
Indonesia | 6.1 | |||
Russia | 6.1 | |||
Kazakhstan | 5.9 | |||
China | 5.1 | |||
India | 3.9 | |||
Croatia | 3.6 | |||
Dominican Republic | 3.2 | |||
Costa Rica | 2.9 | |||
Venezuela | 2.6 | |||
El Salvador | 2.5 | |||
Malaysia | 2.5 | |||
Turkey | 2.5 | |||
Ukraine | 2.5 | |||
Uruguay | 2.5 | |||
Ivory Coast | 2.0 | |||
Paraguay | 2.0 | |||
Peru | 2.0 | |||
Guatemala | 1.8 |
United States | 1.8 | % | ||
United Arab Emirates | 1.7 | |||
Ghana | 1.6 | |||
Netherlands | 1.6 | |||
Argentina | 1.3 | |||
Belarus | 1.3 | |||
Nigeria | 1.3 | |||
Vietnam | 1.3 | |||
Oman | 1.2 | |||
Egypt | 1.1 | |||
Saudi Arabia | 1.1 | |||
Iraq | 0.9 | |||
Gabon | 0.8 | |||
Senegal | 0.8 | |||
Cameroon, United Republic Of | 0.7 | |||
Hong Kong | 0.6 | |||
Kenya | 0.6 | |||
Pakistan | 0.6 | |||
Other Assets, Less Liabilities | 4.0 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Issuers Held as of April 30, 2018 (excluding short-term investment) (Unaudited)
1. | KazMunayGas National Co. JSC, 5.75%–6.375%, due 4/30/43–10/24/48 |
2. | Pertamina Persero PT, 5.625%, due 5/20/43 |
3. | Petroleos Mexicanos, 6.75%, due 9/21/47 |
4. | Croatia Government International Bond, 6.00%–6.375%, due 3/24/21–1/26/24 |
5. | Russian Federal Bond-OFZ, 7.70%, due 3/23/33 |
6. | Dominican Republic International Bond, 5.95%, due 1/25/27 |
7. | Petrobras Global Finance B.V., 6.85%–7.375%, due 1/17/27–12/31/99 |
8. | Turkey Government International Bond, 5.125%–6.625%, due 2/17/28–2/17/45 |
9. | El Salvador Government International Bond, 6.375%, due 1/18/27 |
10. | Ukraine Government International Bond, 7.75%, due 9/1/26 |
8 | MainStay MacKay Emerging Markets Debt Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, and Jakob Bak, PhD, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Emerging Markets Debt Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MacKay Emerging Markets Debt Fund returned –3.36% for Class A shares, –3.53% for Investor Class shares and –3.89% for Class B and Class C shares for the six months ended April 30, 2018. Over the same period, the Fund’s Class I shares returned –3.33%. For the six months ended April 30, 2018, all share classes underperformed the –2.41% return of the JPMorgan EMBI Global Diversified Index,1 which is the Fund’s broad-based securities-market index. Over the same period, all share classes also underperformed the –0.88% return of the Morningstar Emerging Markets Bond Category Average.2 See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Emerging Markets Debt Fund was renamed MainStay MacKay Emerging Markets Debt Fund. Also effective February 28, 2018, Michael Kimble was removed from the Fund and the Fund’s investment objective was simplified. For more information on these changes, please refer to the supplements dated December 15, 2017.
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s underperformance relative to the JPMorgan EMBI Global Diversified Index resulted primarily from various timing factors. In the first half of the reporting period, global volatility remained low and “riskier” countries, such as Ivory Coast, Cameroon, Gabon and Kenya performed well. During that portion of the reporting period, most oil producing countries/companies, such as Ghana, Kazakhstan and Petrobras, were also helped by rising oil prices. In the second half of the reporting period, the Fund’s performance was affected by the rise in interest rates, coupled with the uncertainty surrounding the Trump administration’s stance on tariffs, as global volatility increased.
Venezuela was the most substantial detractor from the Fund’s performance relative to the JPMorgan EMBI Global Diversified Index during the reporting period, as years of government mismanagement finally caught up with the country. Despite the world’s largest oil reserves and sharply higher oil prices, oil production levels fell sharply, undermining Venezuela’s ability to service its debt. U.S. sanctions made it impossible to restructure
the bonds, and as a result, no lender has tried to accelerate the bond payments or attach any assets owned by the national oil company, PDVSA.
What was the Fund’s duration3 strategy during the reporting period?
The Fund ended the reporting period with a longer duration than that of its benchmark. As of April 30, 2018, the Fund’s duration was 7.9 years, compared to the 6.8-year duration of the JPMorgan EMBI Global Diversified Index on the same date.
During the reporting period, which market segments were the strongest positive contributors to the Fund’s relative performance and which market segments were particularly weak?
An overweight position in corporate bonds relative to the JPMorgan EMBI Global Diversified Index contributed positively to the Fund’s relative performance. (Contributions take weightings and total returns into account.) Strong performers during the reporting period were mostly oil producing countries, such as Ghana and Kazakhstan and companies, such as Petrobras—all of which were helped by rising oil prices. As previously noted, Venezuela was a substantial detractor from the Fund’s performance relative to the JPMorgan EMBI Global Diversified Index, as years of government mismanagement finally caught up with the country, which was declared to be in default. The Fund’s being longer in duration than the benchmark was perhaps the largest detractor from performance.
Did the Fund make any significant purchases or sales during the reporting period?
The Fund increased its exposure to local-currency bonds. Specifically, the Fund bought local-currency bonds in Egypt, where an International Monetary Fund program is benefiting from lower inflation and a more balanced budget. The Fund also bought local-currency bonds in Russia, where the ruble failed to increase along with oil despite what we believed to be excellent macro fundamentals, including a very high real rate of interest. We further increased the Fund’s short exposure to Argentina through the sale of bonds issued by the province of Buenos Aires. The Fund’s positions in Brazil, Saudi Arabia, South Africa, Hungary, Sri Lanka and Turkey were also significantly reduced and we exited Portugal and Israel entirely. During the reporting period, we increased the Fund’s exposures to Belarus, Malaysia, China and Iraq.
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 the Morningstar Emerging Markets Bond 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. |
9 |
How did the Fund’s sector and country weightings change during the reporting period?
During the reporting period, the Fund moderately increased its weightings in Russia and Croatia. Over the same period, the Fund decreased its weightings in Turkey and Saudi Arabia. In addition, the Fund slightly reduced its positions in sovereign government bonds, while increasing its allocation to quasi-sovereign state-owned corporate debt.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund held an overweight position relative to the JPMorgan EMBI Global Diversified Index in credit. As of the same date, the Fund held overweight allocations relative to the Index in Brazil, Mexico and Russia. As of April 30, 2018, the Fund had a slightly overweight position in Latin America, coupled with a slightly underweight position in Africa.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Emerging Markets Debt Fund |
Portfolio of Investments April 30, 2018 (Unaudited)
Principal Amount | Value | |||||||
Corporate Bonds 45.8%† | ||||||||
Brazil 6.3% |
| |||||||
Minerva Luxembourg S.A. | $ | 1,375,000 | $ | 1,299,375 | ||||
¨Petrobras Global Finance B.V. |
| |||||||
6.85%, due 12/31/99 | 1,000,000 | 924,000 | ||||||
7.375%, due 1/17/27 | 3,000,000 | 3,217,500 | ||||||
Rumo (Luxembourg) S.A.R.L. | 1,500,000 | 1,592,250 | ||||||
Vale Overseas, Ltd. | 1,800,000 | 2,086,920 | ||||||
Vrio Finco 1, LLC / Vrio Finco 2, Inc. | 1,000,000 | 996,250 | ||||||
|
| |||||||
10,116,295 | ||||||||
|
| |||||||
China 5.1% |
| |||||||
Alibaba Group Holding, Ltd. | 2,000,000 | 2,030,304 | ||||||
China Evergrande Group | 1,000,000 | 959,983 | ||||||
JD.com, Inc. | 1,500,000 | 1,419,737 | ||||||
Proven Glory Capital, Ltd. | 1,000,000 | 933,587 | ||||||
Proven Honour Capital, Ltd. | 1,500,000 | 1,431,450 | ||||||
Tencent Holdings, Ltd. | 1,500,000 | 1,425,446 | ||||||
|
| |||||||
8,200,507 | ||||||||
|
| |||||||
Hong Kong 0.6% |
| |||||||
Melco Resorts Finance, Ltd. | 1,000,000 | 934,772 | ||||||
|
| |||||||
India 3.9% |
| |||||||
Abja Investment Co. | 1,000,000 | 903,165 | ||||||
Bharti Airtel, Ltd. | 2,000,000 | 1,910,665 | ||||||
Reliance Industries, Ltd. | 1,000,000 | 933,969 | ||||||
Tata Motors, Ltd. | 1,500,000 | 1,540,800 |
Principal Amount | Value | |||||||
India (continued) | ||||||||
Vedanta Resources PLC | $ | 1,000,000 | $ | 962,078 | ||||
|
| |||||||
6,250,677 | ||||||||
|
| |||||||
Indonesia 5.1% |
| |||||||
Listrindo Capital B.V. | 1,500,000 | 1,413,750 | ||||||
¨Pertamina Persero PT | 6,700,000 | 6,665,408 | ||||||
|
| |||||||
8,079,158 | ||||||||
|
| |||||||
Kazakhstan 5.9% |
| |||||||
¨KazMunayGas National Co. JSC (a) | ||||||||
5.75%, due 4/30/43 | 5,000,000 | 5,305,000 | ||||||
6.375%, due 10/24/48 | 4,000,000 | 4,085,080 | ||||||
|
| |||||||
9,390,080 | ||||||||
|
| |||||||
Malaysia 2.5% |
| |||||||
Gohl Capital, Ltd. | 1,500,000 | 1,443,489 | ||||||
Petroliam Nasional BHD | 2,000,000 | 2,496,858 | ||||||
|
| |||||||
3,940,347 | ||||||||
|
| |||||||
Mexico 6.9% |
| |||||||
Cemex S.A.B. de C.V. | 2,000,000 | 2,193,000 | ||||||
Comision Federal de Electricidad | 2,000,000 | 1,987,500 | ||||||
Grupo Televisa S.A.B. | 750,000 | 753,725 | ||||||
¨Petroleos Mexicanos | 6,385,000 | 6,164,079 | ||||||
|
| |||||||
11,098,304 | ||||||||
|
| |||||||
Netherlands 1.6% |
| |||||||
GTH Finance B.V. | 1,500,000 | 1,576,650 | ||||||
Samvardhana Motherson Automotive Systems Group B.V. | 1,000,000 | 1,008,770 | ||||||
|
| |||||||
2,585,420 | ||||||||
|
| |||||||
Oman 1.2% |
| |||||||
OmGrid Funding, Ltd. | 2,000,000 | 1,874,040 | ||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest issuers held, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Peru 2.0% |
| |||||||
Banco de Credito del | $ | 1,000,000 | $ | 1,015,550 | ||||
Southern Copper Corp. | 2,000,000 | 2,237,288 | ||||||
|
| |||||||
3,252,838 | ||||||||
|
| |||||||
Russia 1.7% |
| |||||||
Gazprom OAO Via Gaz Capital S.A. | 1,500,000 | 1,902,060 | ||||||
MMC Norilsk Nickel OJSC via MMC Finance DAC | 750,000 | 793,125 | ||||||
|
| |||||||
2,695,185 | ||||||||
|
| |||||||
United Arab Emirates 1.7% |
| |||||||
Abu Dhabi National Energy Co. | 2,750,000 | 2,686,750 | ||||||
|
| |||||||
Venezuela 1.3% |
| |||||||
Petroleos de Venezuela S.A. (b)(d) | ||||||||
Series Reg S | 3,000,000 | 784,500 | ||||||
Series Reg S | 2,500,000 | 631,250 | ||||||
Series Reg S | 2,500,000 | 627,250 | ||||||
|
| |||||||
2,043,000 | ||||||||
|
| |||||||
Total Corporate Bonds | 73,147,373 | |||||||
|
| |||||||
Foreign Government Bonds 48.4% | ||||||||
Argentina 1.3% |
| |||||||
City of Buenos Aires Argentina | 2,000,000 | 2,065,400 | ||||||
|
| |||||||
Belarus 1.3% |
| |||||||
Republic of Belarus International Bond | 2,000,000 | 2,150,800 | ||||||
|
| |||||||
Brazil 1.9% |
| |||||||
Brazil Notas do Tesouro Nacional | BRL 10,000,000 | 3,005,726 | ||||||
|
|
Principal Amount | Value | |||||||
Cameroon, United Republic Of 0.7% |
| |||||||
Republic of Cameroon International Bond | $ | 1,000,000 | $ | 1,147,660 | ||||
|
| |||||||
Costa Rica 2.9% |
| |||||||
Costa Rica Government International Bond | 2,000,000 | 2,025,320 | ||||||
Instituto Costarricense de Electricidad | 3,000,000 | 2,583,750 | ||||||
|
| |||||||
4,609,070 | ||||||||
|
| |||||||
Croatia 3.6% |
| |||||||
¨Croatia Government International Bond | ||||||||
Series Reg S | 3,250,000 | 3,541,772 | ||||||
6.375%, due 3/24/21 (a) | 2,000,000 | 2,146,000 | ||||||
|
| |||||||
5,687,772 | ||||||||
|
| |||||||
Dominican Republic 3.2% |
| |||||||
¨Dominican Republic International Bond | 5,000,000 | 5,112,500 | ||||||
|
| |||||||
Egypt 1.1% |
| |||||||
Egypt Government Bond | EGP 31,000,000 | 1,825,789 | ||||||
|
| |||||||
El Salvador 2.5% |
| |||||||
¨El Salvador Government International Bond | $ | 4,000,000 | 3,950,000 | |||||
|
| |||||||
Gabon 0.8% |
| |||||||
Gabon Government International Bond | 1,296,000 | 1,263,071 | ||||||
|
| |||||||
Ghana 1.6% |
| |||||||
Ghana Government International Bond | 2,000,000 | 2,585,400 | ||||||
|
| |||||||
Guatemala 1.8% |
| |||||||
Guatemala Government Bond | 3,000,000 | 2,936,970 | ||||||
|
| |||||||
Indonesia 1.0% |
| |||||||
Indonesia Government International Bond | 1,500,000 | 1,519,356 | ||||||
|
|
12 | MainStay MacKay Emerging Markets Debt 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 | |||||||
Foreign Government Bonds (continued) | ||||||||
Iraq 0.9% |
| |||||||
Iraq International Bond | $ | 1,500,000 | $ | 1,498,902 | ||||
|
| |||||||
Ivory Coast 2.0% |
| |||||||
Ivory Coast Government International Bond | ||||||||
Series Reg S | 1,388,205 | 1,327,957 | ||||||
6.125%, due 6/15/33 (a) | 2,000,000 | 1,890,200 | ||||||
|
| |||||||
3,218,157 | ||||||||
|
| |||||||
Kenya 0.6% |
| |||||||
Kenya Government International Bond | 1,000,000 | 1,032,176 | ||||||
|
| |||||||
Mexico 0.9% |
| |||||||
Mexican Bonos | MXN 27,500,000 | 1,485,308 | ||||||
|
| |||||||
Nigeria 1.3% |
| |||||||
Nigeria Government International Bond | $ | 2,000,000 | 2,013,328 | |||||
|
| |||||||
Pakistan 0.6% |
| |||||||
Pakistan Government International Bond | 1,000,000 | 1,036,924 | ||||||
|
| |||||||
Paraguay 2.0% |
| |||||||
Paraguay Government International Bond | 3,000,000 | 3,262,500 | ||||||
|
| |||||||
Russia 4.4% |
| |||||||
¨Russian Federal Bond-OFZ | RUB 320,000,000 | 5,211,164 | ||||||
Russian Federation | $ | 1,800,000 | 1,828,458 | |||||
|
| |||||||
7,039,622 | ||||||||
|
| |||||||
Saudi Arabia 1.1% |
| |||||||
Saudi Government International Bond | 2,000,000 | 1,807,268 | ||||||
|
|
Principal Amount | Value | |||||||
Senegal 0.8% |
| |||||||
Senegal Government International Bond | $ | 1,250,000 | $ | 1,281,330 | ||||
|
| |||||||
Turkey 2.5% |
| |||||||
¨Turkey Government International Bond | ||||||||
5.125%, due 2/17/28 | 2,225,000 | 2,079,262 | ||||||
6.625%, due 2/17/45 | 2,000,000 | 1,950,000 | ||||||
|
| |||||||
4,029,262 | ||||||||
|
| |||||||
Ukraine 2.5% |
| |||||||
¨Ukraine Government International Bond | 4,000,000 | 3,943,040 | ||||||
|
| |||||||
Uruguay 2.5% |
| |||||||
Uruguay Government International Bond | ||||||||
5.10%, due 6/18/50 | 2,000,000 | 1,965,000 | ||||||
7.625%, due 3/21/36 | 1,500,000 | 1,952,325 | ||||||
|
| |||||||
3,917,325 | ||||||||
|
| |||||||
Venezuela 1.3% |
| |||||||
Venezuela Government International Bond | 7,095,000 | 2,004,337 | ||||||
|
| |||||||
Vietnam 1.3% |
| |||||||
Vietnam Government International Bond | 2,000,000 | 2,032,514 | ||||||
|
| |||||||
Total Foreign Government Bonds | 77,461,507 | |||||||
|
| |||||||
Short-Term Investment 1.8% | ||||||||
Repurchase Agreement 1.8% |
| |||||||
Fixed Income Clearing Corp. | 2,901,481 | 2,901,481 | ||||||
|
| |||||||
Total Short-Term Investment | 2,901,481 | |||||||
|
| |||||||
Total Investments | 96.0 | % | 153,510,361 | |||||
Other Assets, Less Liabilities | 4.0 | 6,454,215 | ||||||
Net Assets | 100.0 | % | $ | 159,964,576 |
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, 2018 (Unaudited) (continued)
(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) | Issue in default. |
(c) | Step coupon—Rate shown was the rate in effect as of April 30, 2018. |
(d) | Issue in non-accrual status. |
The following abbreviations are used in the preceding pages:
BRL—Brazilian Real
EGP—Egyptian Pound
MXN—Mexican Peso
RUB—New Russian Ruble
The following is a summary of the fair valuations according to the inputs used as of April 30, 2018, 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 | ||||||||||||||||
Corporate Bonds | $ | — | $ | 73,147,373 | $ | — | $ | 73,147,373 | ||||||||
Foreign Government Bonds | — | 77,461,507 | — | 77,461,507 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 150,608,880 | — | 150,608,880 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 2,901,481 | — | 2,901,481 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | — | $ | 153,510,361 | $ | — | $ | 153,510,361 | ||||||||
|
|
|
|
|
|
|
|
(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, 2018, the Fund did not have any transfers among levels. (See Note 2)
As of April 30, 2018, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
14 | MainStay MacKay Emerging Markets Debt 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, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 153,510,361 | ||
Cash denominated in foreign currencies | 295,173 | |||
Cash | 143,750 | |||
Receivables: | ||||
Investment securities sold | 4,546,003 | |||
Interest | 2,013,860 | |||
Fund shares sold | 38,379 | |||
Other assets | 46,358 | |||
|
| |||
Total assets | 160,593,884 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 344,229 | |||
Manager (See Note 3) | 100,398 | |||
NYLIFE Distributors (See Note 3) | 49,132 | |||
Professional fees | 42,755 | |||
Transfer agent (See Note 3) | 26,970 | |||
Shareholder communication | 22,545 | |||
Custodian | 4,479 | |||
Trustees | 406 | |||
Dividend payable | 38,272 | |||
Accrued expenses | 122 | |||
|
| |||
Total liabilities | 629,308 | |||
|
| |||
Net assets | $ | 159,964,576 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 155,423 | ||
Additional paid-in capital | 173,118,274 | |||
|
| |||
173,273,697 | ||||
Undistributed net investment income | 287,757 | |||
Accumulated net realized gain (loss) on investments and foreign currency transactions | (10,928,986 | ) | ||
Net unrealized appreciation (depreciation) on investments | (2,549,025 | ) | ||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | (118,867 | ) | ||
|
| |||
Net assets | $ | 159,964,576 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 99,980,218 | ||
|
| |||
Shares of beneficial interest outstanding | 9,693,847 | |||
|
| |||
Net asset value per share outstanding | $ | 10.31 | ||
Maximum sales charge (4.50% of offering price) | 0.49 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.80 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 17,276,657 | ||
|
| |||
Shares of beneficial interest outstanding | 1,659,503 | |||
|
| |||
Net asset value per share outstanding | $ | 10.41 | ||
Maximum sales charge (4.50% of offering price) | 0.49 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.90 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 4,734,745 | ||
|
| |||
Shares of beneficial interest outstanding | 467,703 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.12 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 24,485,109 | ||
|
| |||
Shares of beneficial interest outstanding | 2,415,229 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.14 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 13,487,847 | ||
|
| |||
Shares of beneficial interest outstanding | 1,305,972 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.33 | ||
|
|
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, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest (a) | $ | 4,599,534 | ||
Other income | 530 | |||
|
| |||
Total income | 4,600,064 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 628,327 | |||
Distribution/Service—Class A (See Note 3) | 131,094 | |||
Distribution/Service—Investor Class (See Note 3) | 22,288 | |||
Distribution/Service—Class B (See Note 3) | 26,826 | |||
Distribution/Service—Class C (See Note 3) | 131,493 | |||
Transfer agent (See Note 3) | 162,950 | |||
Registration | 42,431 | |||
Professional fees | 38,413 | |||
Shareholder communication | 18,185 | |||
Custodian | 7,690 | |||
Trustees | 2,013 | |||
Miscellaneous | 11,568 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,223,278 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (4,894 | ) | ||
|
| |||
Net expenses | 1,218,384 | |||
|
| |||
Net investment income (loss) | 3,381,680 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (1,722,990 | ) | ||
Foreign currency forward transactions | (33,163 | ) | ||
Foreign currency transactions | (14,932 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | (1,771,085 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (7,808,784 | ) | ||
Foreign currency forward contracts | 33,163 | |||
Translation of other assets and liabilities in foreign currencies | (12,413 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (7,788,034 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (9,559,119 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (6,177,439 | ) | |
|
|
(a) | Interest recorded net of foreign withholding taxes in the amount of $26,604. |
16 | MainStay MacKay Emerging Markets Debt 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, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,381,680 | $ | 8,728,593 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (1,771,085 | ) | (966,932 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (7,788,034 | ) | 5,270,354 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (6,177,439 | ) | 13,032,015 | |||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (1,943,237 | ) | (3,566,533 | ) | ||||
Investor Class | (309,649 | ) | (810,566 | ) | ||||
Class B | (74,422 | ) | (187,544 | ) | ||||
Class C | (367,916 | ) | (864,275 | ) | ||||
Class I | (357,500 | ) | (522,156 | ) | ||||
|
| |||||||
(3,052,724 | ) | (5,951,074 | ) | |||||
|
| |||||||
Return of capital: | ||||||||
Class A | — | (1,043,496 | ) | |||||
Investor Class | — | (237,155 | ) | |||||
Class B | — | (54,872 | ) | |||||
Class C | — | (252,869 | ) | |||||
Class I | — | (152,773 | ) | |||||
|
| |||||||
— | (1,741,165 | ) | ||||||
|
| |||||||
Total dividends to shareholders | (3,052,724 | ) | (7,692,239 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 11,220,643 | 43,693,093 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 2,833,086 | 6,890,905 | ||||||
Cost of shares redeemed | (30,708,697 | ) | (69,102,669 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (16,654,968 | ) | (18,518,671 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (25,885,131 | ) | (13,178,895 | ) | ||||
Net Assets | ||||||||
Beginning of period | 185,849,707 | 199,028,602 | ||||||
|
| |||||||
End of period | $ | 159,964,576 | $ | 185,849,707 | ||||
|
| |||||||
Undistributed (distributions in excess of) net investment income at end of period | $ | 287,757 | $ | (41,199 | ) | |||
|
|
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.88 | $ | 10.52 | $ | 9.60 | $ | 11.38 | $ | 11.52 | $ | 12.62 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.22 | 0.53 | 0.57 | 0.62 | 0.68 | 0.68 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.59 | ) | 0.31 | 0.87 | (1.51 | ) | (0.14 | ) | (0.93 | ) | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | 0.01 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.37 | ) | 0.83 | 1.45 | (0.87 | ) | 0.54 | (0.24 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.20 | ) | (0.36 | ) | (0.29 | ) | (0.63 | ) | (0.65 | ) | (0.86 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | — | ||||||||||||||||||||
Return of capital | — | (0.11 | ) | (0.24 | ) | (0.06 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.20 | ) | (0.47 | ) | (0.53 | ) | (0.91 | ) | (0.68 | ) | (0.86 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.31 | $ | 10.88 | $ | 10.52 | $ | 9.60 | $ | 11.38 | $ | 11.52 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (3.36 | %) | 8.18 | % | 15.63 | % | (7.54 | %) | 4.85 | % | (1.98 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 4.07 | % †† | 5.04 | % | 5.70 | %(c) | 6.18 | % | 5.88 | % | 5.58 | % | ||||||||||||||||
Net expenses | 1.24 | % †† | 1.22 | % | 1.22 | %(d) | 1.23 | % | 1.17 | % | 1.16 | % | ||||||||||||||||
Portfolio turnover rate | 29 | % | 37 | % | 38 | % | 19 | % | 20 | % | 36 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 99,980 | $ | 110,238 | $ | 109,657 | $ | 98,573 | $ | 132,654 | $ | 152,832 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.69%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.23%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.98 | $ | 10.61 | $ | 9.68 | $ | 11.46 | $ | 11.60 | $ | 12.71 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.21 | 0.52 | 0.55 | 0.61 | 0.66 | 0.67 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.59 | ) | 0.31 | 0.88 | (1.52 | ) | (0.14 | ) | (0.94 | ) | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | 0.01 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.38 | ) | 0.82 | 1.44 | (0.89 | ) | 0.52 | (0.26 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.35 | ) | (0.27 | ) | (0.61 | ) | (0.63 | ) | (0.85 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | — | ||||||||||||||||||||
Return of capital | — | (0.10 | ) | (0.24 | ) | (0.06 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.19 | ) | (0.45 | ) | (0.51 | ) | (0.89 | ) | (0.66 | ) | (0.85 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.41 | $ | 10.98 | $ | 10.61 | $ | 9.68 | $ | 11.46 | $ | 11.60 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (3.53 | %) | 7.99 | % | 15.38 | % | (7.66 | %) | 4.64 | % | (2.18 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 3.86 | % †† | 4.86 | % | 5.50 | %(c) | 6.01 | % | 5.71 | % | 5.49 | % | ||||||||||||||||
Net expenses | 1.45 | % †† | 1.42 | % | 1.42 | %(d) | 1.41 | % | 1.34 | % | 1.30 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.47 | % †† | 1.42 | % | 1.42 | % | 1.41 | % | 1.34 | % | 1.30 | % | ||||||||||||||||
Portfolio turnover rate | 29 | % | 37 | % | 38 | % | 19 | % | 20 | % | 36 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 17,277 | $ | 18,613 | $ | 32,318 | $ | 25,130 | $ | 27,033 | $ | 27,918 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.49%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.43%. |
18 | MainStay MacKay Emerging Markets Debt 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.69 | $ | 10.34 | $ | 9.44 | $ | 11.20 | $ | 11.35 | $ | 12.45 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.16 | 0.43 | 0.47 | 0.52 | 0.56 | 0.56 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.58 | ) | 0.30 | 0.86 | (1.48 | ) | (0.13 | ) | (0.91 | ) | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | 0.01 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.42 | ) | 0.72 | 1.34 | (0.94 | ) | 0.43 | (0.34 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.29 | ) | (0.20 | ) | (0.54 | ) | (0.55 | ) | (0.76 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | — | ||||||||||||||||||||
Return of capital | — | (0.08 | ) | (0.24 | ) | (0.06 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.37 | ) | (0.44 | ) | (0.82 | ) | (0.58 | ) | (0.76 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.12 | $ | 10.69 | $ | 10.34 | $ | 9.44 | $ | 11.20 | $ | 11.35 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (3.89 | %) | 7.20 | % | 14.60 | % | (8.36 | %) | 3.87 | % | (2.89 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 3.11 | % †† | 4.11 | % | 4.78 | %(c) | 5.24 | % | 4.97 | % | 4.70 | % | ||||||||||||||||
Net expenses | 2.20 | % †† | 2.17 | % | 2.17 | %(d) | 2.16 | % | 2.09 | % | 2.05 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 2.22 | % †† | 2.17 | % | 2.17 | % | 2.16 | % | 2.09 | % | 2.05 | % | ||||||||||||||||
Portfolio turnover rate | 29 | % | 37 | % | 38 | % | 19 | % | 20 | % | 36 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 4,735 | $ | 6,012 | $ | 7,506 | $ | 8,111 | $ | 12,109 | $ | 15,290 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 4.77%. |
(d) | Without the custody fee reimbursement, net expenses would have been 2.18%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.70 | $ | 10.35 | $ | 9.45 | $ | 11.22 | $ | 11.37 | $ | 12.46 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.16 | 0.43 | 0.47 | 0.52 | 0.56 | 0.56 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.57 | ) | 0.29 | 0.86 | (1.49 | ) | (0.13 | ) | (0.90 | ) | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.00 | )‡ | 0.01 | 0.02 | (0.00 | )‡ | 0.01 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.41 | ) | 0.72 | 1.34 | (0.95 | ) | 0.43 | (0.33 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.29 | ) | (0.20 | ) | (0.54 | ) | (0.55 | ) | (0.76 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | — | ||||||||||||||||||||
Return of capital | — | (0.08 | ) | (0.24 | ) | (0.06 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.15 | ) | (0.37 | ) | (0.44 | ) | (0.82 | ) | (0.58 | ) | (0.76 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.14 | $ | 10.70 | $ | 10.35 | $ | 9.45 | $ | 11.22 | $ | 11.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (3.89 | %) | 7.19 | % | 14.58 | % | (8.43 | %) | 3.87 | % | (2.80 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 3.10 | % †† | 4.11 | % | 4.77 | %(c) | 5.24 | % | 4.97 | % | 4.69 | % | ||||||||||||||||
Net expenses | 2.20 | % †† | 2.17 | % | 2.17 | %(d) | 2.16 | % | 2.09 | % | 2.05 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 2.22 | % †† | 2.17 | % | 2.17 | % | 2.16 | % | 2.09 | % | 2.05 | % | ||||||||||||||||
Portfolio turnover rate | 29 | % | 37 | % | 38 | % | 19 | % | 20 | % | 36 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 24,485 | $ | 28,270 | $ | 35,789 | $ | 37,808 | $ | 56,199 | $ | 68,629 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 4.76%. |
(d) | Without the custody fee reimbursement, net expenses would have been 2.18%. |
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 10.90 | $ | 10.53 | $ | 9.61 | $ | 11.39 | $ | 11.53 | $ | 12.63 | ||||||||||||||||
|
| �� |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net investment income (loss) (a) | 0.23 | 0.56 | 0.59 | 0.65 | 0.71 | 0.71 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.59 | ) | 0.32 | 0.88 | (1.52 | ) | (0.14 | ) | (0.93 | ) | ||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | 0.01 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.36 | ) | 0.87 | 1.48 | (0.85 | ) | 0.57 | (0.21 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.21 | ) | (0.39 | ) | (0.32 | ) | (0.65 | ) | (0.68 | ) | (0.89 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | — | ||||||||||||||||||||
Return of capital | — | (0.11 | ) | (0.24 | ) | (0.06 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.21 | ) | (0.50 | ) | (0.56 | ) | (0.93 | ) | (0.71 | ) | (0.89 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 10.33 | $ | 10.90 | $ | 10.53 | $ | 9.61 | $ | 11.39 | $ | 11.53 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (3.33 | %) | 8.54 | % | 15.90 | % | (7.30 | %) | 5.11 | % | (1.73 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 4.34 | % †† | 5.22 | % | 5.96 | %(c) | 6.38 | % | 6.13 | % | 5.86 | % | ||||||||||||||||
Net expenses | 0.98 | % †† | 0.97 | % | 0.97 | %(d) | 0.98 | % | 0.92 | % | 0.91 | % | ||||||||||||||||
Portfolio turnover rate | 29 | % | 37 | % | 38 | % | 19 | % | 20 | % | 36 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 13,488 | $ | 22,717 | $ | 13,759 | $ | 16,825 | $ | 41,174 | $ | 43,678 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.95%. |
(d) | Without the custody fee reimbursement, net expenses would have been 0.98%. |
20 | MainStay MacKay Emerging Markets Debt 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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the ‘‘Funds’’). These financial statements and Notes relate to the MainStay MacKay Emerging Markets Debt Fund (formerly known as MainStay Emerging Markets Debt 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 has seven classes of shares registered for sale. 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 R6 and Class T shares were registered for sale effective as of February 28, 2017. As of the six-month period ended April 30, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made
within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class T shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek current income. 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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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)).
21 |
Notes to Financial Statements (Unaudited) (continued)
To assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 the security’s 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, 2018, 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 the 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, 2018, 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
22 | MainStay MacKay Emerging Markets Debt Fund |
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 and 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. Securities valued using the amortized cost method are not valued using quoted prices in an active market and 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 its 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 tax 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 reclaimable. The Fund will accrue such taxes and reclaims 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 determinations using 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. 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, to the extent the Fund held any such securities during the six-month period ended April 30, 2018, is accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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 all or a portion of any interest receivables when the collection of all or a portion of such 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
23 |
Notes to Financial Statements (Unaudited) (continued)
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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be limited or subject to delay, 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 risks such as 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 NAVs and may result in a loss to the Fund. As of April 30, 2018, the Fund did not hold any futures contracts.
(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 instruments 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
24 | MainStay MacKay Emerging Markets Debt Fund |
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 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.
(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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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, 2018, the Fund did not have any portfolio securities on loan.
(M) High Yield and General Debt Securities Risk. The Fund’s principal investments include high yield debt securities (commonly referred to as “junk bonds”), which are 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. In times of unusual or adverse market economic or political conditions, these securities may experience higher than normal default rates.
(N) Foreign Securities Risk. The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. 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, among other things, economic or political developments in a specific country, industry or region.
(O) 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.
(P) 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 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.
25 |
Notes to Financial Statements (Unaudited) (continued)
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2018:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Total | ||||||||
Forward Contracts | Net realized gain (loss) on foreign currency forward contracts | $ | (33,163 | ) | $ | (33,163 | ) | |||
|
| |||||||||
Total Realized Gain (Loss) | $ | (33,163 | ) | $ | (33,163 | ) | ||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Location | Foreign Exchange Contracts Risk | Total | ||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | $ | 33,163 | $ | 33,163 | |||||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 33,163 | $ | 33,163 | ||||||
|
|
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 attributable to 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 an 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 the services performed and the 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, 2018, 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.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 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.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $628,327 and waived its fees and/or reimbursed expenses in the amount of $4,894.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Investor Class and Class T Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class T shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class T 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 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.
(C) Sales Charges. During the six-month period ended April 30, 2018, the Fund was advised by the Distributor that the amount of initial
26 | MainStay MacKay Emerging Markets Debt Fund |
sales charges retained on sales of Class A and Investor Class shares were $9,994 and 2,648, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $1,200, $15, $2,579 and $633, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 63,541 | ||
Investor Class | 31,668 | |||
Class B | 9,537 | |||
Class C | 46,729 | |||
Class I | 11,475 |
(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, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class A | $ | 225,576 | 0.2 | % |
Note 4–Federal Income Tax
As of April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Appreciation | Gross Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 156,059,386 | $ | 4,520,026 | $ | (7,069,051 | ) | $ | (2,549,025 | ) |
As of October 31, 2017, for federal income tax purposes, capital loss carryforwards of $9,191,064 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) | ||
Unlimited | $409 | $8,782 |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 5,951,074 | ||
Return of Capital | 1,741,165 | |||
Total | $ | 7,692,239 |
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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
27 |
Notes to Financial Statements (Unaudited) (continued)
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $48,976 and $68,727, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 496,936 | $ | 5,324,856 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 169,869 | 1,801,766 | ||||||
Shares redeemed | (1,151,369 | ) | (12,317,881 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (484,564 | ) | (5,191,259 | ) | ||||
Shares converted into Class A (See Note 1) | 78,524 | 841,030 | ||||||
Shares converted from Class A (See Note 1) | (29,849 | ) | (313,431 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (435,889 | ) | $ | (4,663,660 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,720,190 | $ | 18,241,855 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 391,795 | 4,118,552 | ||||||
Shares redeemed | (3,187,906 | ) | (33,535,669 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,075,921 | ) | (11,175,262 | ) | ||||
Shares converted into Class A (See Note 1) | 845,728 | 9,165,350 | ||||||
Shares converted from Class A (See Note 1) | (65,390 | ) | (688,356 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (295,583 | ) | $ | (2,698,268 | ) | |||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 63,646 | $ | 688,761 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 28,470 | 304,696 | ||||||
Shares redeemed | (115,493 | ) | (1,245,992 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (23,377 | ) | (252,535 | ) | ||||
Shares converted into Investor Class (See Note 1) | 55,675 | 594,692 | ||||||
Shares converted from Investor Class (See Note 1) | (67,539 | ) | (729,949 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (35,241 | ) | $ | (387,792 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 206,404 | $ | 2,189,642 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 97,225 | 1,028,872 | ||||||
Shares redeemed | (926,723 | ) | (9,604,953 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (623,094 | ) | (6,386,439 | ) | ||||
Shares converted into Investor Class (See Note 1) | 101,894 | 1,087,744 | ||||||
Shares converted from Investor Class (See Note 1) | (829,412 | ) | (9,072,093 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,350,612 | ) | $ | (14,370,788 | ) | |||
|
|
|
|
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 8,153 | $ | 84,892 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,406 | 66,694 | ||||||
Shares redeemed | (72,148 | ) | (756,203 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (57,589 | ) | (604,617 | ) | ||||
Shares converted from Class B (See Note 1) | (37,368 | ) | (392,342 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (94,957 | ) | $ | (996,959 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 38,191 | $ | 390,440 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 21,259 | 218,872 | ||||||
Shares redeemed | (150,945 | ) | (1,558,335 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (91,495 | ) | (949,023 | ) | ||||
Shares converted from Class B (See Note 1) | (72,105 | ) | (749,331 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (163,600 | ) | $ | (1,698,354 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 67,891 | $ | 713,618 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 32,619 | 339,786 | ||||||
Shares redeemed | (326,314 | ) | (3,435,560 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (225,804 | ) | (2,382,156 | ) | ||||
Shares converted from Class C (See Note 1) | (1,151 | ) | (12,281 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (226,955 | ) | $ | (2,394,437 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 234,518 | $ | 2,424,850 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 94,874 | 978,127 | ||||||
Shares redeemed | (1,144,331 | ) | (11,808,340 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (814,939 | ) | (8,405,363 | ) | ||||
Shares converted from Class C (See Note 1) | (1,261 | ) | (13,330 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (816,200 | ) | $ | (8,418,693 | ) | |||
|
|
|
| |||||
28 | MainStay MacKay Emerging Markets Debt Fund |
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 414,219 | $ | 4,408,516 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 30,120 | 320,144 | ||||||
Shares redeemed | (1,224,454 | ) | (12,953,061 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (780,115 | ) | (8,224,401 | ) | ||||
Shares converted into Class I (See Note 1) | 1,130 | 12,281 | ||||||
|
|
|
| |||||
Net increase (decrease) | (778,985 | ) | $ | (8,212,120 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,896,970 | $ | 20,446,306 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 51,546 | 546,482 | ||||||
Shares redeemed | (1,196,200 | ) | (12,595,372 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 752,316 | 8,397,416 | ||||||
Shares converted into Class I (See Note 1) | 25,884 | 270,016 | ||||||
|
|
|
| |||||
Net increase (decrease) | 778,200 | $ | 8,667,432 | |||||
|
|
|
|
Note 10–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
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, 2018, events and transactions subsequent to April 30, 2018, 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 (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay Emerging Markets Debt Fund (now known as the MainStay MacKay Emerging Markets Debt 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 decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, together with responses from New York Life Investments and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
30 | MainStay MacKay Emerging Markets Debt Fund |
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of MacKay Shields and continuous analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and MacKay Shields’ track record 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, resources and history. The Board considered that New York Life Investments’ and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the
Board recognized 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, including reputational and other indirect benefits.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services
32 | MainStay MacKay Emerging Markets Debt Fund |
provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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 MacKay Emerging Markets Debt Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1738550 MS126-18 | MSEMD10-06/18 (NYLIM) NL020 |
MainStay MacKay Government Fund (Formerly known as MainStay Government Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 1/3/1995 | | | –6.40 –1.99 | %
| | –5.62 –1.17 | %
| | –0.53 0.39 | %
| | 1.99 2.46 | %
| | 1.00 1.00 | %
| ||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –6.55 –2.14 |
| | –5.94 –1.50 | | | –0.80 0.11 | | | 1.77 2.24 | | | 1.30 1.30 |
| ||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First | With sales charges Excluding sales charges | | 5/1/1986 | | | –7.36 –2.52 |
| | –7.08 –2.25 | | | –1.01 –0.64 | | | 1.49 1.49 | | | 2.05 2.05 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | –3.37 –2.40 |
| | –3.10 –2.13 | | | –0.61 –0.61 | | | 1.49 1.49 | | | 2.05 2.05 |
| ||||||||
Class I Shares | No Sales Charge | 1/2/2004 | –1.84 | –0.80 | 0.66 | 2.75 | 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, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six | One Year | Five Years | Ten Years | ||||||||||||
Bloomberg Barclays U.S. Government Bond Index4 | –1.78 | % | –1.04 | % | 0.74 | % | 2.77 | % | ||||||||
Morningstar Intermediate Government Category Average5 | –1.84 | –1.25 | 0.59 | 2.76 |
4. | The Bloomberg Barclays U.S. Government Bond Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg Barclays U.S. Government Bond Index consists of publicly issued debt of the U.S. Treasury and government agencies. Results assume 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. Results are based on average total returns of similar funds 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 MacKay Government Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 980.10 | $ | 4.91 | $ | 1,019.80 | $ | 5.01 | 1.00% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 978.60 | $ | 6.52 | $ | 1,018.20 | $ | 6.66 | 1.33% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 974.80 | $ | 10.18 | $ | 1,014.50 | $ | 10.39 | 2.08% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 976.00 | $ | 10.19 | $ | 1,014.50 | $ | 10.39 | 2.08% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 981.60 | $ | 3.68 | $ | 1,021.10 | $ | 3.76 | 0.75% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2018 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
Top Ten Holdings as of April 30, 2018 (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. | Government National Mortgage Association (Mortgage Pass-Through Securities), 4.00%, due 10/15/41 |
5. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 3.00%, due 6/1/45 |
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. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 3.00%, due 4/1/43 |
9. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 3.50%, due 8/1/43 |
10. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 4.00%, due 12/1/40 |
8 | MainStay MacKay 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 MacKay Government Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MacKay Government Fund returned –1.99% for Class A shares, –2.14% for Investor Class shares, –2.52% for Class B shares and –2.40% for Class C shares for the six months ended April 30, 2018. Over the same period, the Fund’s Class I shares returned –1.84%. For the six months ended April 30, 2018, all share classes underperformed the –1.78% return of the Bloomberg Barclays U.S. Government Bond Index,1 which is the Fund’s broad-based securities-market index. Over the same period, Class I shares performed in line with—and all other share classes underperformed—the –1.84% return of the Morningstar Intermediate Government Category Average.2 See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Government Fund was renamed MainStay MacKay Government Fund. For more information on this change, please refer to the supplement dated December 15, 2017.
What factors affected the Fund’s relative performance during the reporting period?
During the reporting period, the Fund’s performance relative to the Bloomberg Barclays U.S. Government Bond Index was affected primarily by four factors: duration3 positioning, yield-curve4 posture, sector weightings and issue selection.
During the reporting period, the spread5 between the 2- and 30-year U.S. Treasury benchmark yields narrowed. This flattening of the yield curve detracted from the Fund’s performance relative to the Bloomberg Barclays U.S. Government Bond Index, which was more concentrated in longer-duration securities.
The Fund’s duration was shorter than that of the Bloomberg Barclays U.S. Government Bond Index during the reporting period. As a result, the Fund was less sensitive to changes in U.S. Treasury yields than the benchmark and longer-duration peers. The short-duration posture was beneficial for the Fund’s relative performance, as yields rose across the yield curve.
Agency mortgage pass-through securities6 were the largest class of securities in the Fund. The Fund’s commitment to agency mortgage pass-through securities imparted a yield advantage over lower-yielding U.S. Treasury securities and agency debentures. This benefit was reinforced by the outperformance of agency mortgage-backed securities relative to comparable-duration U.S. Treasury securities. The Federal Reserve slowed the pace of reinvestment of principal runoff from its sizeable mortgage position, but investors took the news in stride. The Fund’s strong commitment to mortgage-backed securities helped the Fund’s performance relative to the Bloomberg Barclays U.S. Government Bond Index, which holds no mortgage-backed securities.
As mortgage rates rise and refinancing opportunities fade, the primary driver of the mortgage market transitions from refinancing to housing turnover and prepayment speeds tend to slow. We moderate the effect of slower prepayments by owning mortgage securities backed by loans whose borrowers are less responsive to mortgage rate changes. This contributed positively to the Fund’s relative performance.
The Fund benefited from mortgage securities backed by 30-year loans because longer loan terms offered exposure to a broader segment of the U.S. Treasury yield curve. Their wide cash-flow window, in turn, aligned well with a flatter yield curve. As a consequence, the yield-curve trajectory during the reporting period would have been less promising for peers with larger commitments to mortgage securities backed by shorter-term loans, such as 10- or 20-year loans.
What was the Fund’s duration strategy during the reporting period?
The Fund’s duration extended from 4.60 to 5.25 years during the reporting period. Over the same period, the Bloomberg Barclays U.S. Government Bond Index’s duration fell from 6.1 to 5.9 years. Having a shorter duration than the benchmark helped the Fund’s relative performance because U.S. Treasury yields rose, on average, across the yield curve. The Fund’s duration extension signaled the propensity of mortgage-backed securities to lengthen as residential mortgage rates rise and refinancing opportunities abate.
1. | See footnote on page 6 for more information on the Bloomberg 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 |
During the reporting period, which aspects of the Fund’s positioning were the strongest positive contributors to the Fund’s relative performance and which aspects detracted the most?
Duration was the principal contributor to the Fund’s performance relative to the Bloomberg Barclays U.S. Government Bond Index. (Contributions take weightings and total returns into account.) Because the Fund was positioned to be less sensitive to changes in U.S. Treasury yields, it benefited as U.S. Treasury yields rose during the reporting period.
The yield advantage of mortgage-backed securities relative to comparable-duration U.S. Treasury securities contributed to the Fund’s absolute and relative performance.
The Fund’s commitment to mortgage-backed securities, which outperformed comparable-duration U.S. Treasury securities, contributed positively to performance relative to the benchmark. We favored mortgage-backed securities with stable cash flows, which better positioned the Fund to withstand higher mortgage rates. Most of the Fund’s residential mortgage exposure is taken through mortgage pass-through securities rather than collateralized mortgage obligations (CMOs). In our opinion, the compensation demanded by the market for the better predictability of CMO cash-flows was excessive.
The reporting period highlighted a housing market buoyed by rising home prices (which promotes turnover) and higher mortgage rates (which dampens affordability). To mute the impact of this environment, the Fund emphasized mortgage pass-through securities whose underlying loan pools were less sensitive to changes in mortgage rates, which helped the Fund’s relative performance. These “call-protected” pass-through securities can be a source of better value because the loan pools tend to be less responsive to mortgage rate volatility. This, in turn, stabilizes prepayment speeds and enables investors to preserve more of the security’s yield. A loan pool made up of smaller-balance loans (for example, a loan pool where no mortgage is larger than $150,000) is one instance of a mortgage-backed security with superior call protection.
We diversified a portion of the Fund away from agency mortgage-backed securities to avoid concentration risk, and this
positioning benefited the Fund. Other investments in the Fund included agency debentures, commercial mortgage-backed securities and asset-backed securities.
Issue selection, specifically our willingness to favor Fannie Mae/Freddie Mac passthroughs over Ginnie Mae issues, also contributed positively to the Fund’s relative performance. Ginnie Mae prepayment rates accelerated as mortgage servicers actively refinanced loans. Another aspect of issue selection, our willingness to favor 30-year loan terms over shorter (15- and 20-year) loan terms, had mixed results on the Fund’s relative performance. Loans with 30-year terms tend to be more sensitive to a flatter U.S. Treasury yield curve because they enjoy a wider cash-flow window (as described above), so these loans tended to outperform during the reporting period. When the flatter yield curve coincides with rising U.S. Treasury security yields, however, the benefits of a wider cash-flow window can be offset by the longer duration of the 30-year loans.
The flattening of the yield curve was a detractor from the Fund’s relative performance.
Did the Fund make any purchases or sales during the reporting period?
Sector exposures remained relatively stable during the reporting period. We were inclined to recycle mortgage prepayments back into the mortgage sector.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund held underweight positions relative to the Bloomberg 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, 2018, the Fund’s collective non-government exposure was about 5% of net assets, and the Fund held about 1% 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 MacKay Government Fund |
Portfolio of Investments April 30, 2018 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 98.8%† Asset-Backed Securities 1.3% |
| |||||||
Other Asset-Backed Securities 0.2% |
| |||||||
Small Business Administration Participation Certificates | $ | 271,168 | $ | 267,795 | ||||
|
| |||||||
Utilities 1.1% |
| |||||||
Atlantic City Electric Transition Funding LLC | 1,160,489 | 1,216,905 | ||||||
|
| |||||||
Total Asset-Backed Securities | 1,484,700 | |||||||
|
| |||||||
Corporate Bonds 0.9% | ||||||||
Electric 0.9% |
| |||||||
Duke Energy Florida Project Finance LLC | 1,100,000 | 1,013,459 | ||||||
|
| |||||||
Total Corporate Bonds | 1,013,459 | |||||||
|
| |||||||
Mortgage-Backed Securities 2.3% | ||||||||
Commercial Mortgage Loans |
| |||||||
BXP Trust | 1,055,000 | 1,027,886 | ||||||
Four Times Square Trust | 600,251 | 630,670 | ||||||
|
| |||||||
1,658,556 | ||||||||
|
| |||||||
Residential Mortgages (Collateralized Mortgage Obligations) 0.8% |
| |||||||
Citigroup Mortgage Loan Trust, Inc. | 150,066 | 138,817 | ||||||
Mortgage Equity Conversion Asset Trust | 915,965 | 827,413 | ||||||
|
| |||||||
966,230 | ||||||||
|
| |||||||
Total Mortgage-Backed Securities | 2,624,786 | |||||||
|
|
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies 94.3% | ||||||||
Fannie Mae Strip (Collateralized Mortgage Obligations) 0.0%‡(g) |
| |||||||
Series 360, Class 2, IO | $ | 141,252 | $ | 29,686 | ||||
Series 361, Class 2, IO | 29,505 | 6,973 | ||||||
|
| |||||||
36,659 | ||||||||
|
| |||||||
Federal Home Loan Mortgage Corporation |
| |||||||
2.50%, due 8/1/46 | 1,130,303 | 1,051,877 | ||||||
3.00%, due 4/1/45 | 2,178,059 | 2,109,402 | ||||||
¨3.00%, due 6/1/45 | 2,707,867 | 2,621,039 | ||||||
3.00%, due 7/1/45 | 1,209,518 | 1,170,077 | ||||||
3.00%, due 5/1/46 | 759,973 | 733,967 | ||||||
3.23% (1 Year Treasury Constant Maturity Rate + 2.25%), due 6/1/35 (d) | 100,659 | 106,534 | ||||||
3.50%, due 10/1/25 | 221,292 | 224,279 | ||||||
3.50%, due 11/1/25 | 1,441,377 | 1,460,625 | ||||||
3.50%, due 4/1/42 | 739,665 | 740,552 | ||||||
3.50%, due 5/1/42 | 579,275 | 579,970 | ||||||
3.50%, due 7/1/42 | 289,820 | 290,168 | ||||||
3.50%, due 6/1/43 | 753,901 | 754,806 | ||||||
¨3.50%, due 8/1/43 | 2,407,004 | 2,409,889 | ||||||
3.50%, due 1/1/44 | 802,828 | 803,791 | ||||||
3.50%, due 5/1/44 | 259,065 | 259,376 | ||||||
3.50%, due 3/1/45 | 995,559 | 993,054 | ||||||
3.50%, due 12/1/45 | 426,396 | 425,323 | ||||||
3.50%, due 5/1/46 | 612,075 | 609,779 | ||||||
3.597% (1 Year Treasury Constant Maturity Rate + 2.25%), due 2/1/37 (d) | 37,297 | 39,108 | ||||||
3.673% (12 Month LIBOR + 1.625%), due 3/1/35 (d) | 19,826 | 20,675 | ||||||
4.00%, due 3/1/25 | 559,155 | 579,637 | ||||||
4.00%, due 7/1/25 | 244,382 | 253,558 | ||||||
4.00%, due 8/1/31 | 93,630 | 96,839 | ||||||
4.00%, due 8/1/39 | 201,817 | 207,338 | ||||||
¨4.00%, due 12/1/40 | 2,248,334 | 2,312,950 | ||||||
¨4.00%, due 2/1/41 | 3,559,493 | 3,660,888 | ||||||
¨4.00%, due 3/1/41 | 3,747,443 | 3,855,358 | ||||||
4.00%, due 4/1/41 | 358,861 | 368,857 | ||||||
4.00%, due 1/1/42 | 1,949,834 | 2,005,962 | ||||||
4.00%, due 12/1/42 | 581,091 | 597,482 | ||||||
4.00%, due 11/1/43 | 173,966 | 178,143 | ||||||
4.00%, due 2/1/46 | 928,481 | 949,999 | ||||||
4.50%, due 3/1/41 | 450,018 | 474,937 | ||||||
4.50%, due 8/1/41 | 700,678 | 738,597 | ||||||
5.00%, due 1/1/20 | 26,820 | 26,965 | ||||||
5.00%, due 6/1/33 | 291,926 | 311,843 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund's 10 largest holdings, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
Federal Home Loan Mortgage Corporation |
| |||||||
5.00%, due 8/1/33 | $ | 241,100 | $ | 257,443 | ||||
5.00%, due 5/1/36 | 269,573 | 288,013 | ||||||
5.00%, due 10/1/39 | 621,566 | 670,497 | ||||||
5.50%, due 1/1/21 | 95,106 | 97,329 | ||||||
5.50%, due 11/1/35 | 278,619 | 308,115 | ||||||
5.50%, due 11/1/36 | 66,099 | 73,011 | ||||||
6.50%, due 4/1/37 | 59,541 | 67,068 | ||||||
|
| |||||||
35,785,120 | ||||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
2.00%, due 11/1/31 | 859,267 | 815,740 | ||||||
2.50%, due 2/1/43 | 745,866 | 698,436 | ||||||
3.00%, due 10/1/32 | 695,237 | 685,737 | ||||||
¨3.00%, due 4/1/43 | 2,485,674 | 2,418,466 | ||||||
3.00%, due 3/1/46 | 864,244 | 835,039 | ||||||
3.00%, due 9/1/46 | 2,198,924 | 2,110,221 | ||||||
3.00%, due 10/1/46 | 1,675,572 | 1,607,917 | ||||||
3.00%, due 2/1/57 | 953,580 | 912,339 | ||||||
3.152% (6 Month LIBOR + 1.548%), due 11/1/34 (d) | 82,627 | 85,458 | ||||||
3.339% (12 Month LIBOR + 1.59%), due 4/1/34 (d) | 211,052 | 222,930 | ||||||
3.50%, due 11/1/25 | 723,987 | 734,058 | ||||||
3.50%, due 11/1/32 | 514,177 | 520,679 | ||||||
3.50%, due 2/1/41 | 1,496,936 | 1,497,364 | ||||||
¨3.50%, due 11/1/41 | 2,554,311 | 2,558,713 | ||||||
3.50%, due 12/1/41 | 289,282 | 289,156 | ||||||
3.50%, due 1/1/42 | 1,340,379 | 1,342,946 | ||||||
3.50%, due 3/1/42 | 1,626,680 | 1,627,150 | ||||||
3.50%, due 8/1/42 | 1,039,714 | 1,038,084 | ||||||
3.50%, due 12/1/42 | 671,457 | 673,315 | ||||||
3.50%, due 2/1/43 | 932,508 | 932,837 | ||||||
3.50%, due 5/1/43 | 514,113 | 513,623 | ||||||
3.50%, due 6/1/43 | 674,115 | 673,058 | ||||||
4.00%, due 9/1/31 | 917,120 | 948,190 | ||||||
4.00%, due 2/1/41 | 1,080,288 | 1,110,104 | ||||||
4.00%, due 3/1/41 | 1,615,138 | 1,665,008 | ||||||
4.00%, due 10/1/41 | 361,716 | 372,894 | ||||||
4.00%, due 3/1/42 | 960,232 | 985,498 | ||||||
4.00%, due 4/1/42 | 454,057 | 466,053 | ||||||
4.00%, due 6/1/42 | 1,385,148 | 1,419,956 | ||||||
4.00%, due 7/1/42 | 1,211,517 | 1,241,840 | ||||||
4.50%, due 11/1/18 | 41,300 | 41,604 | ||||||
4.50%, due 6/1/23 | 181,595 | 187,259 | ||||||
4.50%, due 5/1/39 | 447,663 | 472,401 | ||||||
4.50%, due 6/1/39 | 1,348,097 | 1,422,386 | ||||||
4.50%, due 7/1/39 | 1,489,589 | 1,575,550 | ||||||
4.50%, due 8/1/39 | 1,201,389 | 1,267,753 |
Principal Amount | Value | |||||||
Federal National Mortgage Association |
| |||||||
4.50%, due 9/1/40 | $ | 1,059,079 | $ | 1,120,478 | ||||
4.50%, due 12/1/40 | 1,409,177 | 1,482,959 | ||||||
¨4.50%, due 1/1/41 | 2,397,262 | 2,536,441 | ||||||
4.50%, due 2/1/41 | 760,899 | 802,066 | ||||||
4.50%, due 8/1/41 | 537,202 | 566,498 | ||||||
4.50%, due 12/1/43 | 327,756 | 343,348 | ||||||
5.00%, due 9/1/20 | 2,746 | 2,790 | ||||||
5.00%, due 11/1/33 | 297,743 | 320,688 | ||||||
5.00%, due 6/1/35 | 270,456 | 290,414 | ||||||
5.00%, due 10/1/35 | 111,467 | 119,706 | ||||||
5.00%, due 1/1/36 | 55,906 | 59,968 | ||||||
5.00%, due 2/1/36 | 410,077 | 440,366 | ||||||
5.00%, due 5/1/36 | 274,643 | 294,871 | ||||||
5.00%, due 6/1/36 | 50,656 | 54,256 | ||||||
5.00%, due 9/1/36 | 77,189 | 82,895 | ||||||
5.00%, due 3/1/40 | 747,558 | 805,977 | ||||||
5.00%, due 2/1/41 | 1,590,673 | 1,723,958 | ||||||
5.50%, due 6/1/19 | 73,786 | 74,285 | ||||||
5.50%, due 11/1/19 | 81,045 | 81,796 | ||||||
5.50%, due 4/1/21 | 175,789 | 179,784 | ||||||
5.50%, due 6/1/33 | 841,016 | 923,043 | ||||||
5.50%, due 11/1/33 | 487,966 | 534,767 | ||||||
5.50%, due 12/1/33 | 593,074 | 649,846 | ||||||
5.50%, due 6/1/34 | 150,782 | 165,519 | ||||||
5.50%, due 12/1/34 | 43,892 | 47,987 | ||||||
5.50%, due 3/1/35 | 248,829 | 272,139 | ||||||
5.50%, due 12/1/35 | 58,426 | 63,938 | ||||||
5.50%, due 4/1/36 | 170,259 | 186,388 | ||||||
5.50%, due 9/1/36 | 62,240 | 68,295 | ||||||
5.50%, due 7/1/37 | 186,929 | 208,632 | ||||||
6.00%, due 11/1/32 | 157,074 | 175,321 | ||||||
6.00%, due 1/1/33 | 117,611 | 131,180 | ||||||
6.00%, due 3/1/33 | 126,520 | 140,571 | ||||||
6.00%, due 9/1/34 | 48,420 | 53,827 | ||||||
6.00%, due 9/1/35 | 383,458 | 434,647 | ||||||
6.00%, due 10/1/35 | 179,464 | 202,660 | ||||||
6.00%, due 6/1/36 | 105,525 | 116,874 | ||||||
6.00%, due 11/1/36 | 208,591 | 232,901 | ||||||
6.00%, due 4/1/37 | 21,662 | 22,516 | ||||||
6.50%, due 10/1/31 | 93,880 | 104,589 | ||||||
6.50%, due 2/1/37 | 32,882 | 36,633 | ||||||
|
| |||||||
52,125,579 | ||||||||
|
| |||||||
Government National Mortgage Association |
| |||||||
3.00%, due 6/20/46 | 761,862 | 740,801 | ||||||
3.50%, due 12/20/46 | 1,401,396 | 1,409,087 | ||||||
4.00%, due 7/15/39 | 274,418 | 280,821 | ||||||
4.00%, due 9/20/40 | 1,230,213 | 1,274,844 | ||||||
4.00%, due 11/20/40 | 219,502 | 227,540 |
12 | MainStay MacKay 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 | |||||||
U.S. Government & Federal Agencies (continued) | ||||||||
Government National Mortgage Association |
| |||||||
4.00%, due 1/15/41 | $ | 1,232,590 | $ | 1,267,468 | ||||
¨4.00%, due 10/15/41 | 2,873,888 | 2,987,567 | ||||||
4.00%, due 6/20/47 | 974,645 | 988,610 | ||||||
4.50%, due 5/20/40 | 1,118,764 | 1,174,058 | ||||||
5.00%, due 2/20/41 | 272,526 | 291,011 | ||||||
6.00%, due 8/15/32 | 243,282 | 274,250 | ||||||
6.00%, due 12/15/32 | 92,541 | 103,151 | ||||||
6.50%, due 8/15/28 | 85,738 | 95,899 | ||||||
6.50%, due 4/15/31 | 237,778 | 266,473 | ||||||
|
| |||||||
11,381,580 | ||||||||
|
| |||||||
Overseas Private Investment Corporation 1.6% |
| |||||||
5.142%, due 12/15/23 | 1,697,930 | 1,775,033 | ||||||
|
| |||||||
Tennessee Valley Authority 5.6% |
| |||||||
¨4.65%, due 6/15/35 | 5,605,000 | 6,448,266 | ||||||
|
| |||||||
Total U.S. Government & Federal Agencies | 107,552,237 | |||||||
|
| |||||||
Total Long-Term Bonds | 112,675,182 | |||||||
|
| |||||||
Short-Term Investment 1.1% | ||||||||
Repurchase Agreement 1.1% | ||||||||
Fixed Income Clearing Corp. | 1,237,287 | 1,237,287 | ||||||
|
| |||||||
Total Short-Term Investment | 1,237,287 | |||||||
|
| |||||||
Total Investments | 99.9 | % | 113,912,469 | |||||
Other Assets, Less Liabilities | 0.1 | 150,214 | ||||||
Net Assets | 100.0 | % | $ | 114,062,683 |
‡ | 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, 2018. |
(c) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(d) | Floating rate—Rate shown was the rate in effect as of April 30, 2018. |
(e) | Illiquid security—As of April 30, 2018, the total market value of the security deemed illiquid under procedures approved by the Board of Trustees was $827,413, which represented 0.7% of the Fund’s net assets. |
(f) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2018, the total market value of the fair valued security was $827,413, which represented 0.7% of the Fund’s net assets. |
(g) | 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. |
The following abbreviations are used in the preceding pages:
IO—Interest Only
LIBOR—London Interbank Offered Rate
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, 2018 (Unaudited) (continued)
The following is a summary of the fair valuations according to the inputs used as of April 30, 2018, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 1,484,700 | $ | — | $ | 1,484,700 | ||||||||
Corporate Bonds | — | 1,013,459 | — | 1,013,459 | ||||||||||||
Mortgage-Backed Securities (b) | — | 1,797,373 | 827,413 | 2,624,786 | ||||||||||||
U.S. Government & Federal Agencies | — | 107,552,237 | — | 107,552,237 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 111,847,769 | 827,413 | 112,675,182 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 1,237,287 | — | 1,237,287 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | — | $ | 113,085,056 | $ | 827,413 | $ | 113,912,469 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $827,413 is held in Residential Mortgages (Collateralized Mortgage Obligations) within the Mortgage-Backed Securities 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, 2018, the Fund did not have any transfers among levels. (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 October 31, | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation | Purchases | Sales (a) | Transfers into Level 3 | Transfers out of Level 3 | Balance April 30, | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | $ | 835,554 | $ | 321 | $ | 1,985 | $ | 53,623 | $ | — | $ | (64,070 | ) | $ | — | $ | — | $ | 827,413 | $ | 46,163 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 835,554 | $ | 321 | $ | 1,985 | $ | 53,623 | $ | — | $ | (64,070 | ) | $ | — | $ | — | $ | 827,413 | $ | 46,163 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
14 | MainStay MacKay 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, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 113,912,469 | ||
Receivables: | ||||
Interest | 449,463 | |||
Fund shares sold | 8,954 | |||
Investment securities sold | 619 | |||
Other assets | 49,441 | |||
|
| |||
Total assets | 114,420,946 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 180,509 | |||
Manager (See Note 3) | 43,131 | |||
Professional fees | 36,501 | |||
NYLIFE Distributors (See Note 3) | 30,044 | |||
Shareholder communication | 24,103 | |||
Transfer agent (See Note 3) | 23,027 | |||
Custodian | 5,420 | |||
Trustees | 280 | |||
Dividend payable | 14,584 | |||
Accrued expenses | 664 | |||
|
| |||
Total liabilities | 358,263 | |||
|
| |||
Net assets | $ | 114,062,683 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 141,164 | ||
Additional paid-in capital | 115,324,854 | |||
|
| |||
115,466,018 | ||||
Undistributed net investment income | 1,734 | |||
Accumulated net realized gain (loss) on investments | (1,287,831 | ) | ||
Net unrealized appreciation (depreciation) on investments | (117,238 | ) | ||
|
| |||
Net assets | $ | 114,062,683 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 74,070,069 | ||
|
| |||
Shares of beneficial interest outstanding | 9,179,632 | |||
|
| |||
Net asset value per share outstanding | $ | 8.07 | ||
Maximum sales charge (4.50% of offering price) | 0.38 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.45 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 22,451,746 | ||
|
| |||
Shares of beneficial interest outstanding | 2,770,452 | |||
|
| |||
Net asset value per share outstanding | $ | 8.10 | ||
Maximum sales charge (4.50% of offering price) | 0.38 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.48 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 3,921,884 | ||
|
| |||
Shares of beneficial interest outstanding | 485,900 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.07 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 7,942,725 | ||
|
| |||
Shares of beneficial interest outstanding | 984,548 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.07 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 5,676,259 | ||
|
| |||
Shares of beneficial interest outstanding | 695,861 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.16 | ||
|
|
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, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 1,969,209 | ||
Other income | 366 | |||
|
| |||
Total income | 1,969,575 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 300,782 | |||
Distribution/Service—Class A (See Note 3) | 97,209 | |||
Distribution/Service—Investor Class (See Note 3) | 28,847 | |||
Distribution/Service—Class B (See Note 3) | 21,498 | |||
Distribution/Service—Class C (See Note 3) | 42,885 | |||
Transfer agent (See Note 3) | 139,214 | |||
Registration | 37,598 | |||
Professional fees | 33,201 | |||
Shareholder communication | 15,814 | |||
Custodian | 5,535 | |||
Trustees | 1,405 | |||
Miscellaneous | 5,768 | |||
|
| |||
Total expenses before waiver/reimbursement | 729,756 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (29,444 | ) | ||
|
| |||
Net expenses | 700,312 | |||
|
| |||
Net investment income (loss) | 1,269,263 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | (80,459 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (3,673,766 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | (3,754,225 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (2,484,962 | ) | |
|
|
16 | MainStay MacKay 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, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,269,263 | $ | 2,683,030 | ||||
Net realized gain (loss) on investments | (80,459 | ) | (609,487 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (3,673,766 | ) | (3,841,831 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (2,484,962 | ) | (1,768,288 | ) | ||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (903,279 | ) | (1,689,227 | ) | ||||
Investor Class | (229,572 | ) | (634,565 | ) | ||||
Class B | (26,640 | ) | (58,276 | ) | ||||
Class C | (53,141 | ) | (129,650 | ) | ||||
Class I | (83,686 | ) | (224,077 | ) | ||||
|
| |||||||
Total dividends to shareholders | (1,296,318 | ) | (2,735,795 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 2,726,926 | 27,812,690 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 1,194,824 | 2,523,795 | ||||||
Cost of shares redeemed | (14,222,667 | ) | (71,575,286 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (10,300,917 | ) | (41,238,801 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (14,082,197 | ) | (45,742,884 | ) | ||||
Net Assets | ||||||||
Beginning of period | 128,144,880 | 173,887,764 | ||||||
|
| |||||||
End of period | $ | 114,062,683 | $ | 128,144,880 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 1,734 | $ | 28,789 | ||||
|
|
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | $ | 8.57 | $ | 9.02 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.17 | 0.17 | 0.20 | 0.21 | 0.19 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.25 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | (0.41 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.16 | ) | (0.05 | ) | 0.22 | 0.10 | 0.29 | (0.22 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.10 | ) | (0.18 | ) | (0.17 | ) | (0.20 | ) | (0.21 | ) | (0.20 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.10 | ) | (0.18 | ) | (0.17 | ) | (0.22 | ) | (0.23 | ) | (0.23 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.07 | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | $ | 8.57 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (1.99 | %) | (0.60 | %) | 2.60 | % | 1.17 | % | 3.46 | % | (2.50 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.27 | % †† | 2.07 | % | 1.99 | %(c) | 2.38 | % | 2.47 | % | 2.17 | % | ||||||||||||||||
Net expenses | 1.00 | % †† | 1.00 | % | 0.98 | %(d) | 1.00 | % | 0.98 | % | 1.03 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.03 | % †† | 1.00 | % | 0.99 | % | 1.00 | % | 0.98 | % | 1.09 | % | ||||||||||||||||
Portfolio turnover rate (e) | 7 | % | 20 | % | 41 | % | 13 | % | 14 | % | 28 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 74,070 | $ | 82,828 | $ | 93,242 | $ | 90,119 | $ | 100,212 | $ | 143,234 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.98%. |
(d) | Without the custody fee reimbursement, net expenses would have been 0.99%. |
(e) | The portfolio turnover rates not including mortgage dollar rolls were 1%, 6%, 16% and 7% for the six months ended April 30, 2018 and the years ended October 31, 2017, 2016, and 2013, respectively. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.36 | $ | 8.59 | $ | 8.54 | $ | 8.66 | $ | 8.60 | $ | 9.05 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.08 | 0.15 | 0.15 | 0.18 | 0.19 | 0.18 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.26 | ) | (0.23 | ) | 0.05 | (0.10 | ) | 0.08 | (0.42 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.18 | ) | (0.08 | ) | 0.20 | 0.08 | 0.27 | (0.24 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.08 | ) | (0.15 | ) | (0.15 | ) | (0.18 | ) | (0.19 | ) | (0.18 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.08 | ) | (0.15 | ) | (0.15 | ) | (0.20 | ) | (0.21 | ) | (0.21 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.10 | $ | 8.36 | $ | 8.59 | $ | 8.54 | $ | 8.66 | $ | 8.60 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (2.14 | %) | (0.91 | %) | 2.34 | % | 0.88 | % | 3.15 | % | (2.66 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.95 | % †† | 1.77 | % | 1.74 | %(c) | 2.11 | % | 2.19 | % | 2.01 | % | ||||||||||||||||
Net expenses | 1.33 | % †† | 1.30 | % | 1.23 | %(d) | 1.28 | % | 1.26 | % | 1.19 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.43 | % †† | 1.30 | % | 1.24 | % | 1.28 | % | 1.26 | % | 1.25 | % | ||||||||||||||||
Portfolio turnover rate (e) | 7 | % | 20 | % | 41 | % | 13 | % | 14 | % | 28 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 22,452 | $ | 24,187 | $ | 40,094 | $ | 42,444 | $ | 45,947 | $ | 50,200 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.73%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.24%. |
(e) | The portfolio turnover rates not including mortgage dollar rolls were 1%, 6%, 16% and 7% for the six months ended April 30, 2018 and the years ended October 31, 2017, 2016, and 2013, respectively. |
18 | MainStay MacKay 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | $ | 8.57 | $ | 9.02 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.05 | 0.08 | 0.08 | 0.12 | 0.12 | 0.11 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.26 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | (0.42 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.21 | ) | (0.14 | ) | 0.13 | 0.02 | 0.20 | (0.31 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.05 | ) | (0.09 | ) | (0.08 | ) | (0.12 | ) | (0.12 | ) | (0.11 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.05 | ) | (0.09 | ) | (0.08 | ) | (0.14 | ) | (0.14 | ) | (0.14 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.07 | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | $ | 8.57 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (2.52 | %) | (1.66 | %) | 1.59 | % | 0.14 | % | 2.38 | % | (3.40 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.19 | % †† | 1.01 | % | 0.99 | %(c) | 1.35 | % | 1.44 | % | 1.26 | % | ||||||||||||||||
Net expenses | 2.08 | % †† | 2.05 | % | 1.98 | %(d) | 2.03 | % | 2.01 | % | 1.94 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 2.18 | % †† | 2.05 | % | 1.99 | % | 2.03 | % | 2.01 | % | 2.00 | % | ||||||||||||||||
Portfolio turnover rate (e) | 7 | % | 20 | % | 41 | % | 13 | % | 14 | % | 28 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,922 | $ | 4,730 | $ | 7,154 | $ | 8,363 | $ | 10,550 | $ | 14,783 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.98%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.99%. |
(e) | The portfolio turnover rates not including mortgage dollar rolls were 1%, 6%, 16% and 7% for the six months ended April 30, 2018 and the years ended October 31, 2017, 2016, and 2013, respectively. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.32 | $ | 8.55 | $ | 8.50 | $ | 8.62 | $ | 8.56 | $ | 9.01 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.05 | 0.08 | 0.08 | 0.12 | 0.12 | 0.11 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.25 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | (0.42 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.20 | ) | (0.14 | ) | 0.13 | 0.02 | 0.20 | (0.31 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.05 | ) | (0.09 | ) | (0.08 | ) | (0.12 | ) | (0.12 | ) | (0.11 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.05 | ) | (0.09 | ) | (0.08 | ) | (0.14 | ) | (0.14 | ) | (0.14 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.07 | $ | 8.32 | $ | 8.55 | $ | 8.50 | $ | 8.62 | $ | 8.56 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (2.40 | %) | (1.66 | %) | 1.59 | % | 0.14 | % | 2.39 | % | (3.41 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.19 | % †† | 1.00 | % | 0.99 | %(c) | 1.34 | % | 1.44 | % | 1.24 | % | ||||||||||||||||
Net expenses | 2.08 | % †† | 2.05 | % | 1.98 | %(d) | 2.03 | % | 2.01 | % | 1.94 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 2.18 | % †† | 2.05 | % | 1.99 | % | 2.03 | % | 2.01 | % | 2.00 | % | ||||||||||||||||
Portfolio turnover rate (e) | 7 | % | 20 | % | 41 | % | 13 | % | 14 | % | 28 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 7,943 | $ | 9,472 | $ | 19,338 | $ | 17,073 | $ | 11,226 | $ | 12,593 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.98%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.99%. |
(e) | The portfolio turnover rates not including mortgage dollar rolls were 1%, 6%, 16% and 7% for the six months ended April 30, 2018 and the years ended October 31, 2017, 2016, and 2013, 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.42 | $ | 8.64 | $ | 8.59 | $ | 8.71 | $ | 8.65 | $ | 9.10 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.10 | 0.20 | 0.19 | 0.22 | 0.23 | 0.21 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.25 | ) | (0.22 | ) | 0.05 | (0.09 | ) | 0.09 | (0.41 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.15 | ) | (0.02 | ) | 0.24 | 0.13 | 0.32 | (0.20 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.20 | ) | (0.19 | ) | (0.23 | ) | (0.24 | ) | (0.22 | ) | ||||||||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | (0.03 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.20 | ) | (0.19 | ) | (0.25 | ) | (0.26 | ) | (0.25 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.16 | $ | 8.42 | $ | 8.64 | $ | 8.59 | $ | 8.71 | $ | 8.65 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (1.84 | %) | (0.23 | %) | 2.83 | % | 1.41 | % | 3.69 | % | (2.24 | %) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.53 | % †† | 2.33 | % | 2.16 | %(c) | 2.57 | % | 2.70 | % | 2.42 | % | ||||||||||||||||
Net expenses | 0.75 | % †† | 0.75 | % | 0.73 | %(d) | 0.75 | % | 0.73 | % | 0.78 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.78 | % †† | 0.75 | % | 0.74 | % | 0.75 | % | 0.73 | % | 0.84 | % | ||||||||||||||||
Portfolio turnover rate (e) | 7 | % | 20 | % | 41 | % | 13 | % | 14 | % | 28 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 5,676 | $ | 6,926 | $ | 14,061 | $ | 4,492 | $ | 10,020 | $ | 3,561 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 2.15%. |
(d) | Without the custody fee reimbursement, net expenses would have been 0.74%. |
(e) | The portfolio turnover rates not including mortgage dollar rolls were 1%, 6%, 16% and 7% for the six months ended April 30, 2018 and the years ended October 31, 2017, 2016, and 2013, respectively. |
20 | MainStay MacKay 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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and Notes relate to the MainStay MacKay Government Fund (formerly known as 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 has seven classes of shares registered for sale. 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 R6 and Class T shares were registered for sale effective as of February 28, 2017. As of April 30, 2018, Class R6 and Class T shares were not yet offered for sale. Investor Class shares commenced operations on February 28, 2008. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class I shares are offered at NAV without a sales charge. Class T shares are currently
expected to be offered at NAV plus an initial sales charge. Class R6 shares are currently expected to be offered at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class T shares. Class I and Class R6 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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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 assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to
21 |
Notes to Financial Statements (Unaudited) (continued)
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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 the security’s 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, 2018, 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 the 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, 2018, a security that was fair valued in such a manner is shown in the Portfolio of Investments.
22 | MainStay MacKay Government Fund |
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 and 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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 portfolio 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 the 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 materially 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 the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the 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 are
often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2018 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, 2018, 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 its 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 tax 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 determinations using 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 any 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. 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.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
23 |
Notes to Financial Statements (Unaudited) (continued)
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such 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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund.
(H) 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 securities 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).
(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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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, 2018, the Fund did not have any portfolio securities on loan.
(J) Government Risk. Investments in the Fund are not guaranteed, even though some of the Fund’s underlying investments are guaranteed by the U.S. government or its agencies or instrumentalities. The principal risk of mortgage-related and asset-backed securities is that the underlying debt may be prepaid ahead of schedule, if interest rates fall, thereby reducing the value of the Fund’s investment. If interest rates rise, less of the debt may be prepaid and the Fund may lose money because the Fund may be unable to invest in higher yielding assets. The Fund is subject to interest-rate risk and can lose principal value when interest rates rise. Bonds are also subject to credit risk, in which the bond issuer may fail to pay interest and principal in a timely manner.
(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
24 | MainStay MacKay Government Fund |
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 attributable to 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 an 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 the services performed and the facilities furnished 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.
During the six-month period ended April 30, 2018, 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 (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) for 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 except Class R6. New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019, 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.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $300,782 and waived fees/reimbursed expenses in the amount of $29,444.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Investor Class and Class T Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class T shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class T 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 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.
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $1,411 and $1,488, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $13, $2,229 and $154, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc.,
25 |
Notes to Financial Statements (Unaudited) (continued)
pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 43,764 | ||
Investor Class | 58,885 | |||
Class B | 10,972 | |||
Class C | 21,886 | |||
Class I | 3,707 |
(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 April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Appreciation | Gross Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 114,029,707 | $ | 2,490,253 | $ | (2,607,491 | ) | $ | (117,238 | ) |
As of October 31, 2017, for federal income tax purposes, capital loss carryforwards of $1,207,372 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) | ||
Unlimited | $806 | $401 |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 2,735,795 |
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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of U.S. government securities were $7,975 and $17,425, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $0 and $243, respectively.
26 | MainStay MacKay Government Fund |
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 118,949 | $ | 970,385 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 101,741 | 832,478 | ||||||
Shares redeemed | (1,018,939 | ) | (8,372,469 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (798,249 | ) | (6,569,606 | ) | ||||
Shares converted into Class A (See Note 1) | 64,535 | 529,325 | ||||||
Shares converted from Class A (See Note 1) | (33,762 | ) | (274,484 | ) | ||||
|
| |||||||
Net increase (decrease) | (767,476 | ) | $ | (6,314,765 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 442,066 | $ | 3,696,298 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 185,394 | 1,545,806 | ||||||
Shares redeemed | (3,049,836 | ) | (25,436,408 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,422,376 | ) | (20,194,304 | ) | ||||
Shares converted into Class A (See Note 1) | 1,563,241 | 13,077,517 | ||||||
Shares converted from Class A (See Note 1) | (92,688 | ) | (772,095 | ) | ||||
|
| |||||||
Net increase (decrease) | (951,823 | ) | $ | (7,888,882 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 42,867 | $ | 353,341 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 26,998 | 221,864 | ||||||
Shares redeemed | (194,824 | ) | (1,606,787 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (124,959 | ) | (1,031,582 | ) | ||||
Shares converted into Investor Class (See Note 1) | 53,093 | 434,876 | ||||||
Shares converted from Investor Class (See Note 1) | (50,228 | ) | (413,903 | ) | ||||
|
| |||||||
Net increase (decrease) | (122,094 | ) | $ | (1,010,609 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 130,052 | $ | 1,093,794 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 73,026 | 611,415 | ||||||
Shares redeemed | (607,500 | ) | (5,096,604 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (404,422 | ) | (3,391,395 | ) | ||||
Shares converted into Investor Class (See Note 1) | 169,422 | 1,419,001 | ||||||
Shares converted from Investor Class (See Note 1) | (1,539,319 | ) | (12,939,187 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,774,319 | ) | $ | (14,911,581 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 8,093 | $ | 66,326 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,027 | 24,782 | ||||||
Shares redeemed | (59,543 | ) | (489,370 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (48,423 | ) | (398,262 | ) | ||||
Shares converted from Class B (See Note 1) | (33,641 | ) | (275,814 | ) | ||||
|
| |||||||
Net increase (decrease) | (82,064 | ) | $ | (674,076 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 39,552 | $ | 330,200 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,476 | 53,997 | ||||||
Shares redeemed | (212,714 | ) | (1,777,702 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (166,686 | ) | (1,393,505 | ) | ||||
Shares converted from Class B (See Note 1) | (101,530 | ) | (847,690 | ) | ||||
|
| |||||||
Net increase (decrease) | (268,216 | ) | $ | (2,241,195 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 69,972 | $ | 574,441 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,568 | 45,565 | ||||||
Shares redeemed | (228,884 | ) | (1,880,927 | ) | ||||
|
| |||||||
Net increase (decrease) | (153,344 | ) | $ | (1,260,921 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 130,417 | $ | 1,087,194 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 12,652 | 105,425 | ||||||
Shares redeemed | (1,266,564 | ) | (10,556,654 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,123,495 | ) | $ | (9,364,035 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 91,070 | $ | 762,433 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 8,477 | 70,135 | ||||||
Shares redeemed | (226,650 | ) | (1,873,114 | ) | ||||
|
| |||||||
Net increase (decrease) | (127,103 | ) | $ | (1,040,546 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 2,565,649 | $ | 21,605,204 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 24,623 | 207,152 | ||||||
Shares redeemed | (3,402,111 | ) | (28,707,918 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (811,839 | ) | (6,895,562 | ) | ||||
Shares converted into Class I (See Note 1) | 7,422 | 62,454 | ||||||
|
| |||||||
Net increase (decrease) | (804,417 | ) | $ | (6,833,108 | ) | |||
|
|
Note 10–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting
27 |
Notes to Financial Statements (Unaudited) (continued)
change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
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, 2018, events and transactions subsequent to April 30, 2018, 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 MacKay Government Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay Government Fund (now known as the MainStay MacKay 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 decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, together with responses from New York Life Investments and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
29 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of MacKay Shields and continuous analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and MacKay Shields’ track record 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, resources and history. The Board considered that New York Life Investments’ and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the
30 | MainStay MacKay Government Fund |
long-term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with
industry practice and likely to produce reasonable profitability estimates. Although the Board recognized 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, including reputational and other indirect benefits.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of the Agreements.
32 | MainStay MacKay Government 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1737431 MS126-18 | MSG10-06/18 (NYLIM) NL007 |
MainStay MacKay High Yield Corporate Bond Fund
(Formerly known as MainStay High Yield Corporate Bond Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception | Six | One Year | Five Years or Since Inception | Ten Years or Since Inception | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –4.09 0.43 | %
| | –1.43 3.21 | %
| | 3.56 4.52 | %
| | 6.11 6.60 | %
| | 0.98 0.98 | %
| ||||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –4.08 0.44 |
| | –1.43 3.22 | | | 3.52 4.47 | | | 6.06 6.55 | | | 1.03 1.03 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 5/1/1986 | | –4.69 0.20 |
| | –2.31 2.56 | | | 3.40 3.72 | | | 5.76 5.76 | | | 1.78 1.78 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | –0.78 0.20 |
| | 1.58 2.55 | | | 3.68 3.68 | | | 5.76 5.76 | | | 1.78 1.78 |
| ||||||||||
Class I Shares | No Sales Charge | 1/2/2004 | 0.57 | 3.47 | 4.78 | 6.88 | 0.73 | |||||||||||||||||||||
Class R1 Shares | No Sales Charge | 6/29/2012 | 0.52 | 3.37 | 4.68 | 5.91 | 0.83 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 5/1/2008 | 0.39 | 3.11 | 4.38 | 6.50 | 1.08 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | 0.27 | 2.89 | 10.24 | 10.24 | 1.33 | |||||||||||||||||||||
Class R6 Shares | No Sales Charge | 6/17/2013 | 0.64 | 3.64 | 5.32 | 5.32 | 0.59 |
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, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six | One Year | Five Years | Ten Years | ||||||||||||
ICE BofA Merrill Lynch U.S. High Yield Constrained Index4 | –0.23 | % | 3.22 | % | 4.77 | % | 7.83 | % | ||||||||
Credit Suisse High Yield Index5 | –0.16 | 3.06 | 4.68 | 7.48 | ||||||||||||
Morningstar High Yield Bond Category Average6 | –0.34 | 2.63 | 3.57 | 6.32 |
4. | The ICE BofA Merrill Lynch U.S. High Yield Constrained Index is the Fund’s primary broad-based securities market index for comparison purposes. The ICE BofA Merrill Lynch U.S. High Yield Constrained Index is a market value-weighted index of all domestic and Yankee high-yield bonds, including deferred interest bonds and payment-in-kind securities. Issuers included in the Index have maturities of one year or more and have a credit rating lower than BBB-/Baa3, but are not in default. No single issuer may constitute greater than 2% of the Index. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Credit Suisse High Yield Index is the Fund’s secondary benchmark. The Credit Suisse High Yield Index is a market-weighted index that includes |
publicly traded bonds rated below BBB by S&P and Baa by Moody’s. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar High Yield Bond Category Average is representative of funds that concentrate on lower-quality bonds, which are riskier than those of higher-quality companies. These portfolios primarily invest in U.S. high-income debt securities where at least 65% or more of bond assets are not rated or are rated by a major agency such as Standard & Poor’s or Moody’s at the level of BB and below. Results are based on average total returns of similar funds 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 MacKay High Yield Corporate Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,004.30 | $ | 4.92 | $ | 1,019.90 | $ | 4.96 | 0.99% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,004.40 | $ | 5.12 | $ | 1,019.70 | $ | 5.16 | 1.03% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,002.00 | $ | 8.84 | $ | 1,016.00 | $ | 8.90 | 1.78% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,002.00 | $ | 8.84 | $ | 1,016.00 | $ | 8.90 | 1.78% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,005.70 | $ | 3.68 | $ | 1,021.10 | $ | 3.71 | 0.74% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,005.20 | $ | 4.18 | $ | 1,020.60 | $ | 4.21 | 0.84% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,003.90 | $ | 5.42 | $ | 1,019.40 | $ | 5.46 | 1.09% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,002.70 | $ | 6.65 | $ | 1,018.10 | $ | 6.71 | 1.34% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,006.40 | $ | 2.94 | $ | 1,021.90 | $ | 2.96 | 0.59% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2018 (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, 2018 (excluding short-term investment) (Unaudited)
1. | T-Mobile USA, Inc., 4.00%–6.50%, due 4/15/22–2/1/28 |
2. | CCO Holdings LLC / CCO Holdings Capital Corp., 5.00%–5.875%, due 2/15/23–2/1/28 |
3. | Equinix, Inc., 5.375%–5.875%, due 1/1/22–5/15/27 |
4. | HCA, Inc., 4.25%–8.36%, due 10/15/19–11/6/33 |
5. | Exide Technologies |
6. | Comstock Resources, Inc., 7.75%–10.00%, due 4/1/19–6/15/20 |
7. | GenOn Energy, Inc., 7.875%–9.50%, due 6/15/17–10/15/18 |
8. | Carlson Travel, Inc., 6.75%–9.50%, due 12/15/23–12/15/24 |
9. | Netflix, Inc., 4.875%–5.875%, due 2/15/22–11/15/28 |
10. | Stone Energy Corp. |
8 | MainStay MacKay 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 MacKay High Yield Corporate Bond Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MacKay High Yield Corporate Bond Fund returned 0.43% for Class A shares, 0.44% for Investor Class shares and 0.20% for both Class B and Class C shares for the six months ended April 30, 2018. Over the same period, Class I shares returned 0.57%, Class R1 shares returned 0.52%, Class R2 shares returned 0.39%, Class R3 shares returned 0.27% and Class R6 shares returned 0.64%. For the six months ended April 30, 2018, all share classes outperformed the –0.23% return of the ICE BofA Merrill Lynch U.S. High Yield Constrained Index,1 which is the Fund’s primary benchmark; the –0.16% return of the Credit Suisse High Yield Index,1 which is the Fund’s secondary benchmark; and the –0.34% return of the Morningstar High Yield Bond Category Average.2 See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay High Yield Corporate Bond Fund was renamed MainStay MacKay High Yield Corporate Bond Fund. For more information on this change, please refer to the supplement dated December 15, 2017.
What factors affected the Fund’s relative performance during the reporting period?
Fears of rising interest rates underscored the U.S. high-yield market’s returns. During the reporting period, the ICE BofA Merrill Lynch U.S. High Yield Constrained Index returned –0.23%. Over the same period, higher-quality high-yield bonds were the worst performers. Bonds rated BB3 returned –1.43% during the reporting period, while bonds rated B4 gained 0.30%. Bonds rated CCC5 significantly outperformed the market,
returning 2.43%. Investment-grade corporate bonds underperformed high-yield bonds during the reporting period, as the ICE BofA Merrill Lynch U.S. Corporate Index6 returned –2.34%.
The dispersion in high-yield returns during the reporting period was even more pronounced when bonds were viewed by maturity. Longer-maturity bonds materially underperformed as investor complacency toward interest-rate risk receded. Bonds with maturities greater than 10 years returned –1.20%. Short-duration high-yield bonds performed relatively well, gaining 1.14% during the reporting period.
What was the Fund’s duration7 strategy during the reporting period?
The Fund is not managed to a duration strategy, and the Fund’s duration positioning during the reporting period resulted from our bottom-up investment process. During the reporting period, the Fund’s duration was shorter than that of the ICE BofA Merrill Lynch U.S. High Yield Constrained Index. As of April 30, 2018, the Fund’s modified duration to worst8 was approximately 3.3 years. The Fund’s shorter duration relative to the benchmark contributed positively to the Fund’s relative performance. (Contributions take weightings and total returns into account.)
Which sectors were the strongest contributors to the Fund’s relative performance, and which sectors were particularly weak?
Security selection in the basic industry and capital goods sectors contributed positively to the Fund’s performance relative to the ICE BofA Merrill Lynch U.S. High Yield Constrained Index. In the energy sector, security selection was positive in the energy—exploration & production and the oil field equipment & services industries. In particular, the Fund’s positions in California Resources and Comstock Resources significantly outperformed the benchmark.
1. | See footnote on page 6 for more information on this index. |
2. | See footnote on page 6 for more information on the Morningstar High Yield Bond Category Average. |
3. | 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. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
4. | An obligation rated ‘B’ by S&P is deemed by S&P to be more vulnerable to nonpayment than obligations rated ‘BB’, but in the opinion of S&P, the obligor currently has the capacity to meet its financial commitment on the obligation. It is the opinion of S&P that adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
5. | An obligation rated ‘CCC’ by S&P is deemed by S&P to be currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. It is the opinion of S&P that in the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
6. | The ICE BofA Merrill Lynch U.S. Corporate Index tracks the performance of U.S. dollar denominated investment-grade corporate debt publicly issued in the U.S. domestic market. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | 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. |
8. | 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 |
The Fund’s underweight position and security selection in the health care sector detracted from the Fund’s performance relative to the ICE BofA Merrill Lynch U.S. High Yield Constrained Index. Security selection in the telecommunications sector also modestly detracted from the Fund’s performance relative to the benchmark.
Did the Fund make any significant purchases or sales during the reporting period?
During the reporting period, the Fund purchased new-issue bonds of telecommunications company T-Mobile. The company has strategically important assets and has grown free cash flow with moderate leverage relative to its peers. The Fund also purchased new-issue bonds of Netflix. Netflix is a large strategic Internet entertainment company with a growing international subscriber base.
During the reporting period, the Fund reduced its exposure to the bonds of pharmaceuticals company Endo. This reduction was driven by concerns over negative trends in generic drug pricing.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, there were no material changes to the Fund’s sector weightings. There were small increases in the Fund’s weightings in the media and capital goods industries because of valuations and yield levels that we found attractive. During the reporting period, the Fund reduced its exposure to the basic industry and technology sectors.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund held overweight positions relative to the ICE BofA Merrill Lynch U.S. High Yield Constrained Index in the automotive, basic industry and consumer goods sectors. As of the same date, the Fund held underweight positions relative to the Index in the banking, health care and technology sectors.
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 MacKay High Yield Corporate Bond Fund |
Portfolio of Investments April 30, 2018 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 92.0%† Convertible Bonds 1.4% | ||||||||
Auto Parts & Equipment 0.7% |
| |||||||
¨Exide Technologies (a)(b)(c)(d)(e) | ||||||||
7.00% (7.00% PIK), due 4/30/25 | $ | 82,788,373 | $ | 44,540,145 | ||||
7.25% (7.25% PIK), due 4/30/25 | 19,977,200 | 21,475,490 | ||||||
|
| |||||||
66,015,635 | ||||||||
|
| |||||||
Media 0.2% |
| |||||||
DISH Network Corp. | 16,410,000 | 14,933,445 | ||||||
|
| |||||||
Mining 0.0%‡ |
| |||||||
Aleris International, Inc. | 11,797 | 10,924 | ||||||
|
| |||||||
Oil & Gas 0.5% |
| |||||||
¨Comstock Resources, Inc. (b) | ||||||||
7.75% (7.75% PIK), due 4/1/19 | 14,477,161 | 14,121,790 | ||||||
9.50% (9.50% PIK), due 6/15/20 | 34,333,506 | 34,116,312 | ||||||
|
| |||||||
48,238,102 | ||||||||
|
| |||||||
Total Convertible Bonds | 129,198,106 | |||||||
|
| |||||||
Corporate Bonds 89.6% | ||||||||
Advertising 0.7% |
| |||||||
Lamar Media Corp. | ||||||||
5.375%, due 1/15/24 | 5,515,000 | 5,639,088 | ||||||
5.75%, due 2/1/26 | 13,582,000 | 14,040,392 | ||||||
Outfront Media Capital LLC / Outfront Media Capital Corp. | ||||||||
5.25%, due 2/15/22 | 12,600,000 | 12,789,000 | ||||||
5.625%, due 2/15/24 | 28,906,000 | 29,213,849 | ||||||
|
| |||||||
61,682,329 | ||||||||
|
| |||||||
Aerospace & Defense 1.4% |
| |||||||
BBA U.S. Holdings, Inc. | 8,835,000 | 8,884,299 | ||||||
KLX, Inc. | 21,990,000 | 22,952,062 | ||||||
Orbital ATK, Inc. |
| |||||||
5.25%, due 10/1/21 | 5,235,000 | 5,339,700 | ||||||
5.50%, due 10/1/23 | 14,135,000 | 14,806,413 | ||||||
Spirit AeroSystems, Inc. | 10,035,000 | 10,311,214 | ||||||
TransDigm, Inc. | ||||||||
6.00%, due 7/15/22 | 6,935,000 | 7,021,688 | ||||||
6.50%, due 7/15/24 | 27,691,000 | 28,158,286 | ||||||
6.50%, due 5/15/25 | 6,830,000 | 6,949,525 |
Principal Amount | Value | |||||||
Aerospace & Defense (continued) |
| |||||||
Triumph Group, Inc. | $ | 18,015,000 | $ | 18,465,375 | ||||
|
| |||||||
122,888,562 | ||||||||
|
| |||||||
Apparel 0.2% |
| |||||||
William Carter Co. | 17,560,000 | 17,845,350 | ||||||
|
| |||||||
Auto Manufacturers 1.5% |
| |||||||
BCD Acquisition, Inc. | 22,615,000 | 24,537,275 | ||||||
Ford Holdings LLC |
| |||||||
9.30%, due 3/1/30 | 18,195,000 | 24,381,566 | ||||||
9.375%, due 3/1/20 | 1,695,000 | 1,870,541 | ||||||
Ford Motor Co. | 980,000 | 1,476,518 | ||||||
General Motors Financial Co., Inc. | 5,000,000 | 5,017,279 | ||||||
J.B. Poindexter & Company, Inc. | 17,880,000 | 18,192,900 | ||||||
McLaren Finance PLC | 25,035,000 | 25,037,504 | ||||||
Navistar International Corp. | 20,500,000 | 21,268,750 | ||||||
Wabash National Corp. | 17,590,000 | 17,150,250 | ||||||
|
| |||||||
138,932,583 | ||||||||
|
| |||||||
Auto Parts & Equipment 3.6% |
| |||||||
Adient Global Holdings, Ltd. | 20,005,000 | 18,704,675 | ||||||
Allison Transmission, Inc. | 3,000,000 | 2,946,600 | ||||||
American Axle & Manufacturing, Inc. |
| |||||||
6.25%, due 4/1/25 | 15,621,000 | 15,616,314 | ||||||
6.25%, due 3/15/26 | 10,950,000 | 10,840,500 | ||||||
6.50%, due 4/1/27 | 14,000,000 | 13,925,800 | ||||||
Dana Financing Luxembourg S.A.R.L. | 13,190,000 | 13,387,850 | ||||||
¨Exide Technologies | 103,353,241 | 90,434,086 | ||||||
Goodyear Tire & Rubber Co. | 4,005,000 | 3,984,975 | ||||||
IHO Verwaltungs GmbH (b)(e) | ||||||||
4.125% (4.125% Cash or 4.875% PIK), due 9/15/21 | 28,735,000 | 28,819,050 | ||||||
4.50% (4.50% Cash or 5.25% PIK), due 9/15/23 | 27,055,000 | 26,581,537 | ||||||
4.75% (4.75% Cash or 5.5% PIK), due 9/15/26 | 20,145,000 | 19,288,838 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund's 10 largest holdings or issuers held, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Auto Parts & Equipment (continued) |
| |||||||
International Automotive Components Group S.A. | $ | 13,980,000 | $ | 14,035,920 | ||||
Nexteer Automotive Group, Ltd. | 24,020,000 | 24,920,750 | ||||||
Schaeffler Finance B.V. | 24,030,000 | 24,420,487 | ||||||
Tenneco, Inc. | 11,446,000 | 10,702,010 | ||||||
Titan International, Inc. | 5,370,000 | 5,450,550 | ||||||
|
| |||||||
324,059,942 | ||||||||
|
| |||||||
Banks 0.3% |
| |||||||
CIT Group, Inc. | 4,000,000 | 4,004,200 | ||||||
Freedom Mortgage Corp. | 9,185,000 | 9,185,000 | ||||||
Provident Funding Associates, L.P. / PFG Finance Corp. | 14,750,000 | 14,832,305 | ||||||
|
| |||||||
28,021,505 | ||||||||
|
| |||||||
Biotechnology 0.3% |
| |||||||
AMAG Pharmaceuticals, Inc. | 28,045,000 | 27,904,775 | ||||||
|
| |||||||
Building Materials 1.1% |
| |||||||
BMC East LLC | 3,000,000 | 2,973,750 | ||||||
Gibraltar Industries, Inc. | 11,600,000 | 11,784,440 | ||||||
James Hardie International Finance DAC (e) | ||||||||
4.75%, due 1/15/25 | 10,700,000 | 10,432,500 | ||||||
5.00%, due 1/15/28 | 17,000,000 | 16,490,000 | ||||||
Summit Materials LLC / Summit Materials Finance Corp. | ||||||||
5.125%, due 6/1/25 (e) | 5,000,000 | 4,850,000 | ||||||
6.125%, due 7/15/23 | 35,515,000 | 36,303,433 | ||||||
8.50%, due 4/15/22 | 17,520,000 | 18,943,500 | ||||||
|
| |||||||
101,777,623 | ||||||||
|
| |||||||
Chemicals 1.8% |
| |||||||
Blue Cube Spinco, Inc. | ||||||||
9.75%, due 10/15/23 | 33,610,000 | 38,651,500 | ||||||
10.00%, due 10/15/25 | 26,425,000 | 30,983,312 | ||||||
Kissner Holdings, L.P. / Kissner Milling Co., Ltd. / BSC Holding, Inc. / Kissner USA | 21,525,000 | 22,063,125 | ||||||
NOVA Chemicals Corp. (e) | ||||||||
4.875%, due 6/1/24 | 19,795,000 | 19,151,663 | ||||||
5.25%, due 6/1/27 | 1,000,000 | 962,500 |
Principal Amount | Value | |||||||
Chemicals (continued) |
| |||||||
Olin Corp. | $ | 19,094,000 | $ | 19,810,025 | ||||
PolyOne Corp. | 32,754,000 | 33,531,907 | ||||||
|
| |||||||
165,154,032 | ||||||||
|
| |||||||
Commercial Services 4.6% |
| |||||||
Ashtead Capital, Inc. (e) | ||||||||
4.375%, due 8/15/27 | 8,010,000 | 7,559,438 | ||||||
5.625%, due 10/1/24 | 18,785,000 | 19,348,550 | ||||||
Avis Budget Car Rental LLC / Avis Budget Finance, Inc. | ||||||||
5.50%, due 4/1/23 | 26,923,000 | 26,653,770 | ||||||
6.375%, due 4/1/24 (e) | 14,000,000 | 14,140,000 | ||||||
Cimpress N.V. | 35,845,000 | 37,189,187 | ||||||
Flexi-Van Leasing, Inc. | 17,000,000 | 16,915,000 | ||||||
Gartner, Inc. | 32,981,000 | 33,053,558 | ||||||
Great Lakes Dredge & Dock Corp. | 7,000,000 | 7,140,000 | ||||||
IHS Markit, Ltd. (e) | ||||||||
4.75%, due 2/15/25 | 13,010,000 | 13,076,351 | ||||||
5.00%, due 11/1/22 | 60,020,000 | 62,120,700 | ||||||
Jaguar Holding Co. II / Pharmaceutical Product Development LLC | 14,976,000 | 15,163,200 | ||||||
Laureate Education, Inc. | 11,015,000 | 11,841,125 | ||||||
Matthews International Corp. | 10,000,000 | 9,800,000 | ||||||
Nielsen Co. Luxembourg S.A.R.L. (e) | ||||||||
5.00%, due 2/1/25 | 28,027,000 | 27,606,595 | ||||||
5.50%, due 10/1/21 | 4,500,000 | 4,567,500 | ||||||
Nielsen Finance LLC / Nielsen Finance Co. | ||||||||
4.50%, due 10/1/20 | 13,715,000 | 13,732,692 | ||||||
5.00%, due 4/15/22 (e) | 61,935,000 | 62,405,706 | ||||||
Ritchie Bros. Auctioneers, Inc. | 12,920,000 | 12,855,400 | ||||||
United Rentals North America, Inc. | ||||||||
4.625%, due 7/15/23 | 10,600,000 | 10,759,000 | ||||||
4.875%, due 1/15/28 | 5,000,000 | 4,737,500 | ||||||
WEX, Inc. | 3,823,000 | 3,846,894 | ||||||
|
| |||||||
414,512,166 | ||||||||
|
| |||||||
Computers 0.3% |
| |||||||
NCR Corp. | 25,370,000 | 26,257,950 | ||||||
|
|
12 | MainStay MacKay 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 0.5% |
| |||||||
Edgewell Personal Care Co. | ||||||||
4.70%, due 5/19/21 | $ | 28,000,000 | $ | 27,755,000 | ||||
4.70%, due 5/24/22 | 20,713,000 | 20,186,890 | ||||||
|
| |||||||
47,941,890 | ||||||||
|
| |||||||
Distribution & Wholesale 0.1% |
| |||||||
American Tire Distributors, Inc. | 21,080,000 | 11,119,700 | ||||||
|
| |||||||
Diversified Financial Services 3.0% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | ||||||||
4.625%, due 10/30/20 | 9,250,000 | 9,488,015 | ||||||
5.00%, due 10/1/21 | 15,360,000 | 15,954,556 | ||||||
Credit Acceptance Corp. | ||||||||
6.125%, due 2/15/21 | 8,362,000 | 8,403,810 | ||||||
7.375%, due 3/15/23 | 25,095,000 | 26,224,275 | ||||||
Drawbridge Special Opportunities Fund, L.P. / Drawbridge Special Opportunities Finance | 8,000,000 | 8,042,892 | ||||||
Jefferies Finance LLC / JFIN Co-Issuer Corp. | 11,250,000 | 11,151,563 | ||||||
Ladder Capital Finance Holdings LLLP / Ladder Capital Finance Corp. (e) | ||||||||
5.25%, due 3/15/22 | 20,070,000 | 20,070,000 | ||||||
5.25%, due 10/1/25 | 5,700,000 | 5,429,250 | ||||||
5.875%, due 8/1/21 | 25,700,000 | 26,149,750 | ||||||
Lincoln Finance, Ltd. | 18,090,000 | 18,700,538 | ||||||
LPL Holdings, Inc. | 25,445,000 | 24,681,650 | ||||||
Nationstar Mortgage LLC / Nationstar Capital Corp. | 10,000,000 | 10,040,000 | ||||||
Ocwen Loan Servicing LLC | 13,000,000 | 13,422,500 | ||||||
Oxford Finance LLC / Oxford Finance Co-Issuer II, Inc. | 19,000,000 | 19,380,000 | ||||||
Quicken Loans, Inc. (e) | ||||||||
5.25%, due 1/15/28 | 7,500,000 | 6,843,750 | ||||||
5.75%, due 5/1/25 | 6,000,000 | 5,880,000 | ||||||
VFH Parent LLC / Orchestra Co-Issuer, Inc. | 26,865,000 | 27,864,378 | ||||||
Werner FinCo, L.P. / Werner FinCo, Inc. | 11,430,000 | 11,658,600 | ||||||
|
| |||||||
269,385,527 | ||||||||
|
|
Principal Amount | Value | |||||||
Electric 2.3% |
| |||||||
Calpine Corp. (e) | ||||||||
5.875%, due 1/15/24 | $ | 20,321,000 | $ | 20,435,306 | ||||
6.00%, due 1/15/22 | 24,773,000 | 25,330,393 | ||||||
¨GenOn Energy, Inc. (g)(h) | ||||||||
7.875%, due 6/15/17 | 81,632,000 | 68,162,720 | ||||||
9.50%, due 10/15/18 | 59,085,000 | 48,154,275 | ||||||
NRG Energy, Inc. | ||||||||
6.25%, due 7/15/22 | 3,000,000 | 3,075,000 | ||||||
6.25%, due 5/1/24 | 5,340,000 | 5,520,225 | ||||||
6.625%, due 1/15/27 | 14,015,000 | 14,417,931 | ||||||
NRG REMA LLC | 38,680,000 | 23,788,200 | ||||||
Public Service Co. of New Mexico | 2,927,000 | 2,932,548 | ||||||
|
| |||||||
211,816,598 | ||||||||
|
| |||||||
Electrical Components & Equipment 0.7% |
| |||||||
General Cable Corp. | 48,705,000 | 50,007,859 | ||||||
WESCO Distribution, Inc. | 14,549,000 | 14,767,235 | ||||||
|
| |||||||
64,775,094 | ||||||||
|
| |||||||
Electronics 0.1% |
| |||||||
Itron, Inc. | 11,330,000 | 11,131,725 | ||||||
|
| |||||||
Engineering & Construction 0.5% |
| |||||||
Tutor Perini Corp. | 10,010,000 | 10,257,247 | ||||||
Weekley Homes LLC / Weekley Finance Corp. | ||||||||
6.00%, due 2/1/23 | 26,379,000 | 26,049,262 | ||||||
6.625%, due 8/15/25 (e) | 11,015,000 | 10,684,550 | ||||||
|
| |||||||
46,991,059 | ||||||||
|
| |||||||
Entertainment 0.8% |
| |||||||
Boyne USA, Inc. | 12,500,000 | 12,910,000 | ||||||
Churchill Downs, Inc. | 9,950,000 | 9,377,875 | ||||||
GLP Capital, L.P. / GLP Financing II, Inc. | 2,000,000 | 2,044,400 | ||||||
Jacobs Entertainment, Inc. | 10,359,000 | 10,786,309 | ||||||
NAI Entertainment Holdings / NAI Entertainment Holdings Finance Corp. | 18,020,000 | 18,023,604 | ||||||
Rivers Pittsburgh Borrower, L.P. / Rivers Pittsburgh Finance Corp. | 23,000,000 | 22,195,000 | ||||||
|
| |||||||
75,337,188 | ||||||||
|
|
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Food 2.1% |
| |||||||
B&G Foods, Inc. | ||||||||
4.625%, due 6/1/21 | $ | 9,500,000 | $ | 9,390,180 | ||||
5.25%, due 4/1/25 | 31,515,000 | 28,836,225 | ||||||
C&S Group Enterprises LLC | 50,750,000 | 47,705,000 | ||||||
Ingles Markets, Inc. | 14,332,000 | 14,296,170 | ||||||
KeHE Distributors LLC / KeHE Finance Corp. | 25,080,000 | 24,703,800 | ||||||
Land O’ Lakes, Inc. | 23,000,000 | 24,719,606 | ||||||
Land O’Lakes Capital Trust I | 16,324,000 | 18,527,740 | ||||||
TreeHouse Foods, Inc. | 22,840,000 | 22,725,800 | ||||||
|
| |||||||
190,904,521 | ||||||||
|
| |||||||
Forest Products & Paper 0.9% |
| |||||||
Mercer International, Inc. | ||||||||
5.50%, due 1/15/26 (e) | 3,500,000 | 3,438,750 | ||||||
6.50%, due 2/1/24 | 10,998,000 | 11,437,920 | ||||||
Smurfit Kappa Treasury Funding, Ltd. | 52,580,000 | 63,096,000 | ||||||
|
| |||||||
77,972,670 | ||||||||
|
| |||||||
Gas 0.9% |
| |||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | ||||||||
5.50%, due 5/20/25 | 6,575,000 | 6,459,938 | ||||||
5.625%, due 5/20/24 | 26,531,000 | 26,398,345 | ||||||
5.75%, due 5/20/27 | 20,060,000 | 19,307,750 | ||||||
5.875%, due 8/20/26 | 24,425,000 | 24,241,812 | ||||||
Rockpoint Gas Storage Canada, Ltd. | 6,000,000 | 5,992,500 | ||||||
|
| |||||||
82,400,345 | ||||||||
|
| |||||||
Health Care—Products 0.6% |
| |||||||
DJO Finco, Inc. / DJO Finance LLC / DJO Finance Corp. | 18,615,000 | 18,638,269 | ||||||
Halyard Health, Inc. | 9,331,000 | 9,587,602 | ||||||
Hill-Rom Holdings, Inc. | 9,040,000 | 9,333,800 | ||||||
Hologic, Inc. (e) | ||||||||
4.375%, due 10/15/25 | 11,150,000 | 10,731,875 | ||||||
4.625%, due 2/1/28 | 2,000,000 | 1,910,000 | ||||||
|
| |||||||
50,201,546 | ||||||||
|
|
Principal Amount | Value | |||||||
Health Care—Services 5.0% |
| |||||||
Acadia Healthcare Co., Inc. | ||||||||
5.625%, due 2/15/23 | $ | 24,930,000 | $ | 25,186,779 | ||||
6.50%, due 3/1/24 | 9,280,000 | 9,604,800 | ||||||
Centene Corp. | ||||||||
4.75%, due 1/15/25 | 6,965,000 | 6,773,463 | ||||||
5.625%, due 2/15/21 | 14,930,000 | 15,321,912 | ||||||
6.125%, due 2/15/24 | 23,817,000 | 24,948,307 | ||||||
Charles River Laboratories International, Inc. | 15,000,000 | 15,258,000 | ||||||
Fresenius Medical Care U.S. Finance II, Inc. (e) | ||||||||
5.625%, due 7/31/19 | 5,000,000 | 5,143,499 | ||||||
5.875%, due 1/31/22 | 2,600,000 | 2,772,445 | ||||||
¨HCA, Inc. | ||||||||
4.25%, due 10/15/19 | 5,000,000 | 5,037,500 | ||||||
5.25%, due 4/15/25 | 19,000,000 | 19,237,500 | ||||||
5.25%, due 6/15/26 | 11,805,000 | 11,864,025 | ||||||
5.375%, due 2/1/25 | 24,525,000 | 24,402,375 | ||||||
5.875%, due 3/15/22 | 12,030,000 | 12,676,613 | ||||||
5.875%, due 5/1/23 | 4,603,000 | 4,798,628 | ||||||
5.875%, due 2/15/26 | 19,500,000 | 19,743,750 | ||||||
7.50%, due 2/15/22 | 9,417,000 | 10,358,700 | ||||||
7.50%, due 12/15/23 | 1,500,000 | 1,646,250 | ||||||
7.50%, due 11/6/33 | 3,500,000 | 3,771,250 | ||||||
7.58%, due 9/15/25 | 8,020,000 | 8,741,800 | ||||||
7.69%, due 6/15/25 | 30,925,000 | 34,017,500 | ||||||
8.36%, due 4/15/24 | 4,524,000 | 5,112,120 | ||||||
HealthSouth Corp. | 18,575,000 | 18,900,062 | ||||||
Molina Healthcare, Inc. | 16,025,000 | 16,025,000 | ||||||
MPH Acquisition Holdings LLC | 60,250,000 | 61,455,000 | ||||||
Polaris Intermediate Corp. | 20,000,000 | 20,300,000 | ||||||
Tenet Healthcare Corp. | ||||||||
4.625%, due 7/15/24 (e) | 7,000,000 | 6,755,700 | ||||||
6.00%, due 10/1/20 | 8,000,000 | 8,256,400 | ||||||
6.75%, due 6/15/23 | 10,020,000 | 9,850,913 | ||||||
8.125%, due 4/1/22 | 26,975,000 | 28,087,719 | ||||||
WellCare Health Plans, Inc. | 13,310,000 | 13,377,881 | ||||||
|
| |||||||
449,425,891 | ||||||||
|
| |||||||
Home Builders 2.2% |
| |||||||
Ashton Woods USA LLC / Ashton Woods Finance Co. (e) | ||||||||
6.75%, due 8/1/25 | 5,496,000 | 5,303,640 | ||||||
6.875%, due 2/15/21 | 21,140,000 | 21,087,150 | ||||||
Brookfield Residential Properties, Inc. (e) | ||||||||
6.375%, due 5/15/25 | 6,665,000 | 6,756,644 | ||||||
6.50%, due 12/15/20 | 24,800,000 | 25,110,000 |
14 | MainStay MacKay 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) | ||||||||
Home Builders (continued) |
| |||||||
Brookfield Residential Properties, Inc. / Brookfield Residential U.S. Corp. | $ | 37,996,000 | $ | 38,660,930 | ||||
Century Communities, Inc. | ||||||||
5.875%, due 7/15/25 | 2,000,000 | 1,902,500 | ||||||
6.875%, due 5/15/22 | 35,546,000 | 36,612,380 | ||||||
M/I Homes, Inc. | 8,000,000 | 7,700,000 | ||||||
Mattamy Group Corp. | 12,915,000 | 12,882,712 | ||||||
New Home Co., Inc. | 20,030,000 | 20,531,351 | ||||||
Shea Homes, L.P. / Shea Homes Funding Corp. (e) | ||||||||
5.875%, due 4/1/23 | 5,365,000 | 5,411,944 | ||||||
6.125%, due 4/1/25 | 13,900,000 | 13,986,875 | ||||||
Taylor Morrison Communities, Inc. / Taylor Morrison Holdings II, Inc. | 715,000 | 720,362 | ||||||
|
| |||||||
196,666,488 | ||||||||
|
| |||||||
Household Products & Wares 0.9% |
| |||||||
Prestige Brands, Inc. | 37,808,000 | 37,997,040 | ||||||
Spectrum Brands, Inc. |
| |||||||
5.75%, due 7/15/25 | 12,492,000 | 12,480,133 | ||||||
6.125%, due 12/15/24 | 4,000,000 | 4,060,000 | ||||||
6.625%, due 11/15/22 | 24,090,000 | 24,933,150 | ||||||
|
| |||||||
79,470,323 | ||||||||
|
| |||||||
Insurance 1.6% |
| |||||||
American Equity Investment Life Holding Co. | 27,640,000 | 27,432,265 | ||||||
Fairfax Financial Holdings, Ltd. | 5,435,000 | 6,637,979 | ||||||
Fidelity & Guaranty Life Holdings, Inc. (e) | ||||||||
5.50%, due 5/1/25 | 19,175,000 | 19,073,373 | ||||||
6.375%, due 4/1/21 | 27,178,000 | 27,642,744 | ||||||
HUB International, Ltd. | 21,000,000 | 21,026,250 | ||||||
MGIC Investment Corp. | 30,580,000 | 31,268,050 | ||||||
USIS Merger Sub, Inc. | 10,000,000 | 10,000,000 | ||||||
|
| |||||||
143,080,661 | ||||||||
|
| |||||||
Internet 1.9% |
| |||||||
Cogent Communications Group, Inc. | 12,046,000 | 12,332,093 | ||||||
¨Netflix, Inc. |
| |||||||
4.875%, due 4/15/28 (e) | 5,000,000 | 4,718,750 |
Principal Amount | Value | |||||||
Internet (continued) | ||||||||
Netflix, Inc. (continued) | ||||||||
5.50%, due 2/15/22 | $ | 25,265,000 | $ | 26,212,437 | ||||
5.75%, due 3/1/24 | 34,961,000 | 36,228,336 | ||||||
5.875%, due 2/15/25 | 11,411,000 | 11,721,379 | ||||||
5.875%, due 11/15/28 (e) | 23,185,000 | 23,127,038 | ||||||
Symantec Corp. | 15,125,000 | 15,194,322 | ||||||
VeriSign, Inc. | ||||||||
4.625%, due 5/1/23 | 6,615,000 | 6,631,538 | ||||||
4.75%, due 7/15/27 | 12,980,000 | 12,444,575 | ||||||
5.25%, due 4/1/25 | 25,661,000 | 26,334,601 | ||||||
|
| |||||||
174,945,069 | ||||||||
|
| |||||||
Iron & Steel 1.6% |
| |||||||
Allegheny Ludlum LLC | 13,018,000 | 13,473,630 | ||||||
Allegheny Technologies, Inc. | 15,000,000 | 16,253,250 | ||||||
Big River Steel LLC / BRS Finance Corp. | 53,225,000 | 55,487,062 | ||||||
BlueScope Steel Finance, Ltd. / BlueScope Steel Finance USA LLC | 47,055,000 | 48,584,288 | ||||||
Commercial Metals Co. | 8,915,000 | 8,926,144 | ||||||
|
| |||||||
142,724,374 | ||||||||
|
| |||||||
Leisure Time 1.8% |
| |||||||
Brunswick Corp. | 21,573,000 | 21,660,017 | ||||||
¨Carlson Travel, Inc. (e) |
| |||||||
6.75%, due 12/15/23 | 72,516,000 | 71,065,680 | ||||||
9.50%, due 12/15/24 | 47,475,000 | 42,964,875 | ||||||
Vista Outdoor, Inc. | 31,402,000 | 29,282,365 | ||||||
|
| |||||||
164,972,937 | ||||||||
|
| |||||||
Lodging 0.9% |
| |||||||
Choice Hotels International, Inc. | 25,470,000 | 26,934,525 | ||||||
Hilton Domestic Operating Co., Inc. |
| |||||||
4.25%, due 9/1/24 | 7,220,000 | 6,938,059 | ||||||
5.125%, due 5/1/26 (e) | 21,675,000 | 21,675,000 | ||||||
Jack Ohio Finance LLC / Jack Ohio Finance 1 Corp. | 18,480,000 | 19,080,600 | ||||||
MGM Resorts International | 2,664,000 | 2,830,500 | ||||||
|
| |||||||
77,458,684 | ||||||||
|
| |||||||
Machinery—Construction & Mining 0.2% |
| |||||||
BlueLine Rental Finance Corp. / BlueLine Rental LLC | 19,150,000 | 20,365,068 | ||||||
|
|
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Machinery—Diversified 0.2% |
| |||||||
Briggs & Stratton Corp. | $ | 9,000,000 | $ | 9,652,500 | ||||
Tennant Co. | 12,165,000 | 12,395,283 | ||||||
|
| |||||||
22,047,783 | ||||||||
|
| |||||||
Media 6.7% |
| |||||||
Altice Financing S.A. (e) | ||||||||
6.625%, due 2/15/23 | 5,000,000 | 5,000,000 | ||||||
7.50%, due 5/15/26 | 15,335,000 | 15,104,975 | ||||||
Altice France S.A. (e) | ||||||||
6.00%, due 5/15/22 | 3,060,000 | 3,015,997 | ||||||
6.25%, due 5/15/24 | 16,100,000 | 15,335,250 | ||||||
7.375%, due 5/1/26 | 7,000,000 | 6,781,250 | ||||||
Altice Luxembourg S.A. | 3,000,000 | 2,865,000 | ||||||
Altice U.S. Finance I Corp. | 20,225,000 | 20,250,281 | ||||||
Block Communications, Inc. | 38,347,000 | 38,538,735 | ||||||
¨CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
5.00%, due 2/1/28 (e) | 41,215,000 | 38,057,107 | ||||||
5.125%, due 2/15/23 | 24,030,000 | 24,138,135 | ||||||
5.125%, due 5/1/23 (e) | 12,000,000 | 12,056,400 | ||||||
5.125%, due 5/1/27 (e) | 37,725,000 | 35,347,193 | ||||||
5.375%, due 5/1/25 (e) | 5,025,000 | 4,940,203 | ||||||
5.75%, due 2/15/26 (e) | 29,345,000 | 29,124,913 | ||||||
5.875%, due 4/1/24 (e) | 23,715,000 | 24,044,639 | ||||||
5.875%, due 5/1/27 (e) | 5,000,000 | 4,887,500 | ||||||
Charter Communications Operating LLC / Charter Communications Operating Capital | 4,000,000 | 4,011,513 | ||||||
Cogeco Communications, Inc. | 1,620,000 | 1,628,100 | ||||||
DISH DBS Corp. | ||||||||
5.00%, due 3/15/23 | 5,000,000 | 4,331,250 | ||||||
5.875%, due 7/15/22 | 27,297,000 | 25,106,416 | ||||||
5.875%, due 11/15/24 | 29,700,000 | 25,282,125 | ||||||
6.75%, due 6/1/21 | 17,000,000 | 16,915,000 | ||||||
7.75%, due 7/1/26 | 15,875,000 | 14,436,328 | ||||||
Meredith Corp. | 32,500,000 | 32,864,000 | ||||||
Midcontinent Communications / Midcontinent Finance Corp. | 18,030,000 | 18,931,500 | ||||||
Quebecor Media, Inc. | 34,005,000 | 34,855,125 |
Principal Amount | Value | |||||||
Media (continued) | ||||||||
Sterling Entertainment Enterprises LLC | $ | 20,000,000 | $ | 20,200,000 | ||||
Videotron, Ltd. | ||||||||
5.00%, due 7/15/22 | 20,449,000 | 20,883,541 | ||||||
5.125%, due 4/15/27 (e) | 12,526,000 | 12,275,480 | ||||||
5.375%, due 6/15/24 (e) | 21,850,000 | 22,450,875 | ||||||
Virgin Media Secured Finance PLC | 75,875,000 | 77,582,187 | ||||||
|
| |||||||
611,241,018 | ||||||||
|
| |||||||
Metal Fabricate & Hardware 1.5% |
| |||||||
Grinding Media, Inc. / Moly-Cop AltaSteel, Ltd. | 44,870,000 | 47,393,937 | ||||||
Novelis Corp. (e) |
| |||||||
5.875%, due 9/30/26 | 34,850,000 | 34,588,625 | ||||||
6.25%, due 8/15/24 | 21,250,000 | 21,648,438 | ||||||
Optimas OE Solutions Holding LLC / Optimas OE Solutions, Inc. | 18,775,000 | 19,338,250 | ||||||
Park-Ohio Industries, Inc. | 16,190,000 | 16,797,125 | ||||||
|
| |||||||
139,766,375 | ||||||||
|
| |||||||
Mining 3.1% |
| |||||||
Alcoa Nederland Holding B.V. (e) | ||||||||
6.75%, due 9/30/24 | 7,910,000 | 8,483,554 | ||||||
7.00%, due 9/30/26 | 15,600,000 | 17,004,000 | ||||||
Aleris International, Inc. | ||||||||
7.875%, due 11/1/20 | 43,612,000 | 42,957,820 | ||||||
9.50%, due 4/1/21 (e) | 44,005,000 | 45,875,212 | ||||||
Constellium N.V. | 3,000,000 | 2,955,000 | ||||||
First Quantum Minerals, Ltd. | 13,760,000 | 13,722,848 | ||||||
Freeport McMoRan, Inc. | 68,126,000 | 73,065,135 | ||||||
Hecla Mining Co. | 31,623,000 | 32,018,288 | ||||||
Joseph T. Ryerson & Son, Inc. | 9,500,000 | 10,521,250 | ||||||
Lundin Mining Corp. | 10,015,000 | 10,512,545 | ||||||
Petra Diamonds U.S. Treasury PLC | 20,370,000 | 20,359,815 | ||||||
|
| |||||||
277,475,467 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 1.2% |
| |||||||
Amsted Industries, Inc. | 19,270,000 | 19,233,965 | ||||||
CTP Transportation Products LLC / CTP Finance, Inc. | 26,950,000 | 26,983,687 |
16 | MainStay MacKay 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) | ||||||||
Miscellaneous—Manufacturing (continued) | ||||||||
EnPro Industries, Inc. | $ | 24,295,000 | $ | 25,023,850 | ||||
Gates Global LLC / Gates Global Co. | 17,876,000 | 18,099,450 | ||||||
Koppers, Inc. | 17,475,000 | 17,780,813 | ||||||
|
| |||||||
107,121,765 | ||||||||
|
| |||||||
Oil & Gas 7.7% |
| |||||||
Ascent Resources Utica Holdings LLC / ARU Finance Corp. | 20,515,000 | 22,053,625 | ||||||
California Resources Corp. |
| |||||||
5.00%, due 1/15/20 | 16,470,000 | 14,658,300 | ||||||
8.00%, due 12/15/22 (e) | 28,535,000 | 24,540,100 | ||||||
Callon Petroleum Co. | 20,000,000 | 20,400,000 | ||||||
Calumet Specialty Products Partners, L.P. / Calumet Finance Corp. | 4,161,000 | 4,098,585 | ||||||
Carrizo Oil & Gas, Inc. | 3,140,000 | 3,171,400 | ||||||
CNX Resources Corp. | 4,998,000 | 5,022,990 | ||||||
¨Comstock Resources, Inc. | 68,735,000 | 71,742,156 | ||||||
Continental Resources, Inc. | 13,040,000 | 13,251,900 | ||||||
Delek Logistics Partners, L.P. | 10,445,000 | 10,366,663 | ||||||
Energy Ventures Gom LLC / EnVen Finance Corp. | 7,000,000 | 7,122,500 | ||||||
Gulfport Energy Corp. | ||||||||
6.00%, due 10/15/24 | 43,999,000 | 41,799,050 | ||||||
6.375%, due 5/15/25 | 21,725,000 | 20,849,265 | ||||||
6.375%, due 1/15/26 | 5,000,000 | 4,801,250 | ||||||
6.625%, due 5/1/23 | 3,787,000 | 3,805,935 | ||||||
Matador Resources Co. | 12,665,000 | 13,234,925 | ||||||
Moss Creek Resources Holdings, Inc. | 14,465,000 | 14,537,325 | ||||||
Murphy Oil Corp. | 9,590,000 | 10,153,413 | ||||||
Murphy Oil USA, Inc. | 23,635,000 | 24,373,594 | ||||||
Newfield Exploration Co. | ||||||||
5.625%, due 7/1/24 | 19,385,000 | 20,548,100 | ||||||
5.75%, due 1/30/22 | 14,140,000 | 14,847,000 |
Principal Amount | Value | |||||||
Oil & Gas (continued) | ||||||||
Oasis Petroleum, Inc. | $ | 5,000,000 | $ | 5,150,000 | ||||
Parsley Energy LLC / Parsley Finance Corp. (e) | ||||||||
5.25%, due 8/15/25 | 14,125,000 | 14,089,688 | ||||||
5.625%, due 10/15/27 | 7,000,000 | 7,087,500 | ||||||
6.25%, due 6/1/24 | 6,100,000 | 6,374,500 | ||||||
PDC Energy, Inc. | 8,750,000 | 8,968,750 | ||||||
PetroQuest Energy, Inc. | 70,730,926 | 55,523,777 | ||||||
QEP Resources, Inc. | 11,000,000 | 10,532,500 | ||||||
Range Resources Corp. | ||||||||
5.75%, due 6/1/21 | 23,225,000 | 23,805,625 | ||||||
5.875%, due 7/1/22 | 23,861,000 | 24,159,262 | ||||||
Rex Energy Corp. | 116,480,000 | 32,614,400 | ||||||
RSP Permian, Inc. | 17,780,000 | 18,535,650 | ||||||
Southwestern Energy Co. | 20,400,000 | 20,961,000 | ||||||
SRC Energy, Inc. | 23,695,000 | 23,931,950 | ||||||
¨Stone Energy Corp. | 24,562,822 | 24,992,671 | ||||||
Ultra Resources, Inc. | 26,710,000 | 19,631,850 | ||||||
Whiting Petroleum Corp. | 7,150,000 | 7,328,750 | ||||||
WPX Energy, Inc. | 30,158,000 | 31,439,715 | ||||||
|
| |||||||
700,505,664 | ||||||||
|
| |||||||
Oil & Gas Services 0.5% |
| |||||||
Bristow Group, Inc. | 5,300,000 | 5,472,250 | ||||||
Forum Energy Technologies, Inc. | 44,275,000 | 44,053,625 | ||||||
|
| |||||||
49,525,875 | ||||||||
|
| |||||||
Packaging & Containers 0.2% |
| |||||||
Ball Corp. | 7,055,000 | 7,037,362 | ||||||
Berry Global, Inc. | 10,000,000 | 9,550,000 | ||||||
Sealed Air Corp. | 2,465,000 | 2,548,194 | ||||||
|
| |||||||
19,135,556 | ||||||||
|
|
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Pharmaceuticals 0.9% |
| |||||||
Catalent Pharma Solutions, Inc. | $ | 12,250,000 | $ | 11,928,437 | ||||
Endo Finance LLC | 4,000,000 | 3,280,000 | ||||||
Endo Finance LLC / Endo Finco, Inc. | 12,000,000 | 8,685,000 | ||||||
inVentiv Group Holdings, Inc. / inVentiv Health, Inc. / inVentiv Health Clinical, Inc. | 3,667,000 | 3,896,188 | ||||||
Valeant Pharmaceuticals International | 32,975,000 | 33,634,500 | ||||||
Valeant Pharmaceuticals International, Inc. (e) | ||||||||
5.50%, due 11/1/25 | 8,000,000 | 7,960,000 | ||||||
7.50%, due 7/15/21 | 12,990,000 | 13,201,087 | ||||||
|
| |||||||
82,585,212 | ||||||||
|
| |||||||
Pipelines 3.9% |
| |||||||
ANR Pipeline Co. | ||||||||
7.375%, due 2/15/24 | 2,555,000 | 2,906,900 | ||||||
9.625%, due 11/1/21 | 10,349,000 | 12,622,623 | ||||||
Antero Midstream Partners, L.P. / Antero Midstream Finance Corp. | 12,720,000 | 12,656,400 | ||||||
Cheniere Corpus Christi Holdings LLC | 14,380,000 | 14,825,205 | ||||||
Cheniere Energy Partners, L.P. | 13,015,000 | 12,722,163 | ||||||
CNX Midstream Partners L.P. / CNX Midstream Finance Corp. | 11,000,000 | 10,752,500 | ||||||
Genesis Energy, L.P. / Genesis Energy Finance Corp. | 38,000,000 | 38,570,000 | ||||||
Holly Energy Partners, L.P. / Holly Energy Finance Corp. | 18,000,000 | 18,045,000 | ||||||
MPLX, L.P. | ||||||||
4.875%, due 12/1/24 | 27,495,000 | 28,502,874 | ||||||
4.875%, due 6/1/25 | 30,580,000 | 31,657,283 | ||||||
5.50%, due 2/15/23 | 31,010,000 | 31,746,487 | ||||||
NGPL PipeCo LLC (e) | ||||||||
4.375%, due 8/15/22 | 8,875,000 | 8,830,625 | ||||||
4.875%, due 8/15/27 | 16,630,000 | 16,151,887 | ||||||
NuStar Logistics, L.P. | 13,715,000 | 14,229,313 | ||||||
Rockies Express Pipeline LLC | 15,000,000 | 15,262,500 | ||||||
Sabine Pass Liquefaction LLC | 20,065,000 | 21,790,776 |
Principal Amount | Value | |||||||
Pipelines (continued) |
| |||||||
SemGroup Corp. | $ | 7,997,000 | $ | 7,617,143 | ||||
Tallgrass Energy Partners, L.P. / Tallgrass Energy Finance Corp. | 28,235,000 | 28,658,525 | ||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | 17,385,000 | 17,258,089 | ||||||
TransMontaigne Partners, L.P. / TLP Finance Corp. | 13,000,000 | 12,935,000 | ||||||
|
| |||||||
357,741,293 | ||||||||
|
| |||||||
Real Estate 0.9% |
| |||||||
CBRE Services, Inc. | 9,105,000 | 9,683,665 | ||||||
Howard Hughes Corp. | 29,390,000 | 29,316,525 | ||||||
Kennedy Wilson, Inc. | 12,000,000 | 11,820,000 | ||||||
Kennedy-Wilson, Inc. | 8,805,000 | 8,672,925 | ||||||
Realogy Group LLC / Realogy Co-Issuer Corp. | 18,835,000 | 18,204,969 | ||||||
|
| |||||||
77,698,084 | ||||||||
|
| |||||||
Real Estate Investment Trusts 3.9% |
| |||||||
Crown Castle International Corp. | ||||||||
4.875%, due 4/15/22 | 2,000,000 | 2,079,930 | ||||||
5.25%, due 1/15/23 | 76,518,000 | 80,721,887 | ||||||
CTR Partnership LP / CareTrust Capital Corp. | 10,005,000 | 9,879,938 | ||||||
¨Equinix, Inc. | ||||||||
5.375%, due 1/1/22 | 20,391,000 | 21,028,219 | ||||||
5.375%, due 4/1/23 | 17,525,000 | 18,006,938 | ||||||
5.375%, due 5/15/27 | 50,650,000 | 51,536,375 | ||||||
5.75%, due 1/1/25 | 36,737,000 | 38,114,637 | ||||||
5.875%, due 1/15/26 | 38,825,000 | 40,183,875 | ||||||
MGM Growth Properties Operating Partnership, L.P. / MGP Finance Co-Issuer, Inc. | ||||||||
4.50%, due 9/1/26 | 8,000,000 | 7,520,000 | ||||||
5.625%, due 5/1/24 | 63,960,000 | 65,240,479 | ||||||
MPT Operating Partnership, L.P. / MPT Finance Corp. | 20,025,000 | 18,973,688 | ||||||
Starwood Property Trust, Inc. | 5,000,000 | 5,059,850 | ||||||
|
| |||||||
358,345,816 | ||||||||
|
|
18 | MainStay MacKay 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) | ||||||||
Retail 3.8% |
| |||||||
Asbury Automotive Group, Inc. | $ | 56,326,000 | $ | 56,185,185 | ||||
Beacon Roofing Supply, Inc. | 14,000,000 | 13,230,000 | ||||||
Cumberland Farms, Inc. | 20,775,000 | 21,554,062 | ||||||
Dollar Tree, Inc. | 14,690,000 | 15,324,608 | ||||||
DriveTime Automotive Group, Inc. / Bridgecrest Acceptance Corp. | 43,301,000 | 43,409,252 | ||||||
Group 1 Automotive, Inc. | ||||||||
5.00%, due 6/1/22 | 16,040,000 | 16,084,912 | ||||||
5.25%, due 12/15/23 (e) | 11,305,000 | 11,163,688 | ||||||
KFC Holding Co. / Pizza Hut Holdings LLC / Taco Bell of America LLC (e) | ||||||||
4.75%, due 6/1/27 | 11,287,000 | 10,779,085 | ||||||
5.00%, due 6/1/24 | 21,705,000 | 21,705,000 | ||||||
5.25%, due 6/1/26 | 32,750,000 | 32,913,750 | ||||||
L Brands, Inc. | ||||||||
5.25%, due 2/1/28 | 6,000,000 | 5,617,500 | ||||||
5.625%, due 2/15/22 | 8,000,000 | 8,300,800 | ||||||
6.625%, due 4/1/21 | 10,030,000 | 10,656,875 | ||||||
Men’s Wearhouse, Inc. | 14,326,000 | 14,702,058 | ||||||
Penske Automotive Group, Inc. | 27,491,000 | 28,229,821 | ||||||
Rite Aid Corp. | ||||||||
6.125%, due 4/1/23 (e) | 29,000,000 | 29,398,750 | ||||||
6.75%, due 6/15/21 | 3,000,000 | 3,056,250 | ||||||
|
| |||||||
342,311,596 | ||||||||
|
| |||||||
Semiconductors 0.5% |
| |||||||
Micron Technology, Inc. | ||||||||
5.25%, due 1/15/24 (e) | 10,412,000 | 10,833,686 | ||||||
5.50%, due 2/1/25 | 26,142,000 | 27,187,680 | ||||||
Qorvo, Inc. | 5,000,000 | 5,312,500 | ||||||
|
| |||||||
43,333,866 | ||||||||
|
| |||||||
Software 3.1% |
| |||||||
ACI Worldwide, Inc. | 43,650,000 | 44,132,332 | ||||||
Ascend Learning LLC | 27,000,000 | 27,472,500 | ||||||
Donnelley Financial Solutions, Inc. | 20,475,000 | 21,703,500 | ||||||
First Data Corp. (e) | ||||||||
5.00%, due 1/15/24 | 3,500,000 | 3,526,250 | ||||||
7.00%, due 12/1/23 | 5,000,000 | 5,231,900 |
Principal Amount | Value | |||||||
Software (continued) |
| |||||||
MSCI, Inc. (e) | ||||||||
4.75%, due 8/1/26 | $ | 11,290,000 | $ | 11,186,697 | ||||
5.25%, due 11/15/24 | 30,022,000 | 30,622,440 | ||||||
5.75%, due 8/15/25 | 36,281,000 | 37,902,761 | ||||||
Open Text Corp. | 12,740,000 | 13,245,778 | ||||||
PTC, Inc. | 48,968,000 | 51,293,980 | ||||||
Quintiles IMS, Inc. | 30,113,000 | 29,698,946 | ||||||
RP Crown Parent LLC | 9,000,000 | 9,337,500 | ||||||
|
| |||||||
285,354,584 | ||||||||
|
| |||||||
Telecommunications 6.3% |
| |||||||
CenturyLink, Inc. | 28,085,000 | 27,944,575 | ||||||
Cogent Communications Finance, Inc. | 35,015,000 | 35,190,075 | ||||||
Frontier Communications Corp. |
| |||||||
8.50%, due 4/1/26 (e) | 2,415,000 | 2,348,588 | ||||||
10.50%, due 9/15/22 | 19,279,000 | 16,959,736 | ||||||
11.00%, due 9/15/25 | 33,071,000 | 25,381,992 | ||||||
Hughes Satellite Systems Corp. | ||||||||
5.25%, due 8/1/26 | 21,850,000 | 21,358,375 | ||||||
6.625%, due 8/1/26 | 25,220,000 | 25,030,850 | ||||||
7.625%, due 6/15/21 | 31,530,000 | 33,815,925 | ||||||
Inmarsat Finance PLC | 20,020,000 | 19,319,300 | ||||||
Qualitytech, L.P. / QTS Finance Corp. | 18,679,000 | 17,604,958 | ||||||
Sprint Capital Corp. | 74,535,000 | 76,025,700 | ||||||
Sprint Communications, Inc. | ||||||||
7.00%, due 3/1/20 (e) | 25,490,000 | 26,828,225 | ||||||
9.00%, due 11/15/18 (e) | 3,523,000 | 3,622,084 | ||||||
9.25%, due 4/15/22 | 16,831,000 | 19,271,495 | ||||||
Sprint Corp. | ||||||||
7.125%, due 6/15/24 | 3,000,000 | 3,108,750 | ||||||
7.875%, due 9/15/23 | 22,000,000 | 23,595,000 | ||||||
¨T-Mobile USA, Inc. | ||||||||
4.00%, due 4/15/22 | 5,000,000 | 5,000,000 | ||||||
4.50%, due 2/1/26 | 9,940,000 | 9,567,250 | ||||||
4.75%, due 2/1/28 | 28,185,000 | 27,122,425 | ||||||
5.125%, due 4/15/25 | 25,615,000 | 25,807,112 | ||||||
5.375%, due 4/15/27 | 20,175,000 | 20,401,969 | ||||||
6.00%, due 4/15/24 | 15,315,000 | 16,042,463 | ||||||
6.375%, due 3/1/25 | 37,982,000 | 39,881,100 | ||||||
6.50%, due 1/15/24 | 14,485,000 | 15,173,038 | ||||||
6.50%, due 1/15/26 | 29,000,000 | 30,821,780 | ||||||
|
| |||||||
567,222,765 | ||||||||
|
|
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Textiles 0.3% |
| |||||||
Eagle Intermediate Global Holding B.V./ Ruyi US Finance LLC | $ | 28,430,000 | $ | 29,140,750 | ||||
|
| |||||||
Toys, Games & Hobbies 0.2% |
| |||||||
Mattel, Inc. | 19,150,000 | 18,644,440 | ||||||
|
| |||||||
Trucking & Leasing 0.3% |
| |||||||
Fortress Transportation & Infrastructure Investors LLC | 23,480,000 | 23,832,200 | ||||||
|
| |||||||
Total Corporate Bonds | 8,131,154,284 | |||||||
|
| |||||||
Loan Assignments 1.0% (i) | ||||||||
Diversified Financial Services 0.1% |
| |||||||
Jane Street Group LLC | 11,356,250 | 11,427,227 | ||||||
|
| |||||||
Metals & Mining 0.1% |
| |||||||
Neenah Foundry Co. (a)(f) | ||||||||
2017 Term Loan | 5,362,500 | 5,308,875 | ||||||
2017 Term Loan | 5,500,000 | 5,445,000 | ||||||
|
| |||||||
10,753,875 | ||||||||
|
| |||||||
Retail 0.5% |
| |||||||
Bass Pro Group LLC | 46,700,462 | 46,919,394 | ||||||
|
| |||||||
Retail Stores 0.1% |
| |||||||
American Tire Distributors Holdings, Inc. 2015 Term Loan | 6,000,000 | 5,254,998 | ||||||
|
|
Principal Amount | Value | |||||||
Transportation 0.2% |
| |||||||
Commercial Barge Line Co. | $ | 25,910,623 | $ | 15,067,027 | ||||
|
| |||||||
Total Loan Assignments | 89,422,521 | |||||||
|
| |||||||
Total Long-Term Bonds | 8,349,774,911 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 1.0% | ||||||||
Auto Parts & Equipment 0.1% |
| |||||||
¨Exide Technologies (a)(c)(d)(f)(j) | 2,084,972 | 3,836,349 | ||||||
|
| |||||||
Lodging 0.0%‡ |
| |||||||
Majestic Star Casino LLC Membership Units (c)(d)(f) | 446,020 | 423,719 | ||||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, Inc. (a)(c)(d)(f) | 2,287 | 1,416,316 | ||||||
|
| |||||||
Metals & Mining 0.1% |
| |||||||
Neenah Enterprises, Inc. (a)(c)(d)(f)(j) | 720,961 | 8,644,323 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 0.8% |
| |||||||
PetroQuest Energy, Inc. (j) | 908,262 | 512,169 | ||||||
Rex Energy Corp. (c)(j) | 103,000 | 84,460 | ||||||
¨Stone Energy Corp. (f)(j) | 2,074,193 | 73,841,270 | ||||||
Titan Energy LLC (j) | 91,174 | 141,319 | ||||||
|
| |||||||
74,579,218 | ||||||||
|
| |||||||
Total Common Stocks | 88,899,925 | |||||||
|
| |||||||
Exchange-Traded Funds (j) 0.4% | ||||||||
iShares Gold Trust | 618,700 | 7,807,994 | ||||||
SPDR Gold Shares | 189,000 | 23,547,510 | ||||||
|
| |||||||
Total Exchange-Traded Funds | 31,355,504 | |||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 5.9% | ||||||||
Money Market Fund 5.9% |
| |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class 1.63% | $ | 538,489,688 | 538,489,688 | |||||
|
| |||||||
Total Short-Term Investment | 538,489,688 | |||||||
|
| |||||||
Total Investments | 99.3 | % | 9,008,520,028 | |||||
Other Assets, Less Liabilities | 0.7 | 62,484,552 | ||||||
Net Assets | 100.0 | % | $ | 9,071,004,580 |
20 | MainStay MacKay 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. |
‡ | Less than one-tenth of a percent. |
(a) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(b) | PIK ("Payment-in-Kind")—issuer may pay interest or dividends with additional securities and/or in cash. |
(c) | Illiquid security— As of April 30, 2018, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $191,065,811, which represented 2.1% of the Fund’s net assets. |
(d) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2018, the total market value of fair valued securities was $190,981,351, which represented 2.1% of the Fund’s net assets. |
(e) | 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. |
(f) | Restricted security. |
(g) | Issue in non-accrual status. |
(h) | Issue in default. |
(i) | Floating rate—Rate shown was the rate in effect as of April 30, 2018. |
(j) | Non-income producing security. |
The following abbreviations are used in the preceding pages:
LIBOR—London Interbank Offered Rate
SPDR—Standard & Poor’s Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of April 30, 2018, 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) | $ | — | $ | 63,171,547 | $ | 66,026,559 | $ | 129,198,106 | ||||||||
Corporate Bonds (c) | — | 8,040,720,198 | 90,434,086 | 8,131,154,284 | ||||||||||||
Loan Assignments (d) | — | 67,241,419 | 22,181,102 | 89,422,521 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 8,171,133,164 | 178,641,747 | 8,349,774,911 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (e) | 74,579,218 | 423,719 | 13,896,988 | 88,899,925 | ||||||||||||
Exchange-Traded Funds | 31,355,504 | — | — | 31,355,504 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Money Market Fund | 538,489,688 | — | — | 538,489,688 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 644,424,410 | $ | 8,171,556,883 | $ | 192,538,735 | $ | 9,008,520,028 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 securities valued at $66,015,635 and $10,924 are held in Auto Parts & Equipment and Mining, respectively, within the Convertible Bonds section of the Portfolio of Investments. |
(c) | The Level 3 security valued at $90,434,086 is held in Auto Parts & Equipment within the Corporate Bonds section of the Portfolio of Investments. |
(d) | The Level 3 securities valued at $11,427,227 and $10,753,875 are held in Diversified Financial Services and Metals & Mining, respectively, within the Loan Assignments section of the Portfolio of Investments, which were valued by a pricing service without adjustment. |
(e) | The Level 3 securities valued at $3,836,349, $1,416,316, and $8,644,323 are held in Auto Parts & Equipment, Media, and Metals & Mining, 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.
As of April 30, 2018, a security with a market value of $423,719 transferred from Level 1 to Level 2 as the price of this security was based on utilizing significant other observable inputs. As of October 31, 2017, the fair value obtained for these securities were based on utilizing quoted prices in active markets.
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, 2018 (Unaudited) (continued)
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 | 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, 2018 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held as of April 30, 2018 (c) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Convertible Bonds | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | $ | 54,577,221 | $ | 501,423 | $ | — | $ | 7,360,184 | $ | 3,576,807 | (a) | $ | — | $ | — | $ | — | $ | 66,015,635 | $ | 7,360,184 | |||||||||||||||||||
Mining | 10,662 | 394 | — | (132 | ) | — | — | — | — | 10,924 | (132 | ) | ||||||||||||||||||||||||||||
Corporate Bonds | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | 80,579,460 | 907,911 | — | 5,320,528 | 3,626,187 | (a) | — | — | — | 90,434,086 | 5,320,528 | |||||||||||||||||||||||||||||
Entertainment | 36,312,500 | — | 853,300 | (1,312,500 | ) | — | (35,853,300 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Diversified Financial Services | — | 1,030 | — | 96,357 | 11,329,840 | — | — | — | 11,427,227 | 96,357 | ||||||||||||||||||||||||||||||
Metals & Mining | — | 7,167 | 1,309 | (7,101 | ) | 10,890,000 | (137,500 | )(b) | — | — | 10,753,875 | (7,101 | ) | |||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | 3,398,505 | — | — | 437,844 | — | — | — | — | 3,836,349 | 437,844 | ||||||||||||||||||||||||||||||
Lodging | 423,719 | — | — | — | — | — | — | (423,719 | ) | — | — | |||||||||||||||||||||||||||||
Media | 1,551,935 | — | — | (135,619 | ) | — | — | — | — | 1,416,316 | (135,619 | ) | ||||||||||||||||||||||||||||
Metals & Mining | 8,644,323 | — | — | — | — | — | — | — | 8,644,323 | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 185,498,325 | $ | 1,417,925 | $ | 854,609 | $ | 11,759,561 | $ | 29,422,834 | $ | (35,990,800 | ) | $ | — | $ | (423,719 | ) | $ | 192,538,735 | $ | 13,072,061 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Purchases include PIK securities. |
(b) | Sales include principal reductions. |
(c) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
22 | MainStay MacKay 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 Assets and Liabilities as of April 30, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 9,008,520,028 | ||
Receivables: | ||||
Interest | 143,016,256 | |||
Fund shares sold | 13,767,869 | |||
Investment securities sold | 1,036,583 | |||
Other assets | 238,563 | |||
|
| |||
Total assets | 9,166,579,299 | |||
|
| |||
Liabilities | ||||
Due to custodian | 4,601,500 | |||
Payables: | ||||
Investment securities purchased | 63,696,926 | |||
Fund shares redeemed | 15,980,217 | |||
Manager (See Note 3) | 4,049,740 | |||
NYLIFE Distributors (See Note 3) | 1,341,805 | |||
Transfer agent (See Note 3) | 1,075,518 | |||
Shareholder communication | 475,439 | |||
Professional fees | 142,871 | |||
Trustees | 25,404 | |||
Custodian | 21,896 | |||
Dividend payable | 4,098,795 | |||
Accrued expenses | 64,608 | |||
|
| |||
Total liabilities | 95,574,719 | |||
|
| |||
Net assets | $ | 9,071,004,580 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 16,101,344 | ||
Additional paid-in capital | 9,325,275,173 | |||
|
| |||
9,341,376,517 | ||||
Distributions in excess of net investment income | (40,181,124 | ) | ||
Accumulated net realized gain (loss) on investments | (201,121,536 | ) | ||
Net unrealized appreciation (depreciation) on investments | (29,069,277 | ) | ||
|
| |||
Net assets | $ | 9,071,004,580 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 3,492,715,037 | ||
|
| |||
Shares of beneficial interest outstanding | 620,059,752 | |||
|
| |||
Net asset value per share outstanding | $ | 5.63 | ||
Maximum sales charge (4.50% of offering price) | 0.27 | |||
|
| |||
Maximum offering price per share outstanding | $ | 5.90 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 164,283,627 | ||
|
| |||
Shares of beneficial interest outstanding | 28,932,599 | |||
|
| |||
Net asset value per share outstanding | $ | 5.68 | ||
Maximum sales charge (4.50% of offering price) | 0.27 | |||
|
| |||
Maximum offering price per share outstanding | $ | 5.95 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 93,909,563 | ||
|
| |||
Shares of beneficial interest outstanding | 16,751,074 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.61 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 611,447,211 | ||
|
| |||
Shares of beneficial interest outstanding | 109,020,428 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.61 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 3,955,313,499 | ||
|
| |||
Shares of beneficial interest outstanding | 701,524,279 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.64 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 36,985 | ||
|
| |||
Shares of beneficial interest outstanding | 6,569 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.63 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 7,452,553 | ||
|
| |||
Shares of beneficial interest outstanding | 1,322,707 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.63 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 460,901 | ||
|
| |||
Shares of beneficial interest outstanding | 81,899 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.63 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 745,385,204 | ||
|
| |||
Shares of beneficial interest outstanding | 132,435,115 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.63 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Statement of Operations for the six months ended April 30, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 293,536,082 | ||
Dividends | 549,721 | |||
Other income | 29,847 | |||
|
| |||
Total income | 294,115,650 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 26,018,861 | |||
Distribution/Service—Class A (See Note 3) | 4,448,433 | |||
Distribution/Service—Investor Class (See Note 3) | 204,212 | |||
Distribution/Service—Class B (See Note 3) | 502,048 | |||
Distribution/Service—Class C (See Note 3) | 3,205,309 | |||
Distribution/Service—Class R2 (See Note 3) | 10,459 | |||
Distribution/Service—Class R3 (See Note 3) | 980 | |||
Transfer agent (See Note 3) | 6,634,526 | |||
Shareholder communication | 1,094,300 | |||
Professional fees | 281,945 | |||
Registration | 186,986 | |||
Trustees | 113,356 | |||
Custodian | 25,121 | |||
Shareholder service (See Note 3) | 4,398 | |||
Miscellaneous | 195,056 | |||
|
| |||
Total expenses | 42,925,990 | |||
|
| |||
Net investment income (loss) | 251,189,660 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments | ||||
Net realized gain (loss) on investments | 77,673,206 | |||
Net change in unrealized appreciation (depreciation) on investments | (277,179,777 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | (199,506,571 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 51,683,089 | ||
|
|
24 | MainStay MacKay 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. |
Statements of Changes in Net Assets
for the six months ended April 30, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 251,189,660 | $ | 548,987,599 | ||||
Net realized gain (loss) on investments | 77,673,206 | 72,799,100 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (277,179,777 | ) | 66,411,721 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 51,683,089 | 688,198,420 | ||||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (103,343,633 | ) | (191,741,233 | ) | ||||
Investor Class | (4,714,156 | ) | (14,209,393 | ) | ||||
Class B | (2,496,655 | ) | (5,575,422 | ) | ||||
Class C | (15,949,463 | ) | (32,240,202 | ) | ||||
Class I | (118,294,733 | ) | (289,948,747 | ) | ||||
Class R1 | (1,082 | ) | (2,677 | ) | ||||
Class R2 | (236,463 | ) | (537,905 | ) | ||||
Class R3 | (10,901 | ) | (13,936 | ) | ||||
Class R6 | (34,800,063 | ) | (18,838,061 | ) | ||||
|
| |||||||
(279,847,149 | ) | (553,107,576 | ) | |||||
|
| |||||||
Return of capital: | ||||||||
Class A | — | (31,015,011 | ) | |||||
Investor Class | — | (2,298,433 | ) | |||||
Class B | — | (901,850 | ) | |||||
Class C | — | (5,214,999 | ) | |||||
Class I | — | (46,900,521 | ) | |||||
Class R1 | — | (433 | ) | |||||
Class R2 | — | (87,009 | ) | |||||
Class R3 | — | (2,254 | ) | |||||
Class R6 | — | (3,047,141 | ) | |||||
|
| |||||||
— | (89,467,651 | ) | ||||||
|
| |||||||
Total dividends to shareholders | (279,847,149 | ) | (642,575,227 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares (a) | 1,466,132,814 | 4,854,487,899 | ||||||
Net asset value of shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | — | 317,232,064 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 254,852,181 | 586,154,449 | ||||||
Cost of shares redeemed | (2,802,509,224 | ) | (5,451,117,279 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (1,081,524,229 | ) | 306,757,133 | |||||
|
| |||||||
Net increase (decrease) in net assets | (1,309,688,289 | ) | 352,380,326 |
2018 | 2017 | |||||||
Net Assets | ||||||||
Beginning of period | 10,380,692,869 | 10,028,312,543 | ||||||
|
| |||||||
End of period | $ | 9,071,004,580 | $ | 10,380,692,869 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (40,181,124 | ) | $ | (11,523,635 | ) | ||
|
|
(a) | Includes in-kind subscriptions in the amount of $11,683,015 during the year ended October 31, 2017. (See Note 11) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.15 | 0.30 | 0.33 | 0.31 | 0.34 | 0.36 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.09 | 0.20 | (0.31 | ) | (0.09 | ) | 0.06 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.03 | 0.39 | 0.53 | 0.00 | ‡ | 0.25 | 0.42 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.31 | ) | (0.34 | ) | (0.31 | ) | (0.40 | ) | (0.42 | ) | ||||||||||||||||
Return of capital | — | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.17 | ) | (0.36 | ) | (0.36 | ) | (0.36 | ) | (0.40 | ) | (0.42 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.63 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.43 | % | 6.91 | % | 9.96 | % | 0.06 | % | 4.14 | % | 7.15 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.16 | %†† | 5.25 | % | 5.98 | % | 5.45 | % | 5.52 | % | 5.89 | % | ||||||||||||||||
Net expenses | 0.99 | %†† | 0.97 | % | 0.95 | % | 0.96 | % | 0.99 | % | 1.01 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | 38 | % | 41 | % | 40 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,492,715 | $ | 3,683,113 | $ | 3,551,864 | $ | 3,364,517 | $ | 3,678,466 | $ | 4,055,185 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.82 | $ | 5.79 | $ | 5.62 | $ | 5.99 | $ | 6.14 | $ | 6.13 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.15 | 0.30 | 0.33 | 0.31 | 0.34 | 0.36 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.09 | 0.20 | (0.31 | ) | (0.09 | ) | 0.07 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.03 | 0.39 | 0.53 | (0.00 | )‡ | 0.25 | 0.43 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.31 | ) | (0.34 | ) | (0.32 | ) | (0.40 | ) | (0.42 | ) | ||||||||||||||||
Return of capital | — | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.17 | ) | (0.36 | ) | (0.36 | ) | (0.37 | ) | (0.40 | ) | (0.42 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.68 | $ | 5.82 | $ | 5.79 | $ | 5.62 | $ | 5.99 | $ | 6.14 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.44 | % | 6.90 | % | 9.91 | % | (0.07 | %) | 4.13 | % | 7.24 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.12 | %†† | 5.21 | % | 5.90 | % | 5.39 | % | 5.50 | % | 5.88 | % | ||||||||||||||||
Net expenses | 1.03 | %†† | 1.02 | % | 1.03 | % | 1.02 | % | 1.01 | % | 1.02 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | 38 | % | 41 | % | 40 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 164,284 | $ | 167,139 | $ | 287,493 | $ | 282,451 | $ | 296,535 | $ | 307,643 |
* | 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. For periods of less than one year, total return is not annualized. |
26 | MainStay MacKay 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 B | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.74 | $ | 5.71 | $ | 5.54 | $ | 5.90 | $ | 6.05 | $ | 6.05 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.12 | 0.26 | 0.28 | 0.27 | 0.29 | 0.31 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | 0.08 | 0.20 | (0.32 | ) | (0.09 | ) | 0.06 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.01 | 0.34 | 0.48 | (0.05 | ) | 0.20 | 0.37 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.27 | ) | (0.29 | ) | (0.26 | ) | (0.35 | ) | (0.37 | ) | ||||||||||||||||
Return of capital | — | (0.04 | ) | (0.02 | ) | (0.05 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | (0.35 | ) | (0.37 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.61 | $ | 5.74 | $ | 5.71 | $ | 5.54 | $ | 5.90 | $ | 6.05 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.20 | % | 6.06 | % | 8.85 | % | (0.60 | %) | 3.35 | % | 6.36 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 4.37 | %†† | 4.47 | % | 5.16 | % | 4.64 | % | 4.75 | % | 5.13 | % | ||||||||||||||||
Net expenses | 1.78 | %†† | 1.77 | % | 1.78 | % | 1.77 | % | 1.76 | % | 1.77 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | 38 | % | 41 | % | 40 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 93,910 | $ | 108,263 | $ | 132,509 | $ | 139,683 | $ | 172,640 | $ | 197,273 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.74 | $ | 5.72 | $ | 5.55 | $ | 5.90 | $ | 6.05 | $ | 6.05 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.12 | 0.26 | 0.28 | 0.27 | 0.29 | 0.31 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | 0.07 | 0.20 | (0.31 | ) | (0.09 | ) | 0.06 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.01 | 0.33 | 0.48 | (0.04 | ) | 0.20 | 0.37 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.27 | ) | (0.29 | ) | (0.26 | ) | (0.35 | ) | (0.37 | ) | ||||||||||||||||
Return of capital | — | (0.04 | ) | (0.02 | ) | (0.05 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | (0.35 | ) | (0.37 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.61 | $ | 5.74 | $ | 5.72 | $ | 5.55 | $ | 5.90 | $ | 6.05 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.20 | % | 5.87 | % | 9.04 | % | (0.60 | %) | 3.34 | % | 6.36 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 4.37 | %†† | 4.45 | % | 5.15 | % | 4.64 | % | 4.75 | % | 5.13 | % | ||||||||||||||||
Net expenses | 1.78 | %†† | 1.77 | % | 1.78 | % | 1.77 | % | 1.76 | % | 1.77 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | 38 | % | 41 | % | 40 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 611,447 | $ | 676,463 | $ | 678,364 | $ | 679,392 | $ | 785,873 | $ | 814,589 |
* | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class I | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.78 | $ | 5.75 | $ | 5.58 | $ | 5.94 | $ | 6.08 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.15 | 0.32 | 0.34 | 0.33 | 0.35 | 0.37 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.08 | 0.20 | (0.31 | ) | (0.08 | ) | 0.07 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.03 | 0.40 | 0.54 | 0.02 | 0.27 | 0.44 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.32 | ) | (0.35 | ) | (0.33 | ) | (0.41 | ) | (0.44 | ) | ||||||||||||||||
Return of capital | — | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.17 | ) | (0.37 | ) | (0.37 | ) | (0.38 | ) | (0.41 | ) | (0.44 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.64 | $ | 5.78 | $ | 5.75 | $ | 5.58 | $ | 5.94 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.57 | % | 7.17 | % | 10.23 | % | 0.32 | % | 4.58 | % | 7.40 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.42 | %†† | 5.51 | % | 6.23 | % | 5.70 | % | 5.76 | % | 6.13 | % | ||||||||||||||||
Net expenses | 0.74 | %†† | 0.72 | % | 0.70 | % | 0.71 | % | 0.74 | % | 0.76 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | 38 | % | 41 | % | 40 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 3,955,313 | $ | 4,067,560 | $ | 5,313,266 | $ | 4,844,891 | $ | 3,762,169 | $ | 3,393,780 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R1 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.15 | 0.32 | 0.34 | 0.32 | 0.34 | 0.37 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.07 | 0.19 | (0.31 | ) | (0.08 | ) | 0.06 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.03 | 0.39 | 0.53 | 0.01 | 0.26 | 0.43 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.31 | ) | (0.34 | ) | (0.32 | ) | (0.41 | ) | (0.43 | ) | ||||||||||||||||
Return of capital | — | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.17 | ) | (0.36 | ) | (0.36 | ) | (0.37 | ) | (0.41 | ) | (0.43 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.63 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.52 | % | 7.07 | % | 10.13 | % | 0.21 | % | 4.31 | % | 7.32 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.33 | %†† | 5.48 | % | 6.11 | % | 5.60 | % | 5.66 | % | 6.03 | % | ||||||||||||||||
Net expenses | 0.84 | %†† | 0.82 | % | 0.80 | % | 0.81 | % | 0.84 | % | 0.86 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | 38 | % | 41 | % | 40 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 37 | $ | 37 | $ | 59 | $ | 39 | $ | 29 | $ | 28 |
* | 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. For periods of less than one year, total return is not annualized. |
28 | MainStay MacKay 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 R2 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.14 | 0.30 | 0.32 | 0.31 | 0.33 | 0.35 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.08 | 0.20 | (0.31 | ) | (0.09 | ) | 0.07 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.02 | 0.38 | 0.52 | (0.00 | )‡ | 0.24 | 0.42 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.30 | ) | (0.33 | ) | (0.31 | ) | (0.39 | ) | (0.42 | ) | ||||||||||||||||
Return of capital | — | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.16 | ) | (0.35 | ) | (0.35 | ) | (0.36 | ) | (0.39 | ) | (0.42 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.63 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.39 | % | 6.80 | % | 9.83 | % | (0.04 | %) | 4.04 | % | 7.06 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.06 | %†† | 5.16 | % | 5.89 | % | 5.35 | % | 5.43 | % | 5.79 | % | ||||||||||||||||
Net expenses | 1.09 | %†† | 1.07 | % | 1.05 | % | 1.06 | % | 1.09 | % | 1.11 | % | ||||||||||||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | 38 | % | 41 | % | 40 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 7,453 | $ | 9,562 | $ | 10,917 | $ | 10,084 | $ | 11,049 | $ | 15,008 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | February 29, 2016** through October 31, | ||||||||||
Class R3 | 2018* | 2017 | 2016 | |||||||||
Net asset value at beginning of period | $ | 5.77 | $ | 5.74 | $ | 5.17 | ||||||
|
|
|
|
|
| |||||||
Net investment income (loss) (a) | 0.14 | 0.28 | 0.20 | |||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.09 | 0.60 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 0.02 | 0.37 | 0.80 | |||||||||
|
|
|
|
|
| |||||||
Less dividends and distributions: | ||||||||||||
From net investment income | (0.16 | ) | (0.29 | ) | (0.21 | ) | ||||||
Return of capital | — | (0.05 | ) | (0.02 | ) | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.16 | ) | (0.34 | ) | (0.23 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value at end of period | $ | 5.63 | $ | 5.77 | $ | 5.74 | ||||||
|
|
|
|
|
| |||||||
Total investment return (b) | 0.27 | % | 6.58 | % | 15.59 | % | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 4.81 | %†† | 4.81 | % | 5.40 | %†† | ||||||
Net expenses | 1.34 | %†† | 1.32 | % | 1.30 | %†† | ||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | ||||||
Net assets at end of period (in 000’s) | $ | 461 | $ | 392 | $ | 130 |
* | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 5.77 | $ | 5.74 | $ | 5.58 | $ | 5.94 | $ | 6.09 | $ | 6.11 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.16 | 0.32 | 0.35 | 0.34 | 0.36 | 0.14 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.09 | 0.19 | (0.31 | ) | (0.08 | ) | 0.03 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.04 | 0.41 | 0.54 | 0.03 | 0.28 | 0.17 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.18 | ) | (0.33 | ) | (0.36 | ) | (0.34 | ) | (0.43 | ) | (0.19 | ) | ||||||||||||||||
Return of capital | — | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.18 | ) | (0.38 | ) | (0.38 | ) | (0.39 | ) | (0.43 | ) | (0.19 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 5.63 | $ | 5.77 | $ | 5.74 | $ | 5.58 | $ | 5.94 | $ | 6.09 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 0.64 | % | 7.36 | % | 10.24 | % | 0.50 | % | 4.60 | % | 2.79 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 5.54 | %†† | 5.45 | % | 6.23 | % | 5.84 | % | 5.88 | % | 6.24 | %†† | ||||||||||||||||
Net expenses | 0.59 | %†† | 0.58 | % | 0.58 | % | 0.58 | % | 0.58 | % | 0.59 | %†† | ||||||||||||||||
Portfolio turnover rate | 16 | % | 43 | % | 41 | % | 38 | % | 41 | % | 40 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 745,385 | $ | 1,668,163 | $ | 53,712 | $ | 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. For periods of less than one year, total return is not annualized. |
30 | MainStay MacKay 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. |
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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the ‘‘Funds’’). These financial statements and Notes relate to the MainStay MacKay High Yield Corporate Bond Fund (formerly known as 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 has ten classes of shares registered for sale. 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 T shares of the Fund were registered for sale effective as of February 28, 2017. As of April 30, 2018, Class T shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of
such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class I, Class R1, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. When available for sale, Class T shares are currently expected to be offered at NAV plus an initial 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class R2, Class R3 and Class T shares. 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, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation
31 |
Notes to Financial Statements (Unaudited) (continued)
Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state 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 assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 the security’s 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, 2018, 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 the 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
32 | MainStay MacKay High Yield Corporate Bond Fund |
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, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Equity securities, including 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 and 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.
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, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 method-
ologies 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 Class | Fair Value at 4/30/18* | Valuation Technique | Unobservable Inputs | Range | ||||||||
Convertible Bond (3) | $ | 66,015,635 | Market Approach | Estimated Enterprise Value | $953.1m–$1,097.5m | |||||||
10,924 | Income Approach | Liquidity Discount | 100bps | |||||||||
Subordination Discount | 150bps | |||||||||||
Corporate Bonds (1) | 90,434,086 | Income Approach | Estimated Yield to Maturity | 16.05 | % | |||||||
Spread Adjustment | 3.28 | % | ||||||||||
Common Stocks (3) | 3,836,349 | Market Approach | Estimated Enterprise Value | $953.1m–$1,097.5m | ||||||||
Estimated Volatility | 20.00 | % | ||||||||||
1,416,316 | Market Approach | Terminal Value Multiple | 9.0x | |||||||||
Liquidity Discount | 20.00 | % | ||||||||||
8,644,323 | Market Approach | EBITDA Multiple | 5.75x | |||||||||
Discount Rate | 10.00 | % | ||||||||||
|
| |||||||||||
$ | 170,357,633 | |||||||||||
|
|
* | The table above does not include Level 3 investments that were valued by brokers without adjustment. As of April 30, 2018, the value of these investments were $22,181,102. The inputs for this investment were not readily available or cannot be reasonably estimated. |
A portfolio 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 the 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 materially 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 the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the 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
33 |
Notes to Financial Statements (Unaudited) (continued)
(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 are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2018 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, 2018, 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 its 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 tax 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 determinations using 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. 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 accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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 all or a portion of any interest receivables when the collection of all or a portion of such 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.
Additionally, the Fund may invest in shares of ETFs or mutual funds, which are subject to management fees and other fees that may increase the costs of investing in ETFs or mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of ETFs or mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the
34 | MainStay MacKay High Yield Corporate Bond Fund |
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, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of April 30, 2018, the Fund did not hold any repurchase agreements.
(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 (“LIBOR”).
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 enter 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, 2018, the Fund did not hold any unfunded commitments.
(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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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, 2018, the Fund did not have any portfolio securities on loan.
(J) 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.
(K) Debt Securities and Loan Risk. The Fund primarily invests in high-yield debt securities (commonly referred to as “junk bonds”), which are considered speculative because they present a greater risk of loss, including default, than higher rated 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. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
The loans in which the Fund invests are usually rated below investment grade, or if unrated, determined by the Subadvisor to be of comparable quality (commonly referred to as “junk bonds”) and are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. Moreover, such securities may, under certain circumstances, be particularly susceptible to liquidity and valuation risks. Although certain loans are collateralized, there is no guarantee that the value of the collateral will be sufficient or available to satisfy the borrower’s obligation. In times of unusual or adverse market, economic or political conditions, loans may experience higher than normal default rates. In the event of a recession or serious credit event, among other eventualities, the value of the Fund’s investments in loans are more likely to decline. The secondary market for loans is limited and, thus, the Fund’s ability to sell or realize the full value of its investment in these loans to reinvest sale proceeds or to meet redemption obligations may be impaired. In addition, loans 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.
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of the anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
(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
35 |
Notes to Financial Statements (Unaudited) (continued)
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 attributable to 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 an 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 the services performed and the 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; 0.50% from $7 billion up to $10 billion; 0.49% from $10 billion to $15 billion; and 0.48% in excess of $15 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, 2018, the Fund paid the Manager a monthly fee for the services performed and the 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; 0.50% from $7 billion up to $10 billion; and 0.49% in excess of $10 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, 2018, the effective management fee rate was 0.54% 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
(excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019, 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.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $26,018,861.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T 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
36 | MainStay MacKay High Yield Corporate Bond Fund |
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 the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2018, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 18 | ||
Class R2 | 4,184 | |||
Class R3 | 196 |
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $406,722 and $43,093, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $38,379, $6, $62,943 and $19,272, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 2,744,724 | ||
Investor Class | 157,337 | |||
Class B | 96,740 | |||
Class C | 617,543 | |||
Class I | 3,011,418 | |||
Class R1 | 28 | |||
Class R2 | 6,433 | |||
Class R3 | 303 |
(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, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $ | 934,374 | 0.0 | %‡ | ||||
Class R1 | 34,956 | 94.5 |
‡ | Less than one-tenth of a percent. |
Note 4–Federal Income Tax
As of April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 9,038,450,534 | $ | 206,088,833 | $ | (236,019,339 | ) | $ | (29,930,506 | ) |
As of October 31, 2017, for federal income tax purposes, capital loss carryforwards of $277,829,060 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.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $26,783 | $251,046 |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 553,107,576 | ||
Return of Capital | 89,467,651 | |||
Total | $ | 642,575,227 |
37 |
Notes to Financial Statements (Unaudited) (continued)
Note 5–Restricted Securities
As of April 30, 2018, the Fund held the following restricted securities:
Security | Date(s) of Acquisition | Principal Amount/ Shares | Cost | 4/30/18 Value | Percent of Net Assets | |||||||||||||||
Aleris International, Inc. | 7/6/10 | $ | 11,797 | $ | 9,778 | $ | 10,924 | 0.0 | %‡ | |||||||||||
Exide Technologies | | 4/30/15- 9/29/17 |
| 2,084,972 | 53,289,038 | 3,836,349 | 0.1 | |||||||||||||
ION Media Networks, Inc. | | 3/12/10- 9/29/17 |
| 2,287 | 13,572 | 1,416,316 | 0.0 | ‡ | ||||||||||||
Majestic Star Casino LLC Membership Units | 12/1/11 | 446,020 | 892,040 | 423,719 | 0.0 | ‡ | ||||||||||||||
Neenah Enterprises, Inc. | | 7/29/10- 9/29/17 | 720,961 | 6,114,571 | 8,644,322 | 0.1 | ||||||||||||||
Neenah Foundry Co. | 12/8/17 | $ | 10,862,500 | 10,760,976 | 10,753,875 | 0.1 | ||||||||||||||
Sterling Entertainment Enterprises LLC | 12/28/17 | $ | 20,000,000 | 19,710,204 | 20,200,000 | 0.2 | ||||||||||||||
Stone Energy Corp. | 3/3/17 | 2,074,193 | 69,729,344 | 73,841,271 | 0.8 | |||||||||||||||
Stone Energy Corp. | | 3/3/17- 1/3/18 |
| $ | 24,562,822 | 25,359,760 | 24,992,671 | 0.3 | ||||||||||||
Total | $ | 185,879,283 | $ | 144,119,447 | 1.6 | % |
‡ | 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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the
Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $1,436,332 and $2,509,255, respectively.
38 | MainStay MacKay High Yield Corporate Bond Fund |
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 50,056,432 | $ | 286,447,041 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 15,569,400 | 88,720,739 | ||||||
Shares redeemed | (86,111,965 | ) | (492,416,029 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (20,486,133 | ) | (117,248,249 | ) | ||||
Shares converted into Class A (See Note 1) | 2,949,209 | 16,869,657 | ||||||
Shares converted from Class A (See Note 1) | (675,142 | ) | (3,829,591 | ) | ||||
|
| |||||||
Net increase (decrease) | (18,212,066 | ) | $ | (104,208,183 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 137,960,535 | $ | 796,510,493 | |||||
Shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | 10,796,682 | 62,812,936 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | 33,255,027 | 191,827,227 | ||||||
Shares redeemed | (185,358,822 | ) | (1,070,313,899 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (3,346,578 | ) | (19,163,243 | ) | ||||
Shares converted into Class A (See Note 1) | 27,937,559 | 162,107,881 | ||||||
Shares converted from Class A (See Note 1) | (4,923,114 | ) | (28,586,448 | ) | ||||
|
| |||||||
Net increase (decrease) | 19,667,867 | $ | 114,358,190 | |||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 1,909,688 | $ | 11,015,522 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 774,352 | 4,448,046 | ||||||
Shares redeemed | (1,874,782 | ) | (10,819,351 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 809,258 | 4,644,217 | ||||||
Shares converted into Investor Class (See Note 1) | 961,887 | 5,508,964 | ||||||
Shares converted from Investor Class (See Note 1) | (1,570,893 | ) | (9,053,406 | ) | ||||
|
| |||||||
Net increase (decrease) | 200,252 | $ | 1,099,775 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 5,619,055 | $ | 32,742,492 | |||||
Shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | 883,418 | 5,181,248 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,644,158 | 15,376,930 | ||||||
Shares redeemed | (5,651,793 | ) | (32,923,120 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 3,494,838 | 20,377,550 | ||||||
Shares converted into Investor Class (See Note 1) | 2,275,619 | 13,254,259 | ||||||
Shares converted from Investor Class (See Note 1) | (26,698,350 | ) | (156,019,665 | ) | ||||
|
| |||||||
Net increase (decrease) | (20,927,893 | ) | $ | (122,387,856 | ) | |||
|
|
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 106,813 | $ | 606,637 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 391,022 | 2,218,183 | ||||||
Shares redeemed | (1,770,921 | ) | (10,077,062 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,273,086 | ) | (7,252,242 | ) | ||||
Shares converted from Class B (See Note 1) | (828,971 | ) | (4,711,743 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,102,057 | ) | $ | (11,963,985 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 889,619 | $ | 5,102,460 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,005,592 | 5,771,859 | ||||||
Shares redeemed | (4,238,908 | ) | (24,373,758 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,343,697 | ) | (13,499,439 | ) | ||||
Shares converted into Class B (See Note 1) | 562 | 3,201 | ||||||
Shares converted from Class B (See Note 1) | (1,994,735 | ) | (11,476,196 | ) | ||||
|
| |||||||
Net increase (decrease) | (4,337,870 | ) | $ | (24,972,434 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 3,770,276 | $ | 21,503,887 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,493,103 | 14,145,733 | ||||||
Shares redeemed | (14,981,068 | ) | (85,292,281 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (8,717,689 | ) | (49,642,661 | ) | ||||
Shares converted from Class C (See Note 1) | (13,245 | ) | (76,142 | ) | ||||
|
| |||||||
Net increase (decrease) | (8,730,934 | ) | $ | (49,718,803 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 13,097,649 | $ | 75,284,450 | |||||
Shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | 12,822,216 | 74,236,783 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,581,771 | 32,066,658 | ||||||
Shares redeemed | (32,264,507 | ) | (185,641,594 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (762,871 | ) | (4,053,703 | ) | ||||
Shares converted from Class C (See Note 1) | (160,698 | ) | (922,248 | ) | ||||
|
| |||||||
Net increase (decrease) | (923,569 | ) | $ | (4,975,951 | ) | |||
|
|
39 |
Notes to Financial Statements (Unaudited) (continued)
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 164,441,458 | $ | 940,981,348 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 19,347,934 | 110,387,757 | ||||||
Shares redeemed | (179,318,231 | ) | (1,026,679,788 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 4,471,161 | 24,689,317 | ||||||
Shares converted into Class I (See Note 1) | 68,185 | 388,266 | ||||||
Shares converted from Class I (See Note 1) | (7,219,439 | ) | (41,161,988 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,680,093 | ) | $ | (16,084,405 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold (a) | 399,617,814 | $ | 2,309,616,788 | |||||
Shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | 30,051,743 | 175,001,097 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | 55,184,195 | 318,761,441 | ||||||
Shares redeemed | (709,292,405 | ) | (4,099,545,620 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (224,438,653 | ) | (1,296,166,294 | ) | ||||
Shares converted into Class I (See Note 1) | 3,985,779 | 23,178,011 | ||||||
|
| |||||||
Net increase (decrease) | (220,452,874 | ) | $ | (1,272,988,283 | ) | |||
|
| |||||||
(a) Includes in-kind subscriptions in the amount of $11,683,015 during the year ended October 31, 2017. (See Note 11) |
| |||||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 321 | $ | 1,827 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 190 | 1,082 | ||||||
Shares redeemed | (392 | ) | (2,262 | ) | ||||
|
| |||||||
Net increase (decrease) | 119 | $ | 647 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 599 | $ | 3,456 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 540 | 3,110 | ||||||
Shares redeemed | (4,902 | ) | (28,556 | ) | ||||
|
| |||||||
Net increase (decrease) | (3,763 | ) | $ | (21,990 | ) | |||
|
|
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 163,188 | $ | 932,235 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 33,048 | 188,451 | ||||||
Shares redeemed | (526,067 | ) | (3,014,990 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (329,831 | ) | (1,894,304 | ) | ||||
Shares converted from Class R2 (See Note 1) | (3,959 | ) | (22,765 | ) | ||||
|
| |||||||
Net increase (decrease) | (333,790 | ) | $ | (1,917,069 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 326,120 | $ | 1,884,122 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 81,384 | 469,649 | ||||||
Shares redeemed | (651,458 | ) | (3,769,543 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (243,954 | ) | (1,415,772 | ) | ||||
Shares converted from Class R2 (See Note 1) | (260 | ) | (1,507 | ) | ||||
|
| |||||||
Net increase (decrease) | (244,214 | ) | $ | (1,417,279 | ) | |||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Period ended April 30, 2018: | ||||||||
Shares sold | 23,476 | $ | 133,537 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,608 | 9,149 | ||||||
Shares redeemed | (11,214 | ) | (64,361 | ) | ||||
|
| |||||||
Net increase (decrease) | 13,870 | $ | 78,325 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 83,301 | $ | 481,206 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,416 | 13,944 | ||||||
Shares redeemed | (28,201 | ) | (162,967 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 57,516 | 332,183 | ||||||
Shares converted from Class R3 (See Note 1) | (12,048 | ) | (69,759 | ) | ||||
|
| |||||||
Net increase (decrease) | 45,468 | $ | 262,424 | |||||
|
|
40 | MainStay MacKay High Yield Corporate Bond Fund |
Class R6 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 35,740,638 | $ | 204,510,780 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,084,274 | 34,733,041 | ||||||
Shares redeemed | (205,006,228 | ) | (1,174,143,100 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (163,181,316 | ) | (934,899,279 | ) | ||||
Shares converted into Class R6 (See Note 1) | 7,232,124 | 41,161,988 | ||||||
Shares converted from Class R6 (See Note 1) | (885,229 | ) | (5,073,240 | ) | ||||
|
| |||||||
Net increase (decrease) | (156,834,421 | ) | $ | (898,810,531 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 282,318,578 | $ | 1,632,862,432 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,784,191 | 21,863,631 | ||||||
Shares redeemed | (5,937,095 | ) | (34,358,222 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 280,165,674 | 1,620,367,841 | ||||||
Shares converted from Class R6 (See Note 1) | (253,219 | ) | (1,467,529 | ) | ||||
|
| |||||||
Net increase (decrease) | 279,912,455 | $ | 1,618,900,312 | |||||
|
|
Note 11–In-Kind Transfer of Securities
During the six-month period ended April 30, 2018, the Fund received shares of beneficial interest in exchange for securities. Cash and securities were transferred at their current value on the date of the transaction.
Transaction Date | Shares | Value | ||
9/29/17 | 2,014,313 | $11,683,015 |
Note 12–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 Large Cap Growth Fund, the MainStay High Yield Corporate Bond Fund and another fund previously managed by New York Life Investments 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 May 6, 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 second amended complaint. This motion was denied on October 28, 2015. New York Life Investments filed an answer to the second amended complaint on November 30, 2015. Discovery in the case has been concluded. New York Life Investments filed its motion for summary judgement on December 15, 2017.
Note 13–Fund Acquisitions
MainStay High Yield Opportunities Fund
At a meeting held on November 1-2, 2016, the Board approved an Agreement and Plan of Reorganization providing for the acquisition of the assets and liabilities of the MainStay High Yield Opportunities Fund, a series of MainStay Funds Trust, by the Fund, in exchange for shares of the Fund, followed by the complete liquidation of the MainStay High Yield Opportunities Fund (the “Reorganization”). The Reorganization was completed on February 17, 2017. The aggregate net assets of the Fund immediately before the acquisition were $10,459,740,548 and the combined net assets after the acquisition were $10,776,972,612.
41 |
Notes to Financial Statements (Unaudited) (continued)
The chart below shows a summary of net assets, shares outstanding, net unrealized appreciation/(depreciation), undistributed net investment income and accumulated net realized gains/(losses), before and after the reorganization.
Before Reorganization | After Reorganization | |||||||||||
MainStay High Yield Opportunities Fund | MainStay High Yield Corporate Bond Fund | MainStay High Yield Corporate Bond Fund | ||||||||||
Net Assets: | ||||||||||||
Class A | $ | 62,812,936 | $ | 3,593,566,219 | $ | 3,656,379,155 | ||||||
Investor Class | 5,181,248 | 288,079,044 | 293,260,292 | |||||||||
Class B | — | 130,694,661 | 130,694,661 | |||||||||
Class C | 74,236,783 | 671,406,491 | 745,643,274 | |||||||||
Class I | 175,001,097 | 5,700,715,046 | 5,875,716,143 | |||||||||
Class R1 | — | 62,081 | 62,081 | |||||||||
Class R2 | — | 10,841,706 | 10,841,706 | |||||||||
Class R3 | — | 222,918 | 222,918 | |||||||||
Class R6 | — | 64,152,382 | 64,152,382 | |||||||||
Shares Outstanding: | ||||||||||||
Class A | 5,800,751 | 617,686,243 | 628,482,926 | |||||||||
Investor Class | 480,906 | 49,118,183 | 50,001,601 | |||||||||
Class B | — | 22,582,583 | 22,582,583 | |||||||||
Class C | 6,885,751 | 115,964,747 | 128,786,963 | |||||||||
Class I | 16,123,153 | 978,944,874 | 1,008,996,752 | |||||||||
Class R1 | — | 10,674 | 10,674 | |||||||||
Class R2 | — | 1,862,964 | 1,862,964 | |||||||||
Class R3 | — | 38,332 | 38,332 | |||||||||
Class R6 | — | 11,028,891 | 11,028,891 | |||||||||
Net unrealized appreciation/(depreciation) | 10,328,312 | 276,337,007 | 286,665,319 | |||||||||
Undistributed net investment income | 251,519 | 1,327,073 | 1,327,073 | |||||||||
Accumulated net realized gain/(loss) | (78,971,873 | ) | (248,958,072 | ) | (248,958,072 | ) |
Assuming the acquisition of MainStay High Yield Opportunities Fund had been completed on November 1, 2016, the beginning of the annual reporting period of the Fund, the Fund’s pro forma results of operations for the year ended October 31, 2017, were as follows:
Net investment income | $ | 553,923,686 | ||
Net gain on investments | 145,265,223 | |||
Net increase in net assets resulting from operations | $ | 699,188,909 |
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the MainStay High Yield Opportunities Fund that have been included in the Fund’s Statement of Operations since February 17, 2017.
For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received from MainStay High Yield Opportunities Fund, in the amount of $301,102,166, was carried forward to align ongoing reporting of the Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes. The Fund acquired capital loss carryovers of $78,386,195 (subject to future annual limitations).
Note 14–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 15–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, 2018, events and transactions subsequent to April 30, 2018, 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.
42 | MainStay MacKay High Yield Corporate Bond Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay High Yield Corporate Bond Fund (now known as the MainStay MacKay 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 decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, together with responses from New York Life Investments and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
43 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of MacKay Shields and continuous analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and MacKay Shields’ track record 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, resources and history. The Board considered that New York Life Investments’ and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support the Fund. In this regard, the Board considered the experience of the Fund’s portfolio manager, the number of accounts managed by the portfolio manager and the method for compensating the portfolio manager.
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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 manager 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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
44 | MainStay MacKay High Yield Corporate Bond Fund |
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 seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized 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, including reputational and other indirect benefits.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York
45 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board noted that, following discussions with the Board, New York Life Investments had proposed an additional management fee breakpoint for the Fund, effective February 28, 2018.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net
assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of the Agreements.
46 | MainStay MacKay High Yield Corporate 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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).
47 |
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MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1739388 MS126-18 | MSHY10-06/18 (NYLIM) NL008 |
MainStay MacKay International Equity Fund (Formerly known as MainStay International Equity Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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
Semiannual Report | ||||
Investment and Performance Comparison | 5 | |||
Portfolio Management Discussion and Analysis | 9 | |||
Portfolio of Investments | 11 | |||
Financial Statements | 15 | |||
Notes to Financial Statements | 22 | |||
Board Consideration and Approval of Management Agreement and Subadvisory Agreement | 30 | |||
Proxy Voting Policies and Procedures and Proxy Voting Record | 34 | |||
Shareholder Reports and Quarterly Portfolio Disclosure | 34 |
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six | One Year | Five Years | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –0.58 5.21 | %
| | 10.34 16.76 | %
| | 5.61 6.81 | %
| | 2.87 3.45 | %
| | 1.34 1.34 | %
| ||||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –0.74 5.04 |
| | 10.01 16.41 | | | 5.25 6.44 | | | 2.53 3.11 | | | 1.69 1.69 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 9/13/1994 | | –0.33 4.67 |
| | 10.55 15.55 | | | 5.33 5.65 | | | 2.34 2.34 | | | 2.44 2.44 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | 3.60 4.60 |
| | 14.55 15.55 | | | 5.63 5.63 | | | 2.34 2.34 | | | 2.44 2.44 |
| ||||||||||
Class I Shares | No Sales Charge | 1/2/2004 | 5.29 | 17.09 | 7.08 | 3.72 | 1.09 | |||||||||||||||||||||
Class R1 Shares | No Sales Charge | 1/2/2004 | 5.29 | 17.00 | 6.97 | 3.63 | 1.19 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 1/2/2004 | 5.09 | 16.67 | 6.70 | 3.36 | 1.44 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | 5.01 | 16.45 | 6.44 | 3.11 | 1.69 |
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, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
MSCI ACWI® Ex U.S. Index4 | 3.47 | % | 15.91 | % | 5.46 | % | 2.26 | % | ||||||||
MSCI EAFE® Index5 | 3.41 | 14.51 | 5.90 | 2.43 | ||||||||||||
Morningstar Foreign Large Growth Category Average6 | 2.85 | 16.15 | 7.00 | 3.36 |
4. | The Fund has selected the MSCI ACWI® Ex U.S. Index as its primary broad-based securities market index. The MSCI ACWI® Ex U.S. Index 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. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The MSCI EAFE® Index is the Fund’s secondary benchmark. The MSCI EAFE® Index consists of international stocks representing the developed world outside of North America. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Foreign Large Growth Category Average is representative of funds that focus on high-priced growth stocks, mainly outside of the United States. Most of these portfolios divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. These portfolios primarily invest in stocks that have market caps in the top 70% of each economically integrated market and will have less than 20% of assets invested in U.S. stocks. Results are based on average total returns of similar funds 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 MacKay International Equity Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,052.10 | $ | 6.72 | $ | 1,018.20 | $ | 6.61 | 1.32% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,050.40 | $ | 8.39 | $ | 1,016.60 | $ | 8.25 | 1.65% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,046.70 | $ | 12.18 | $ | 1,012.90 | $ | 11.98 | 2.40% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,046.00 | $ | 12.18 | $ | 1,012.90 | $ | 11.98 | 2.40% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,052.90 | $ | 5.45 | $ | 1,019.50 | $ | 5.36 | 1.07% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,052.90 | $ | 5.96 | $ | 1,019.00 | $ | 5.86 | 1.17% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,050.90 | $ | 7.22 | $ | 1,017.80 | $ | 7.10 | 1.42% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,050.10 | $ | 8.49 | $ | 1,016.50 | $ | 8.35 | 1.67% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Exchange-Traded Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Country Composition as of April 30, 2018 (Unaudited)
United States | 20.3 | % | ||
United Kingdom | 17.5 | |||
Germany | 10.8 | |||
Japan | 9.2 | |||
Spain | 6.2 | |||
Netherlands | 5.6 | |||
Canada | 4.9 | |||
India | 4.8 | |||
Switzerland | 4.7 | |||
Israel | 2.6 | |||
Sweden | 2.6 |
Denmark | 2.3 | % | ||
France | 1.9 | |||
Taiwan | 1.9 | |||
Italy | 1.3 | |||
Mexico | 1.3 | |||
Ireland | 0.9 | |||
Brazil | 0.7 | |||
Australia | 0.5 | |||
Other Assets, Less Liabilities | 0.0 | ‡ | ||
|
| |||
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 as of April 30, 2018 (excluding short-term investment) (Unaudited)
1. | Start Today Co., Ltd. |
2. | Prudential PLC |
3. | Shire PLC |
4. | Fresenius Medical Care A.G. & Co. KGaA |
5. | iShares MSCI ACWI ex U.S. ETF |
6. | Johnson Matthey PLC |
7. | Whitbread PLC |
8. | ICON PLC |
9. | Koninklijke Philips N.V. |
10. | United Internet A.G., Registered |
8 | MainStay MacKay International Equity Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Carlos Garcia-Tunon, CFA, Ian Murdoch and Lawrence Rosenberg of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay International Equity Fund perform relative to its benchmarks and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MacKay International Equity Fund returned 5.21% for Class A shares, 5.04% for Investor Class shares, 4.67% for Class B shares and 4.60% for Class C shares for the six months ended April 30, 2018. Over the same period, the Fund’s Class I shares returned 5.29%, Class R1 shares returned 5.29%, Class R2 shares returned 5.09% and Class R3 shares returned 5.01%. For the six months ended April 30, 2018, all share classes outperformed the 3.47% return of the MSCI ACWI® Ex U.S. Index,1 which is the Fund’s primary benchmark; the 3.41% return of the MSCI EAFE® Index,1 which is the Fund’s secondary benchmark; and the 2.85% return of the Morningstar Foreign Large Growth Category Average.2 See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective January 1, 2018, MacKay Shields assumed subadvisory responsibilities for the Fund, and the portfolio managers from Cornerstone Capital Management Holdings LLC transitioned to MacKay Shields. Effective February 28, 2018, the Fund was renamed MainStay MacKay International Equity Fund. For more information on these changes, please refer to the supplements dated September 28, 2017, and December 15, 2017.
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s performance relative to the MSCI ACWI® Ex U.S. Index experienced positive contributions from stock selection on both a country and sector basis. (Contributions take weightings and total returns into account.) This was partially offset by negative allocation effects on both a country and sector basis. Stock selection on a sector basis contributed to the Fund’s performance relative to the MSCI ACWI® Ex U.S. Index, with particular strength in the consumer discretionary, information technology and health care sectors. Sector allocation suffered mainly from the Fund’s underweight exposure relative to the benchmark in the energy sector and overweight exposure in information technology and health care. Stock selection on a country basis contributed positively to the Fund’s performance relative to the MSCI ACWI® Ex U.S. Index, with particular strength in Japan, Germany and Canada. The Fund’s country allocations suffered primarily from overweight exposure to Germany and Belgium along with underweight exposure to South Africa.
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. Index were consumer discretionary, information technology and health care. Consumer discretionary benefited from positive stock selection, with the allocation effect adding incrementally to the Fund’s performance. Information technology and health care benefited from favorable stock selection, partially offset by a negative allocation effect. The Fund held overweight positions in all three sectors, of which consumer discretionary outperformed the MSCI ACWI® Ex U.S. Index and information technology and health care underperformed the Index.
The sectors that made the weakest contributions to the Fund’s performance relative to the MSCI ACWI® Ex U.S. Index were energy, materials and financials. All three of these sectors suffered from negative allocation effects, with the contribution from stock selection being negative for materials and financials and neutral for energy. The Fund held underweight positions in all three sectors, and all three sectors outperformed the MSCI ACWI® Ex U.S. Index.
During the reporting period, which individual stocks made the strongest 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 during the reporting period were Japanese media company CyberAgent, German IT services company Wirecard and Canadian software holding company Constellation Software. Each of these stocks contributed positively to absolute performance because of continued strong growth and strategy execution.
The most significant detractors from the Fund’s absolute performance were Israeli software company Check Point Software, Belgian personal products company Ontex Group and Italian diversified financial services company Banca IFIS. Check Point Software underperformed following a reduction in its earnings guidance and difficulties in its U.S. business. Shares of Ontex Group declined following a weak earnings report and difficulty integrating a recent acquisition in Latin America. Banca IFIS suffered mainly from increased political uncertainty after a general election that resulted in a hung parliament.
1. | See footnote on page 6 for more information on this index. |
2. | See footnote on page 6 for more information on Morningstar Foreign Large Growth Category Average. |
9 |
Did the Fund make any significant purchases or sales during the reporting period?
Notable purchases during the reporting period included shares of U.K. wealth manager and financial planner St. James’s Place, Spanish omni-channel apparel retailer Industria de Diseño Textil (better known as Inditex) and Spanish IT services provider to the global travel and tourism industry Amadeus IT Group. Notable sales during the reporting period included positions in Belgian personal products company Ontex Group, Thailand-based banking company Kasikornbank and Jordanian pharmaceutical company Hikma Pharmaceuticals.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund increased its exposure to the financials and industrials sectors. Over the same period, the
Fund reduced its exposure to the consumer staples and information technology sectors.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund held overweight positions relative to the MSCI ACWI® Ex U.S. Index in the health care, information technology and consumer discretionary sectors. As of the same date, the Fund held underweight positions in the financials, consumer staples and energy 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 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 MacKay International Equity Fund |
Portfolio of Investments April 30, 2018 (Unaudited)
Shares | Value | |||||||
Common Stocks 93.4%† | ||||||||
Australia 0.5% |
| |||||||
Gateway Lifestyle (Real Estate Management & Development) | 1,304,810 | $ | 1,944,690 | |||||
|
| |||||||
Brazil 0.7% |
| |||||||
Cielo S.A. (IT Services) | 424,839 | 2,328,417 | ||||||
|
| |||||||
Canada 4.9% |
| |||||||
Bank of Nova Scotia (Banks) | 140,719 | 8,649,514 | ||||||
Constellation Software, Inc. (Software) | 12,155 | 8,687,093 | ||||||
|
| |||||||
17,336,607 | ||||||||
|
| |||||||
Denmark 2.3% |
| |||||||
Novo Nordisk A/S, Class B (Pharmaceuticals) | 170,351 | 7,998,119 | ||||||
|
| |||||||
France 1.9% |
| |||||||
Teleperformance (Professional Services) | 41,364 | 6,629,135 | ||||||
|
| |||||||
Germany 10.8% |
| |||||||
¨Fresenius Medical Care A.G. & Co. KGaA (Health Care Providers & Services) | 109,338 | 11,134,215 | ||||||
Scout24 A.G. (Internet Software & Services) (a) | 141,761 | 7,343,997 | ||||||
¨United Internet A.G., Registered (Internet Software & Services) | 155,205 | 10,039,989 | ||||||
Wirecard A.G. (IT Services) | 72,082 | 9,799,973 | ||||||
|
| |||||||
38,318,174 | ||||||||
|
| |||||||
India 4.8% |
| |||||||
Housing Development Finance Corp., Ltd. (Thrifts & Mortgage Finance) | 302,249 | 8,479,207 | ||||||
Yes Bank, Ltd. (Banks) | 1,604,693 | 8,620,637 | ||||||
|
| |||||||
17,099,844 | ||||||||
|
| |||||||
Ireland 0.9% |
| |||||||
Paddy Power Betfair PLC (Hotels, Restaurants & Leisure) | 32,697 | 3,232,761 | ||||||
|
| |||||||
Israel 2.6% |
| |||||||
Check Point Software Technologies, Ltd. (Software) (b) | 96,662 | 9,328,850 | ||||||
|
| |||||||
Italy 1.3% |
| |||||||
Banca IFIS S.p.A. (Diversified Financial Services) | 118,222 | 4,649,307 | ||||||
|
| |||||||
Japan 9.2% |
| |||||||
CyberAgent, Inc. (Media) | 113,100 | 6,199,438 | ||||||
Relo Group, Inc. (Real Estate Management & Development) | 187,600 | 4,185,917 |
Shares | Value | |||||||
Japan (continued) |
| |||||||
¨Start Today Co., Ltd. (Internet & Direct Marketing Retail) | 500,996 | $ | 14,460,832 | |||||
Tsuruha Holdings, Inc. (Food & Staples Retailing) | 54,088 | 7,765,425 | ||||||
|
| |||||||
32,611,612 | ||||||||
|
| |||||||
Mexico 1.3% |
| |||||||
Regional S.A.B. de C.V. (Banks) | 735,587 | 4,682,068 | ||||||
|
| |||||||
Netherlands 5.6% |
| |||||||
GrandVision N.V. (Specialty Retail) (a)(c) | 197,658 | 4,856,680 | ||||||
IMCD N.V. (Trading Companies & Distributors) | 79,043 | 4,859,079 | ||||||
¨Koninklijke Philips N.V. (Health Care Equipment & Supplies) | 238,874 | 10,083,989 | ||||||
|
| |||||||
19,799,748 | ||||||||
|
| |||||||
Spain 6.2% |
| |||||||
Amadeus IT Group S.A. (IT Services) | 91,192 | 6,645,669 | ||||||
Grifols S.A. (Biotechnology) | 297,364 | 8,321,718 | ||||||
Industria de Diseno Textil S.A. (Specialty Retail) | 221,831 | 6,871,274 | ||||||
|
| |||||||
21,838,661 | ||||||||
|
| |||||||
Sweden 2.6% |
| |||||||
Hexagon AB, Class B (Electronic Equipment, Instruments & Components) | 159,728 | 9,197,710 | ||||||
|
| |||||||
Switzerland 4.7% |
| |||||||
DKSH Holding A.G. (Professional Services) | 63,191 | 5,070,359 | ||||||
TE Connectivity, Ltd. (Electronic Equipment, Instruments & Components) | 99,643 | 9,142,245 | ||||||
Tecan Group A.G., Registered (Life Sciences Tools & Services) | 11,974 | 2,630,443 | ||||||
|
| |||||||
16,843,047 | ||||||||
|
| |||||||
Taiwan 1.9% |
| |||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR (Semiconductors & Semiconductor Equipment) | 174,994 | 6,728,519 | ||||||
|
| |||||||
United Kingdom 17.5% |
| |||||||
Big Yellow Group PLC (Equity Real Estate Investment Trusts) | 416,986 | 5,286,114 | ||||||
BTG PLC (Pharmaceuticals) (b) | 507,001 | 4,760,855 | ||||||
Experian PLC (Professional Services) | 291,766 | 6,660,901 | ||||||
HomeServe PLC (Commercial Services & Supplies) | 510,443 | 5,189,875 | ||||||
¨Johnson Matthey PLC (Chemicals) | 231,405 | 10,469,204 | ||||||
¨ Prudential PLC (Insurance) | 463,961 | 11,899,377 | ||||||
St. James’s Place PLC (Capital Markets) | 473,658 | 7,393,608 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
United Kingdom (continued) |
| |||||||
¨Whitbread PLC (Hotels, Restaurants & Leisure) | 175,151 | $ | 10,310,936 | |||||
|
| |||||||
61,970,870 | ||||||||
|
| |||||||
United States 13.7% |
| |||||||
Accenture PLC, Class A (IT Services) | 55,815 | 8,439,228 | ||||||
¨ICON PLC (Life Sciences Tools & Services) (b) | 86,224 | 10,142,529 | ||||||
LivaNova PLC (Health Care Equipment & Supplies) (b) | 101,822 | 9,039,757 | ||||||
Samsonite International S.A. (Textiles, Apparel & Luxury Goods) | 2,155,952 | 9,767,599 | ||||||
¨Shire PLC (Biotechnology) | 212,379 | 11,286,432 | ||||||
|
| |||||||
48,675,545 | ||||||||
|
| |||||||
Total Common Stocks |
| 331,213,684 | ||||||
|
| |||||||
Exchange-Traded Funds 3.0% | ||||||||
United States 3.0% |
| |||||||
¨iShares MSCI ACWI ex U.S. ETF (Exchange Traded Funds) | 211,469 | 10,567,106 | ||||||
|
| |||||||
Total Exchange-Traded Funds |
| 10,567,106 | ||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 3.6% | ||||||||
Repurchase Agreement 3.6% |
| |||||||
Fixed Income Clearing Corp. | $ | 12,679,135 | 12,679,135 | |||||
|
| |||||||
Total Short-Term Investment |
| 12,679,135 | ||||||
|
| |||||||
Total Investments | 100.0 | % | 354,459,925 | |||||
Other Assets, Less Liabilities | 0.0 | ‡ | 107,043 | |||||
Net Assets | 100.0 | % | $ | 354,566,968 |
‡ | 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) | Non-income producing security. |
(c) | All or a portion of this security was held on loan. As of April 30, 2018, market value of securities loaned was $226,666 and the Fund received non-cash collateral in the amount of $235,877. (See Note 2(I)). |
The following abbreviations are used in the preceding pages:
ADR—American Depositary Receipt
ETF—Exchange-Traded Fund
12 | MainStay MacKay 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 following is a summary of the fair valuations according to the inputs used as of April 30, 2018, 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 | ||||||||||||||||
Australia | $ | — | $ | 1,944,690 | $ | — | $ | 1,944,690 | ||||||||
Denmark | — | 7,998,119 | — | 7,998,119 | ||||||||||||
France | — | 6,629,135 | — | 6,629,135 | ||||||||||||
Germany | — | 38,318,174 | — | 38,318,174 | ||||||||||||
India | — | 17,099,844 | — | 17,099,844 | ||||||||||||
Ireland | — | 3,232,761 | — | 3,232,761 | ||||||||||||
Italy | — | 4,649,307 | — | 4,649,307 | ||||||||||||
Japan | — | 32,611,612 | — | 32,611,612 | ||||||||||||
Netherlands | — | 19,799,748 | — | 19,799,748 | ||||||||||||
Spain | — | 21,838,661 | — | 21,838,661 | ||||||||||||
Sweden | — | 9,197,710 | — | 9,197,710 | ||||||||||||
Switzerland | 9,142,245 | 7,700,802 | — | 16,843,047 | ||||||||||||
United Kingdom | — | 61,970,870 | — | 61,970,870 | ||||||||||||
United States | 27,621,514 | 21,054,031 | — | 48,675,545 | ||||||||||||
All Other Countries | 40,404,461 | — | — | 40,404,461 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Common Stocks | 77,168,220 | 254,045,464 | — | 331,213,684 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Exchange-Traded Funds | 10,567,106 | — | — | 10,567,106 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 12,679,135 | — | 12,679,135 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 87,735,326 | $ | 266,724,599 | $ | — | $ | 354,459,925 | ||||||||
|
|
|
|
|
|
|
|
(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.
As of April 30, 2018, certain foreign equity securities with a market value of $190,068,470 transferred from Level 1 to Level 2 as the price of these securities were based on utilizing significant other observable inputs. As of October 31, 2017, the fair value obtained for these securities were based on utilizing quoted prices in active markets.
As of April 30, 2018, 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 |
Portfolio of Investments April 30, 2018 (Unaudited) (continued)
The table below sets forth the diversification of MainStay MacKay International Equity Fund investments by industry.
Industry Diversification
Value | Percent † | |||||||
Banks | $ | 21,952,219 | 6.2 | % | ||||
Biotechnology | 19,608,150 | 5.5 | ||||||
Capital Markets | 20,072,743 | 5.7 | ||||||
Chemicals | 10,469,204 | 2.9 | ||||||
Commercial Services & Supplies | 5,189,875 | 1.5 | ||||||
Diversified Financial Services | 4,649,307 | 1.3 | ||||||
Electronic Equipment, Instruments & Components | 18,339,955 | 5.2 | ||||||
Equity Real Estate Investment Trusts | 5,286,114 | 1.5 | ||||||
Exchange-Traded Funds | 10,567,106 | 3.0 | ||||||
Food & Staples Retailing | 7,765,425 | 2.2 | ||||||
Health Care Equipment & Supplies | 19,123,746 | 5.4 | ||||||
Health Care Providers & Services | 11,134,215 | 3.1 | ||||||
Hotels, Restaurants & Leisure | 13,543,697 | 3.8 | ||||||
Insurance | 11,899,377 | 3.4 | ||||||
Internet & Direct Marketing Retail | 14,460,832 | 4.1 | ||||||
Internet Software & Services | 17,383,986 | 4.9 | ||||||
IT Services | 27,213,287 | 7.7 | ||||||
Life Sciences Tools & Services | 12,772,972 | 3.6 | ||||||
Media | 6,199,438 | 1.7 | ||||||
Pharmaceuticals | 12,758,974 | 3.6 | ||||||
Professional Services | 18,360,395 | 5.2 | ||||||
Real Estate Management & Development | 6,130,607 | 1.7 | ||||||
Semiconductors & Semiconductor Equipment | 6,728,519 | 1.9 | ||||||
Software | 18,015,943 | 5.1 | ||||||
Specialty Retail | 11,727,954 | 3.3 | ||||||
Textiles, Apparel & Luxury Goods | 9,767,599 | 2.7 | ||||||
Thrifts & Mortgage Finance | 8,479,207 | 2.4 | ||||||
Trading Companies & Distributors | 4,859,079 | 1.4 | ||||||
|
|
|
| |||||
354,459,925 | 100.0 | |||||||
Other Assets, Less Liabilities | 107,043 | 0.0 | ‡ | |||||
|
|
|
| |||||
Net Assets | $ | 354,566,968 | 100.0 | % | ||||
|
|
|
|
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
14 | MainStay MacKay 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 Assets and Liabilities as of April 30, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 354,459,925 | ||
Cash denominated in foreign currencies | 9,699,404 | |||
Receivables: | ||||
Dividends and interest | 1,052,490 | |||
Investment securities sold | 185,100 | |||
Fund shares sold | 173,267 | |||
Securities lending income | 373 | |||
Other assets | 72,579 | |||
|
| |||
Total assets | 365,643,138 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 10,630,142 | |||
Manager (See Note 3) | 250,493 | |||
Fund shares redeemed | 30,986 | |||
Professional fees | 30,010 | |||
NYLIFE Distributors (See Note 3) | 30,001 | |||
Transfer agent (See Note 3) | 28,546 | |||
Custodian | 26,061 | |||
Foreign capital gains tax (See Note 2(C)) | 24,920 | |||
Shareholder communication | 24,272 | |||
Trustees | 524 | |||
Accrued expenses | 215 | |||
|
| |||
Total liabilities | 11,076,170 | |||
|
| |||
Net assets | $ | 354,566,968 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 207,247 | ||
Additional paid-in capital | 319,332,667 | |||
|
| |||
319,539,914 | ||||
Distributions in excess of net investment income | (2,263,805 | ) | ||
Accumulated net realized gain (loss) on investments and foreign currency transactions (a) | (23,770,309 | ) | ||
Net unrealized appreciation (depreciation) on investments (b) | 61,160,416 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | (99,248 | ) | ||
|
| |||
Net assets | $ | 354,566,968 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 62,947,040 | ||
|
| |||
Shares of beneficial interest outstanding | 3,672,124 | |||
|
| |||
Net asset value per share outstanding | $ | 17.14 | ||
Maximum sales charge (5.50% of offering price) | 1.00 | |||
|
| |||
Maximum offering price per share outstanding | $ | 18.14 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 25,280,458 | ||
|
| |||
Shares of beneficial interest outstanding | 1,482,063 | |||
|
| |||
Net asset value per share outstanding | $ | 17.06 | ||
Maximum sales charge (5.50% of offering price) | 0.99 | |||
|
| |||
Maximum offering price per share outstanding | $ | 18.05 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 5,567,730 | ||
|
| |||
Shares of beneficial interest outstanding | 365,620 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.23 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 8,315,968 | ||
|
| |||
Shares of beneficial interest outstanding | 546,006 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.23 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 247,973,114 | ||
|
| |||
Shares of beneficial interest outstanding | 14,397,111 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.22 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 2,486,801 | ||
|
| |||
Shares of beneficial interest outstanding | 145,167 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.13 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 683,293 | ||
|
| |||
Shares of beneficial interest outstanding | 39,741 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.19 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 1,312,564 | ||
|
| |||
Shares of beneficial interest outstanding | 76,908 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.07 | ||
|
|
(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 $24,920. |
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, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 2,072,845 | ||
Interest | 10,745 | |||
Securities lending income | 373 | |||
Other income | 1,002 | |||
|
| |||
Total income | 2,084,965 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 1,430,813 | |||
Distribution/Service—Class A (See Note 3) | 73,538 | |||
Distribution/Service—Investor Class (See Note 3) | 31,412 | |||
Distribution/Service—Class B (See Note 3) | 29,453 | |||
Distribution/Service—Class C (See Note 3) | 40,125 | |||
Distribution/Service—Class R2 (See Note 3) | 1,278 | |||
Distribution/Service—Class R3 (See Note 3) | 3,304 | |||
Transfer agent (See Note 3) | 177,110 | |||
Custodian | 49,219 | |||
Registration | 48,969 | |||
Professional fees | 40,311 | |||
Shareholder communication | 18,862 | |||
Trustees | 3,447 | |||
Shareholder service (See Note 3) | 2,447 | |||
Miscellaneous | 17,238 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,967,526 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (8,402 | ) | ||
|
| |||
Net expenses | 1,959,124 | |||
|
| |||
Net investment income (loss) | 125,841 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions (b) | 12,414,782 | |||
Foreign currency transactions | (76,379 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | 12,338,403 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (c) | 3,924,621 | |||
Translation of other assets and liabilities in foreign currencies | 26,349 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 3,950,970 | |||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 16,289,373 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 16,415,214 | ||
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $161,410. |
(b) | Realized gain (loss) on security transactions recorded net of foreign capital gains tax in the amount of $300,294. |
(c) | Net change in unrealized appreciation (depreciation) on investments recorded net of foreign capital gains tax in the amount of $215,682. |
16 | MainStay MacKay International Equity 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, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 125,841 | $ | 376,014 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 12,338,403 | 23,740,798 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 3,950,970 | 31,909,745 | ||||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 16,415,214 | 56,026,557 | ||||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (306,159 | ) | (109,089 | ) | ||||
Investor Class | (44,461 | ) | — | |||||
Class I | (1,621,018 | ) | (939,444 | ) | ||||
Class R1 | (17,860 | ) | (10,000 | ) | ||||
Class R2 | (5,543 | ) | (1,310 | ) | ||||
Class R3 | (2,963 | ) | — | |||||
|
| |||||||
Total dividends to shareholders | (1,998,004 | ) | (1,059,843 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 57,312,827 | 38,670,309 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 1,980,858 | 1,054,329 | ||||||
Cost of shares redeemed | (22,772,192 | ) | (63,024,436 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 36,521,493 | (23,299,798 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 50,938,703 | 31,666,916 | ||||||
Net Assets | ||||||||
Beginning of period | 303,628,265 | 271,961,349 | ||||||
|
| |||||||
End of period | $ | 354,566,968 | $ | 303,628,265 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (2,263,805 | ) | $ | (391,642 | ) | ||
|
|
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | $ | 13.37 | $ | 11.68 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.00 | )‡ | 0.00 | ‡ | 0.04 | 0.03 | 0.07 | 0.05 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.85 | 2.90 | (0.04 | ) | 0.49 | (0.26 | ) | 1.75 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.85 | 2.91 | 0.01 | 0.49 | (0.23 | ) | 1.79 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.09 | ) | (0.04 | ) | (0.01 | ) | (0.09 | ) | (0.03 | ) | (0.10 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 17.14 | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | $ | 13.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 5.21 | % | 21.59 | % | 0.05 | % | 3.78 | % | (1.76 | %) | 15.43 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.02 | %)†† | 0.01 | % | 0.28 | %(c) | 0.20 | % | 0.51 | % | 0.38 | % | ||||||||||||||||
Net expenses | 1.32 | % †† | 1.34 | % | 1.32 | %(d) | 1.33 | % | 1.34 | % | 1.40 | % | ||||||||||||||||
Portfolio turnover rate | 24 | % | 45 | % | 33 | % | 42 | % | 37 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 62,947 | $ | 54,553 | $ | 41,891 | $ | 43,405 | $ | 45,882 | $ | 57,948 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.27%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.33%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 16.27 | $ | 13.43 | $ | 13.47 | $ | 13.07 | $ | 13.35 | $ | 11.66 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.04 | ) | (0.01 | ) | (0.02 | ) | 0.03 | 0.01 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.85 | 2.87 | (0.04 | ) | 0.50 | (0.27 | ) | 1.75 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.82 | 2.84 | (0.04 | ) | 0.45 | (0.28 | ) | 1.75 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.03 | ) | — | — | (0.05 | ) | — | (0.06 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 17.06 | $ | 16.27 | $ | 13.43 | $ | 13.47 | $ | 13.07 | $ | 13.35 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 5.04 | % | 21.15 | % | (0.30 | %) | 3.43 | % | (2.10 | %) | 15.07 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.40 | %)†† | (0.26 | %) | (0.11 | %)(c) | (0.14 | %) | 0.19 | % | 0.05 | % | ||||||||||||||||
Net expenses | 1.65 | % †† | 1.69 | % | 1.69 | % (d) | 1.68 | % | 1.67 | % | 1.72 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.69 | % †† | 1.69 | % | 1.69 | % | 1.68 | % | 1.67 | % | 1.72 | % | ||||||||||||||||
Portfolio turnover rate | 24 | % | 45 | % | 33 | % | 42 | % | 37 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 25,280 | $ | 25,029 | $ | 31,523 | $ | 34,329 | $ | 34,377 | $ | 37,457 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.12)%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.70%. |
18 | MainStay MacKay 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 B | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 14.55 | $ | 12.10 | $ | 12.23 | $ | 11.91 | $ | 12.26 | $ | 10.73 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.09 | ) | (0.14 | ) | (0.10 | ) | (0.11 | ) | (0.07 | ) | (0.08 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.77 | 2.58 | (0.04 | ) | 0.46 | (0.24 | ) | 1.62 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.68 | 2.45 | (0.13 | ) | 0.32 | (0.35 | ) | 1.53 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 15.23 | $ | 14.55 | $ | 12.10 | $ | 12.23 | $ | 11.91 | $ | 12.26 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 4.67 | % | 20.25 | % | (1.06 | %) | 2.69 | % | (2.85 | %) | 14.26 | % (c) | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (1.18 | %)†† | (1.05 | %) | (0.86 | %)(d) | (0.91 | %) | (0.57 | %) | (0.73 | %) | ||||||||||||||||
Net expenses | 2.40 | % †† | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | 2.47 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 2.44 | % †† | 2.44 | % | 2.44 | % | 2.43 | % | 2.42 | % | 2.47 | % | ||||||||||||||||
Portfolio turnover rate | 24 | % | 45 | % | 33 | % | 42 | % | 37 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 5,568 | $ | 6,210 | $ | 6,991 | $ | 8,982 | $ | 11,058 | $ | 13,981 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | Without the custody fee reimbursement, net investment income (loss) would have been (0.87)%. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.45%. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 14.56 | $ | 12.10 | $ | 12.23 | $ | 11.92 | $ | 12.26 | $ | 10.74 | ||||||||||||||||
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Net investment income (loss) (a) | (0.08 | ) | (0.14 | ) | (0.10 | ) | (0.11 | ) | (0.07 | ) | (0.08 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.75 | 2.59 | (0.04 | ) | 0.45 | (0.24 | ) | 1.61 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.01 | (0.03 | ) | (0.03 | ) | (0.01 | ) | ||||||||||||||||||
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Total from investment operations | 0.67 | 2.46 | (0.13 | ) | 0.31 | (0.34 | ) | 1.52 | ||||||||||||||||||||
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Net asset value at end of period | $ | 15.23 | $ | 14.56 | $ | 12.10 | $ | 12.23 | $ | 11.92 | $ | 12.26 | ||||||||||||||||
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Total investment return (b) | 4.60 | % | 20.33 | % | (1.06 | %) | 2.60 | % | (2.77 | %) | 14.15 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (1.13 | %)†† | (1.05 | %) | (0.84 | %)(c) | (0.90 | %) | (0.57 | %) | (0.71 | %) | ||||||||||||||||
Net expenses | 2.40 | % †† | 2.44 | % | 2.44 | % (d) | 2.43 | % | 2.42 | % | 2.47 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 2.44 | % †† | 2.44 | % | 2.44 | % | 2.43 | % | 2.42 | % | 2.47 | % | ||||||||||||||||
Portfolio turnover rate | 24 | % | 45 | % | 33 | % | 42 | % | 37 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 8,316 | $ | 7,564 | $ | 7,850 | $ | 8,292 | $ | 8,383 | $ | 10,088 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.85)%. |
(d) | Without the custody fee reimbursement, net expenses would have been 2.45%. |
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 16.48 | $ | 13.59 | $ | 13.59 | $ | 13.19 | $ | 13.45 | $ | 11.75 | ||||||||||||||||
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Net investment income (loss) (a) | 0.02 | 0.05 | 0.07 | 0.06 | 0.11 | 0.08 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.85 | 2.90 | (0.04 | ) | 0.50 | (0.27 | ) | 1.76 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | ||||||||||||||||||
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Total from investment operations | 0.87 | 2.96 | 0.04 | 0.53 | (0.20 | ) | 1.83 | |||||||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.07 | ) | (0.04 | ) | (0.13 | ) | (0.06 | ) | (0.13 | ) | ||||||||||||||||
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Net asset value at end of period | $ | 17.22 | $ | 16.48 | $ | 13.59 | $ | 13.59 | $ | 13.19 | $ | 13.45 | ||||||||||||||||
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Total investment return (b) | 5.29 | % | 21.94 | % | 0.29 | % | 4.04 | % | (1.49 | %) | 15.72 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.24 | %†† | 0.31 | % | 0.54 | %(c) | 0.46 | % | 0.79 | % | 0.62 | % | ||||||||||||||||
Net expenses | 1.07 | %†† | 1.09 | % | 1.07 | %(d) | 1.08 | % | 1.09 | % | 1.14 | % | ||||||||||||||||
Portfolio turnover rate | 24 | % | 45 | % | 33 | % | 42 | % | 37 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 247,973 | $ | 205,009 | $ | 179,274 | $ | 224,307 | $ | 223,797 | $ | 202,289 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.53%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.08%. |
�� | ||||||||||||||||||||||||||||
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R1 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | $ | 13.37 | $ | 11.67 | ||||||||||||||||
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Net investment income (loss) (a) | 0.01 | 0.03 | 0.06 | 0.04 | 0.09 | 0.06 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.85 | 2.89 | (0.05 | ) | 0.50 | (0.27 | ) | 1.76 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | ||||||||||||||||||
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Total from investment operations | 0.86 | 2.93 | 0.02 | 0.51 | (0.22 | ) | 1.81 | |||||||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.06 | ) | (0.02 | ) | (0.11 | ) | (0.04 | ) | (0.11 | ) | ||||||||||||||||
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Net asset value at end of period | $ | 17.13 | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | $ | 13.37 | ||||||||||||||||
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Total investment return (b) | 5.29 | % | 21.78 | % | 0.18 | % | 3.95 | % | (1.63 | %) | 15.68 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.08 | %†† | 0.21 | % | 0.41 | %(c) | 0.33 | % | 0.66 | % | 0.49 | % | ||||||||||||||||
Net expenses | 1.17 | %†† | 1.19 | % | 1.17 | %(d) | 1.18 | % | 1.19 | % | 1.25 | % | ||||||||||||||||
Portfolio turnover rate | 24 | % | 45 | % | 33 | % | 42 | % | 37 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,487 | $ | 2,616 | $ | 2,478 | $ | 3,032 | $ | 3,597 | $ | 4,003 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.40%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.18%. |
20 | MainStay MacKay 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 R2 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 16.42 | $ | 13.54 | $ | 13.54 | $ | 13.14 | $ | 13.40 | $ | 11.70 | ||||||||||||||||
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Net investment income (loss) (a) | (0.03 | ) | 0.01 | 0.01 | 0.01 | 0.05 | 0.03 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.88 | 2.88 | (0.01 | ) | 0.50 | (0.26 | ) | 1.76 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.00 | ‡ | (0.03 | ) | (0.04 | ) | (0.01 | ) | |||||||||||||||||
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Total from investment operations | 0.85 | 2.90 | 0.00 | ‡ | 0.48 | (0.25 | ) | 1.78 | ||||||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.08 | ) | (0.02 | ) | — | (0.08 | ) | (0.01 | ) | (0.08 | ) | |||||||||||||||||
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Net asset value at end of period | $ | 17.19 | $ | 16.42 | $ | 13.54 | $ | 13.54 | $ | 13.14 | $ | 13.40 | ||||||||||||||||
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Total investment return (b) | 5.09 | % | 21.55 | %(c) | (0.07 | %) | 3.73 | % | (1.88 | %) | 15.34 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.41 | %)†† | 0.06 | % | 0.08 | % | 0.11 | % | 0.36 | % | 0.26 | % | ||||||||||||||||
Net expenses | 1.42 | % †† | 1.44 | % | 1.42 | % | 1.43 | % | 1.44 | % | 1.49 | % | ||||||||||||||||
Portfolio turnover rate | 24 | % | 45 | % | 33 | % | 42 | % | 37 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 683 | $ | 1,201 | $ | 847 | $ | 2,313 | $ | 3,509 | $ | 8,487 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class R3 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 16.29 | $ | 13.44 | $ | 13.48 | $ | 13.07 | $ | 13.35 | $ | 11.64 | ||||||||||||||||
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Net investment income (loss) (a) | (0.04 | ) | (0.04 | ) | (0.01 | ) | (0.02 | ) | 0.02 | (0.01 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.86 | 2.88 | (0.04 | ) | 0.50 | (0.26 | ) | 1.76 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | ||||||||||||||||||
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Total from investment operations | 0.82 | 2.85 | (0.04 | ) | 0.45 | (0.28 | ) | 1.74 | ||||||||||||||||||||
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Less dividends: | ||||||||||||||||||||||||||||
From net investment income | (0.04 | ) | — | — | (0.04 | ) | — | (0.03 | ) | |||||||||||||||||||
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Net asset value at end of period | $ | 17.07 | $ | 16.29 | $ | 13.44 | $ | 13.48 | $ | 13.07 | $ | 13.35 | ||||||||||||||||
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Total investment return (b) | 5.01 | % | 21.21 | % | (0.30 | %) | 3.44 | % | (2.10 | %) | 15.02 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.42 | %)†† | (0.27 | %) | (0.11 | %)(c) | (0.15 | %) | 0.17 | % | (0.05 | %) | ||||||||||||||||
Net expenses | 1.67 | % †† | 1.69 | % | 1.67 | % (d) | 1.68 | % | 1.69 | % | 1.74 | % | ||||||||||||||||
Portfolio turnover rate | 24 | % | 45 | % | 33 | % | 42 | % | 37 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 1,313 | $ | 1,446 | $ | 1,108 | $ | 1,204 | $ | 1,291 | $ | 1,365 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.12)%. |
(d) | Without the custody fee reimbursement, net expenses would have been 1.68%. |
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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and Notes relate to the MainStay MacKay International Equity Fund (formerly known as 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 has ten classes of shares registered for sale. 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 R6 and Class T shares of the Fund were registered for sale effective as of February 28, 2017. As of April 30, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares
are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R1, Class R2 and Class R3 shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. 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, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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)).
22 | MainStay MacKay International Equity Fund |
To assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • 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 the security’s 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, 2018, 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 the 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, 2018, 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 NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer
23 |
Notes to Financial Statements (Unaudited) (continued)
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 the Subadvisor conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee 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, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Equity securities, including 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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 portfolio 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 the 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 materially 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 the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the 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 are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2018 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, 2018, 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 its 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 tax 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 reclaimable. The Fund will accrue such taxes and reclaims 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, if
24 | MainStay MacKay International Equity Fund |
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 determinations using 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 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.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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.
Additionally, the Fund may invest in ETFs or mutual funds, which are subject to management fees and other fees that may increase the costs of investing in ETFs or mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of ETFs or mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually
financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund.
(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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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, 2018, the Fund had securities on loan with a value of $226,666 and had received non-cash collateral of $235,877. Income earned from securities lending activity is reflected in the Statement of Operations.
(J) 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. |
25 |
Notes to Financial Statements (Unaudited) (continued)
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.
(K) Foreign Securities Risk. The Fund invests in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. 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, among other things, 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 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 attributable to the Fund. The Fund’s subadvisor changed effective January 1, 2018 due to an organizational restructuring whereby all investment personnel of Cornerstone Capital Management Holdings
LLC, the former subadvisor, transitioned to MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life. MacKay Shields is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an 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 the services performed and the facilities furnished at an annual 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, 2018, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.89%.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 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 voluntarily agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) 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 without notice.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $1,430,813 and waived its fees and/or reimbursed expenses in the amount of $8,402.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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,
26 | MainStay MacKay International Equity Fund |
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, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T 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 the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2018, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 1,275 | ||
Class R2 | 511 | |||
Class R3 | 661 |
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $11,510 and $6,469, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $68, $2,098 and $780, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period
ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 18,876 | ||
Investor Class | 55,668 | |||
Class B | 13,056 | |||
Class C | 17,768 | |||
Class I | 70,166 | |||
Class R1 | 820 | |||
Class R2 | 331 | |||
Class R3 | 425 |
(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, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $ | 96,565,641 | 38.9 | % |
Note 4–Federal Income Tax
As of April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 296,170,174 | $ | 64,732,222 | $ | (6,442,471 | ) | $ | 58,289,751 |
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, 2017, for federal income tax purposes, capital loss carryforwards of $35,592,840 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
27 |
Notes to Financial Statements (Unaudited) (continued)
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) | ||
2019 | $35,593 | $— |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 1,059,843 |
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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $104,269 and $75,620, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 488,968 | $ | 8,337,900 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 17,877 | 301,222 | ||||||
Shares redeemed | (286,032 | ) | (4,837,534 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 220,813 | 3,801,588 | ||||||
Shares converted into Class A (See Note 1) | 130,717 | 2,209,278 | ||||||
Shares converted from Class A (See Note 1) | (9,256 | ) | (154,821 | ) | ||||
|
| |||||||
Net increase (decrease) | 342,274 | $ | 5,856,045 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 345,562 | $ | 5,153,486 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 8,386 | 106,672 | ||||||
Shares redeemed | (877,615 | ) | (12,554,676 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (523,667 | ) | (7,294,518 | ) | ||||
Shares converted into Class A (See Note 1) | 787,104 | 12,465,344 | ||||||
Shares converted from Class A (See Note 1) | (33,750 | ) | (483,068 | ) | ||||
|
| |||||||
Net increase (decrease) | 229,687 | $ | 4,687,758 | |||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 107,401 | $ | 1,818,682 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,537 | 42,599 | ||||||
Shares redeemed | (71,310 | ) | (1,200,555 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 38,628 | 660,726 | ||||||
Shares converted into Investor Class (See Note 1) | 27,365 | 455,575 | ||||||
Shares converted from Investor Class (See Note 1) | (122,308 | ) | (2,057,964 | ) | ||||
|
| |||||||
Net increase (decrease) | (56,315 | ) | $ | (941,663 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 173,615 | $ | 2,541,116 | |||||
Shares redeemed | (274,294 | ) | (3,908,999 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (100,679 | ) | (1,367,883 | ) | ||||
Shares converted into Investor Class (See Note 1) | 77,754 | 1,116,985 | ||||||
Shares converted from Investor Class (See Note 1) | (786,293 | ) | (12,378,871 | ) | ||||
|
| |||||||
Net increase (decrease) | (809,218 | ) | $ | (12,629,769 | ) | |||
|
|
28 | MainStay MacKay International Equity Fund |
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 10,814 | $ | 161,949 | |||||
Shares redeemed | (41,656 | ) | (625,444 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (30,842 | ) | (463,495 | ) | ||||
Shares converted from Class B (See Note 1) | (30,251 | ) | (452,068 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (61,093 | ) | $ | (915,563 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 38,477 | $ | 482,874 | |||||
Shares redeemed | (115,580 | ) | (1,470,403 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (77,103 | ) | (987,529 | ) | ||||
Shares converted from Class B (See Note 1) | (73,733 | ) | (945,459 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (150,836 | ) | $ | (1,932,988 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 72,684 | $ | 1,096,035 | |||||
Shares redeemed | (46,300 | ) | (696,041 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 26,384 | $ | 399,994 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 100,333 | $ | 1,293,338 | |||||
Shares redeemed | (229,189 | ) | (2,877,871 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (128,856 | ) | $ | (1,584,533 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 2,676,507 | $ | 45,428,044 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 95,419 | 1,614,501 | ||||||
Shares redeemed | (816,042 | ) | (13,926,989 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 1,955,884 | $ | 33,115,556 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,946,659 | $ | 27,785,220 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 73,427 | 936,926 | ||||||
Shares redeemed | (2,782,401 | ) | (40,635,078 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (762,315 | ) | (11,912,932 | ) | ||||
Shares converted into Class I (See Note 1) | 16,255 | 225,069 | ||||||
|
|
|
| |||||
Net increase (decrease) | (746,060 | ) | $ | (11,687,863 | ) | |||
|
| |||||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 2,288 | $ | 38,045 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,061 | 17,860 | ||||||
Shares redeemed | (17,843 | ) | (301,359 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (14,494 | ) | $ | (245,454 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 8,744 | $ | 131,452 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 787 | 10,000 | ||||||
Shares redeemed | (33,216 | ) | (486,548 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (23,685 | ) | $ | (345,096 | ) | |||
|
|
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 15,574 | $ | 268,407 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 102 | 1,720 | ||||||
Shares redeemed | (49,055 | ) | (817,620 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (33,379 | ) | $ | (547,493 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 56,641 | $ | 797,268 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 57 | 731 | ||||||
Shares redeemed | (46,136 | ) | (680,328 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 10,562 | $ | 117,671 | |||||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 9,642 | $ | 163,765 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 176 | 2,956 | ||||||
Shares redeemed | (21,700 | ) | (366,650 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (11,882 | ) | $ | (199,929 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 34,475 | $ | 485,555 | |||||
Shares redeemed | (28,104 | ) | (410,533 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 6,371 | $ | 75,022 | |||||
|
|
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, 2018, events and transactions subsequent to April 30, 2018, 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 (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay International Equity Fund (now known as the MainStay MacKay 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 MacKay Shields LLC (“MacKay Shields”) with respect to the Fund.
In reaching its decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, together with responses from New York Life Investments and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
30 | MainStay MacKay International Equity Fund |
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of MacKay Shields and continuous analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and MacKay Shields’ track record 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, resources and history. The Board considered that New York Life Investments’ and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record. The Board noted that the Fund’s investment performance compared favorably relative to the Fund’s benchmark index and was in line with peer funds over certain time periods and considered its discussions
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
with representatives from New York Life Investments regarding the Fund’s underperformance relative to the Fund’s benchmark index and peer funds over other time periods. The Board further noted recent management team changes at MacKay Shields.
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 seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized 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, including reputational and other indirect benefits. The Board recognized, for example, the benefits to MacKay Shields from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to MacKay Shields in exchange for commissions paid by the Fund with respect to trades on the Fund’s portfolio securities.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
In assessing the reasonableness of the Fund’s fees and expenses, the Board primarily considered comparative data provided by Strategic
32 | MainStay MacKay International Equity Fund |
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board considered its discussions with representatives from New York Life Investments regarding the management fee paid by the Fund.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the
shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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 MacKay International Equity Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1737261 MS126-18 | MSIE10-06/18 (NYLIM) NL010 |
MainStay MacKay Tax Free Bond Fund (Formerly known as MainStay Tax Free Bond Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2018
This page intentionally left blank
Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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
Semiannual Report | ||||
Investment and Performance Comparison | 5 | |||
Portfolio Management Discussion and Analysis | 9 | |||
Portfolio of Investments | 11 | |||
Financial Statements | 31 | |||
Notes to Financial Statements | 37 | |||
Board Consideration and Approval of Management Agreement and Subadvisory Agreement | 45 | |||
Proxy Voting Policies and Procedures and Proxy Voting Record | 49 | |||
Shareholder Reports and Quarterly Portfolio Disclosure | 49 |
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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six | One Year | Five Years | Ten Years or Since | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 1/3/1995 | | | –4.43 0.07 | %
| | –1.74 2.89 | %
| | 2.03 2.98 | %
| | 4.13 4.61 | %
| | 0.81 0.81 | %
| ||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –4.42 0.08 |
| | –1.72 2.91 | | | 2.00 2.95 | | | 4.06 4.54 | | | 0.79 0.79 |
| ||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 5/1/1986 | | | –4.88 0.05 |
| | –2.34 2.65 | | | 2.35 2.71 | | | 4.29 4.29 | | | 1.04 1.04 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | –1.03 –0.05 |
| | 1.65 2.65 | | | 2.71 2.71 | | | 4.29 4.29 | | | 1.04 1.04 |
| ||||||||
Class I Shares | No Sales Charge | 12/21/2009 | 0.19 | 3.14 | 3.23 | 5.15 | 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, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Bloomberg Barclays Municipal Bond Index4 | –0.97 | % | 1.56 | % | 2.44 | % | 4.25 | % | ||||||||
Morningstar Muni National Long Category Average5 | –0.84 | 1.89 | 2.35 | 4.08 |
4. | The Bloomberg Barclays Municipal Bond Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg Barclays Municipal Bond Index is considered representative of the broad-based 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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Muni National Long Category Average is representative of funds that invest in bonds issued by various state and local governments to fund public projects. The income from these bonds is generally free from federal taxes. These portfolios have durations of more than 7.0 years. Results are based on average total returns of similar funds 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 MacKay Tax Free Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,000.70 | $ | 3.97 | $ | 1,020.80 | $ | 4.01 | 0.80% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,000.80 | $ | 3.87 | $ | 1,020.90 | $ | 3.91 | 0.78% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,000.50 | $ | 5.11 | $ | 1,019.70 | $ | 5.16 | 1.03% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 999.50 | $ | 5.11 | $ | 1,019.70 | $ | 5.16 | 1.03% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,001.90 | $ | 2.73 | $ | 1,022.10 | $ | 2.76 | 0.55% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2018 (Unaudited)
New York | 18.7 | % | ||
California | 13.4 | |||
Illinois | 12.9 | |||
Puerto Rico | 7.6 | |||
Texas | 4.6 | |||
New Jersey | 4.4 | |||
South Carolina | 3.9 | |||
Michigan | 3.0 | |||
Pennsylvania | 2.4 | |||
Nebraska | 2.2 | |||
Colorado | 2.1 | |||
Connecticut | 2.1 | |||
U.S. Virgin Islands | 1.8 | |||
Arkansas | 1.7 | |||
Florida | 1.6 | |||
Virginia | 1.5 | |||
Guam | 1.4 | |||
Rhode Island | 1.2 | |||
Massachusetts | 1.1 | |||
Oklahoma | 1.1 | |||
District of Columbia | 1.0 | |||
Maryland | 1.0 | |||
Arizona | 0.9 | |||
Indiana | 0.7 | |||
Kansas | 0.7 |
Louisiana | 0.7 | % | ||
Missouri | 0.7 | |||
Ohio | 0.7 | |||
Alabama | 0.5 | |||
Montana | 0.4 | |||
Tennessee | 0.4 | |||
Idaho | 0.3 | |||
Kentucky | 0.3 | |||
Minnesota | 0.2 | |||
New Hampshire | 0.2 | |||
Wisconsin | 0.2 | |||
Alaska | 0.1 | |||
Georgia | 0.1 | |||
Hawaii | 0.1 | |||
Iowa | 0.1 | |||
Mississippi | 0.1 | |||
New Mexico | 0.1 | |||
North Dakota | 0.1 | |||
South Dakota | 0.1 | |||
Wyoming | 0.1 | |||
North Carolina | 0.0 | ‡ | ||
Utah | 0.0 | ‡ | ||
Other Assets, Less Liabilities | 1.5 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories.
‡ | Less than one-tenth of a percent. |
Top Ten Issuers Held as of April 30, 2018 (Unaudited)
1. | New York State Dormitory Authority, Sales Tax, Revenue Bonds, 5.00%, due 3/15/34–3/15/44 |
2. | New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds, 5.00%, due 5/1/32–8/1/45 |
3. | South Carolina Public Service Authority, Revenue Bonds, 5.00%, due 12/1/29–12/1/56 |
4. | Puerto Rico Highway & Transportation Authority, Revenue Bonds, 5.25%–5.50%, due 7/1/21–7/1/41 |
5. | Central Plains Energy, Project No. 3, Revenue Bonds, 5.00%–5.25%, due 9/1/32–9/1/42 |
6. | State of Illinois, Unlimited General Obligation, 4.00%–5.00%, due 11/1/18���6/1/41 |
7. | Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation, (zero coupon)–6.00%, due 7/1/19–7/1/37 |
8. | City of Chicago IL, Wastewater Transmission, Revenue Bonds, 5.00%–5.25%, due 1/1/28–1/1/47 |
9. | New York State Energy Research & Development Authority, Niagara Mohawk Power Corp., Revenue Bonds, 4.59%–4.746%, due 12/1/25–7/1/29 |
10. | Tobacco Settlement Financing Corp., Revenue Bonds, 5.00%, due 6/1/28–6/1/35 |
8 | MainStay MacKay 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 MacKay Tax Free Bond Fund perform relative to its primary benchmark and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MacKay Tax Free Bond Fund returned 0.07% for Class A shares, 0.08% for Investor Class shares, 0.05% for Class B shares and –0.05% for Class C shares for the six months ended April 30, 2018. Over the same period, Class I shares returned 0.19%. For the six months ended April 30, 2018, all share classes outperformed the –0.97% return of the Bloomberg Barclays Municipal Bond Index,1 which is the Fund’s broad-based securities-market index, and the –0.84% return of the Morningstar Muni National Long Category Average.2 See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Tax Free Bond Fund was renamed MainStay MacKay Tax Free Bond Fund. For more information on this change, please refer to the supplement dated December 15, 2017.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
The Fund was hedged with a combination of 10-year and 30-year U.S. Treasury futures during the reporting period. The Fund marginally increased its short position in U.S. Treasury futures to reduce duration. This decision, along with improving municipal/U.S. Treasury ratios, contributed positively to the Fund’s performance for the majority of the reporting period. (Contributions take weightings and total returns into account.)
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s performance relative to the Bloomberg Barclays Municipal Bond Index was affected by yield curve3 positioning. An underweight position relative to the Bloomberg Barclays Municipal Bond Index among bonds maturing in seven or fewer years contributed positively to the Fund’s performance, while an overweight position relative to the benchmark to bonds maturing in more than seven years detracted from performance. The Fund’s overweight exposure relative to the benchmark in securities issued in the Virgin Islands added to the Fund’s perform-
ance, as investor sentiment improved following indications of a strong recovery from the hurricanes that occurred in the fall of 2017. An overweight exposure to certain Illinois appropriation-backed credits detracted from performance, as investors became concerned about the state’s upcoming budget deadline in June 2018 and the state’s gubernatorial election in November 2018. The Fund’s U.S. Treasury hedge mitigated the effects of rising rates during the reporting period and contributed positively to relative performance.
What was the Fund’s duration4 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. This target typically places the Fund’s duration within plus or minus 10% of the benchmark’s duration. As of April 30, 2018, the Fund’s modified duration to worst5 was 4.61 years.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s performance and which sectors were particularly weak?
The most substantial positive contribution to the Fund’s performance during the reporting period came from security selection in the state general obligation and special-tax sectors. The contribution was mainly fueled by the continued recovery of the U.S. Virgin Islands and Puerto Rico following the hurricanes in the fall of 2017. Also contributing positively to performance was the Fund’s security selection in the tobacco sector, as the state of New Jersey refinanced all of its tobacco bonds. Following the refinancing, demand increased across other higher-yielding tobacco bonds. During the reporting period, the Fund’s exposure to the incremental-tax, leasing and local general obligation sectors detracted from the Fund’s performance.
How did the Fund’s sector weightings change during the reporting period?
The Fund’s sector weightings generally remained the same with a few notable decreases and slight increases across multiple sectors. The Fund decreased its exposure to the hospital sector from just over 10.5% to under 7% of net assets because of some deteriorating credit factors. The Fund also continued to decrease its exposure to prerefunded bonds in anticipation of
1. | See footnote on page 6 for more information on the Bloomberg Barclays Municipal Bond Index. |
2. | See footnote on page 6 for more information on the Morningstar Muni National Long Category Average. |
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. | 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. | 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 |
the Federal Reserve’s raising the federal funds target range. During the reporting period, the Fund marginally increased its allocations to the special-tax, local and state general obligation, education, transportation and leasing sectors.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund continued to hold an overweight position relative to the Bloomberg Barclays Municipal Bond
Index in bonds with maturities of 15 years or longer. New purchases throughout the reporting period, however, had gradually reduced this overweight position. As of the same date, the Fund had an overweight exposure relative to the benchmark in bonds rated AA6 and BBB.7 As of April 30, 2018, the Fund held underweight positions relative the Bloomberg Barclays Municipal Bond Index in securities rated AAA8 and in bonds with maturities less than 10 years. The Fund also maintained its defensive duration position in relation to the benchmark.
6. | An obligation rated ‘AA’ by Standard & Poor’s (“S&P”) is deemed by S&P to differ from the highest-rated obligations only to a small degree. In the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is very strong. Ratings from ‘AA’ to ‘CCC may be modified by the addition of a plus (+) or minus (–) sign to show relative standing within the major rating categories. 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. |
7. | An obligation rated ‘BBB’ by 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 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 MacKay Tax Free Bond Fund |
Portfolio of Investments April 30, 2018 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 98.5%† Municipal Bonds 98.5% | ||||||||
Alabama 0.5% |
| |||||||
City of Birmingham AL, Unlimited General Obligation | $ | 4,150,000 | $ | 4,508,809 | ||||
Houston County Health Care Authority, Southeast Alabama Medical, Revenue Bonds | 1,000,000 | 1,108,190 | ||||||
5.00%, due 10/1/30 | 3,700,000 | 4,069,889 | ||||||
University of South Alabama, Revenue Bonds Insured: AGM | 2,000,000 | 2,068,480 | ||||||
Insured: AGM | 1,110,000 | 1,285,347 | ||||||
Insured: AGM | 2,000,000 | 2,307,800 | ||||||
|
| |||||||
15,348,515 | ||||||||
|
| |||||||
Alaska 0.1% |
| |||||||
Alaska Industrial Development & Export Authority, FairBanks Community Hospital, Revenue Bonds | 3,550,000 | 3,829,953 | ||||||
|
| |||||||
Arizona 0.9% |
| |||||||
Arizona Health Facilities Authority, Banner Health, Revenue Bonds | 2,500,000 | 2,500,000 | ||||||
Arizona Health Facilities Authority, Phoenix Children’s Hospital, Revenue Bonds | 1,000,000 | 1,051,840 | ||||||
Salt River Project Agricultural Improvement & Power District, Electric System, Revenue Bonds | 10,000,000 | 11,621,100 | ||||||
Series A | 10,000,000 | 11,602,900 | ||||||
|
| |||||||
26,775,840 | ||||||||
|
| |||||||
Arkansas 1.7% |
| |||||||
City of Fort Smith AR, Water & Sewer, Revenue Bonds | 1,945,000 | 2,247,973 |
Principal Amount | Value | |||||||
Arkansas (continued) |
| |||||||
City of Fort Smith AR, Water & Sewer, Revenue Bonds (continued) | ||||||||
Insured: BAM | $ | 1,535,000 | $ | 1,767,921 | ||||
Insured: BAM | 1,075,000 | 1,233,799 | ||||||
Insured: BAM | 2,335,000 | 2,663,161 | ||||||
County of Pulaski AR, Arkansas Children’s Hospital, Revenue Bonds | 2,000,000 | 2,255,100 | ||||||
5.00%, due 3/1/35 | 1,550,000 | 1,745,300 | ||||||
Pulaski County Special School District, Limited General Obligation | 15,500,000 | 15,833,405 | ||||||
Springdale Public Facilities Board, Arkansas Children’s Northwest, Revenue Bonds | 2,890,000 | 3,272,173 | ||||||
Springdale School District No. 50, Limited General Obligation | 2,500,000 | 2,608,975 | ||||||
4.00%, due 6/1/40 | 11,000,000 | 11,274,560 | ||||||
University of Arkansas, UALR Campus, Revenue Bonds | 1,315,000 | 1,536,946 | ||||||
5.00%, due 10/1/30 | 1,110,000 | 1,292,806 | ||||||
5.00%, due 10/1/31 | 1,205,000 | 1,397,571 | ||||||
|
| |||||||
49,129,690 | ||||||||
|
| |||||||
California 13.4% |
| |||||||
Anaheim Public Financing Authority, Public Improvements Project, Revenue Bonds | 11,990,000 | 7,287,762 | ||||||
Series A-1, Insured: NATL-RE | 15,675,000 | 15,704,939 | ||||||
Antelope Valley Community College District, Election 2016, Unlimited General Obligation | 15,000,000 | 16,476,900 | ||||||
California Educational Facilities Authority, Loma Linda University, Revenue Bonds | 390,000 | 432,561 | ||||||
California Educational Facilities Authority, Prerefunded—University of San Francisco, Revenue Bonds | 745,000 | 845,381 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund's 10 largest issuers held, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
California (continued) |
| |||||||
California Educational Facilities Authority, Unrefunded—University of San Francisco, Revenue Bonds | $ | 780,000 | $ | 885,097 | ||||
California Health Facilities Financing Authority, Dignity Health, Revenue Bonds | 3,000,000 | 3,145,110 | ||||||
California Health Facilities Financing Authority, Providence St. Joseph Health, Revenue Bonds | 1,230,000 | 1,268,118 | ||||||
California Health Facilities Financing Authority, Sutter Health, Revenue Bonds | 5,000,000 | 5,555,950 | ||||||
California Municipal Finance Authority, Community Medical Centers, Revenue Bonds | 7,250,000 | 7,863,785 | ||||||
California Municipal Finance Authority, Southern California Institute of Architecture Project, Revenue Bonds | 390,000 | 434,265 | ||||||
5.00%, due 12/1/23 | 405,000 | 457,877 | ||||||
5.00%, due 12/1/24 | 425,000 | 486,595 | ||||||
5.00%, due 12/1/25 | 450,000 | 520,848 | ||||||
5.00%, due 12/1/26 | 470,000 | 548,373 | ||||||
5.00%, due 12/1/27 | 495,000 | 581,397 | ||||||
5.00%, due 12/1/28 | 520,000 | 607,443 | ||||||
California School Facilities Financing Authority, Azusa Unified School District, Revenue Bonds | 16,000,000 | 3,563,360 | ||||||
California State Educational Facilities Authority, Sutter Health, Revenue Bonds | 5,000,000 | 5,651,950 | ||||||
California State Public Works Board, Various Capital Project, Revenue Bonds | 1,400,000 | 1,478,652 | ||||||
Series I-1 | 170,000 | 170,179 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
California Statewide Communities Development Authority, Aspire Public Schools, Revenue Bonds | $ | 780,000 | $ | 803,946 | ||||
California Statewide Communities Development Authority, Cottage Health Obligation Group, Revenue Bonds | 1,475,000 | 1,576,303 | ||||||
City of Escondido CA, Unlimited General Obligation | 5,000,000 | 5,608,000 | ||||||
City of Long Beach CA, Airport System, Revenue Bonds | 5,000,000 | 5,305,150 | ||||||
City of Richmond CA, Wastewater Revenue, Revenue Bonds | 10,000,000 | 11,577,200 | ||||||
Coachella Valley Unified School District, Election 2005, Unlimited General Obligation | 12,385,000 | 13,893,741 | ||||||
Coast Community College District, Election 2012, Unlimited General Obligation | 24,500,000 | 26,907,615 | ||||||
Colton Joint Unified School District, Unlimited General Obligation | 3,495,000 | 3,748,562 | ||||||
Etiwanda School District, Election 2016, Unlimited General Obligation | 5,725,000 | 6,486,883 | ||||||
Firebaugh-Las Deltas Unified School District, Election 2016, Unlimited General Obligation | 3,000,000 | 3,512,340 | ||||||
Fontana Public Finance Authority, Revenue Bonds | 2,640,000 | 2,916,619 | ||||||
Fontana Unified School District, Unlimited General Obligation | 14,800,000 | 6,554,032 | ||||||
Series C | 15,500,000 | 6,370,810 |
12 | MainStay MacKay 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) |
| |||||||
Fresno Unified School District, Election 2001, Unlimited General Obligation | $ | 6,000,000 | $ | 2,638,260 | ||||
Series G | 10,000,000 | 4,081,400 | ||||||
Series G | 23,485,000 | 5,464,959 | ||||||
Golden State Tobacco Securitization Corp., Asset-Backed, Revenue Bonds | 5,410,000 | 6,062,500 | ||||||
Irvine Ranch Water District, Improvement District Construction, Special Assessment | 3,550,000 | 3,550,000 | ||||||
Lennox School District, Election 2016, Unlimited General Obligation Insured: AGM | 5,000,000 | 5,809,550 | ||||||
Live Oak Elementary School District, Certificates of Participation Insured: AGM | 3,205,000 | 3,590,529 | ||||||
Oakland Unified School District, Alameda County, Unlimited General Obligation Insured: AGM | 1,160,000 | 1,358,650 | ||||||
Insured: AGM | 1,755,000 | 2,046,646 | ||||||
Insured: AGM | 2,535,000 | 2,943,490 | ||||||
Oceanside Unified School District, Unrefunded Election 2008, Unlimited General Obligation | 560,000 | 72,010 | ||||||
Palomar Health, Revenue Bonds Insured: AGM | 7,500,000 | 8,351,025 | ||||||
Paramount Unified School District, Unlimited General Obligation | 25,000,000 | 5,632,250 | ||||||
Pomona Unified School District, Election 2008, Unlimited General Obligation | 3,285,000 | 3,597,174 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
Riverside County Redevelopment Successor Agency, Jurupa Valley Project, Tax Allocation | $ | 2,510,000 | $ | 2,897,293 | ||||
Series B, Insured: BAM | 875,000 | 1,005,576 | ||||||
Series B, Insured: BAM | 2,645,000 | 3,026,356 | ||||||
Riverside County Transportation Commission, Limited Tax, Revenue Bonds | 23,920,000 | 28,051,223 | ||||||
San Bernardino City Unified School District, Election 2012, Unlimited General Obligation | 1,000,000 | 1,109,720 | ||||||
San Diego Association of Governments, South Bay Expressway, Senior Lien, Revenue Bonds | 2,475,000 | 2,912,333 | ||||||
Series A | 1,800,000 | 2,097,486 | ||||||
Series A | 1,150,000 | 1,315,198 | ||||||
San Diego Public Facilities Financing Authority, Capital Improvement Projects, Revenue Bonds | 3,000,000 | 3,349,170 | ||||||
San Jose Redevelopment Agency Successor Agency, Tax Allocation | 20,000,000 | 23,402,200 | ||||||
San Marcos School Financing Authority, Revenue Bonds | 500,000 | 581,825 | ||||||
Insured: AGM | 1,000,000 | 1,156,620 | ||||||
Insured: AGM | 1,000,000 | 1,153,990 | ||||||
Insured: AGM | 1,100,000 | 1,266,518 | ||||||
San Mateo Union High School District, Election 2010, Unlimited General Obligation | 6,500,000 | 5,457,465 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
California (continued) |
| |||||||
Santa Clara County Financing Authority, Revenue Bonds | $ | 5,000,000 | $ | 5,259,850 | ||||
Santa Clara Valley Transportation Authority, Revenue Bonds | 3,900,000 | 4,420,104 | ||||||
Simi Valley Unified School District, Election 2016, Unlimited General Obligation | 1,000,000 | 1,156,050 | ||||||
Series A | 1,000,000 | 1,147,360 | ||||||
Series A | 1,195,000 | 1,375,242 | ||||||
Solano County Conmunity College District, Election 2012, Unlimited General Obligation | 16,460,000 | 19,314,493 | ||||||
Southern California Public Power Authority, Apex Power Project, Revenue Bonds | 4,500,000 | 5,097,600 | ||||||
Southwestern Community College District, Election 2008, Unlimited General Obligation | 13,000,000 | 3,866,850 | ||||||
State of California, Unlimited General Obligation | 22,000,000 | 25,606,460 | ||||||
5.25%, due 10/1/39 | 5,635,000 | 6,509,270 | ||||||
6.00%, due 11/1/35 | 2,500,000 | 2,653,650 | ||||||
6.25%, due 11/1/34 | 4,000,000 | 4,262,400 | ||||||
Tahoe-Truckee Unified School District, Unlimited General Obligation | 2,200,000 | 2,496,890 | ||||||
Twin Rivers Unified School District, Unrefunded Election 2006, Unlimited General Obligation | 5,120,000 | 3,058,176 | ||||||
University of California, Revenue Bonds | 1,725,000 | 1,983,026 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
Westminster School District, Election 2008, Unlimited General Obligation | $ | 13,900,000 | $ | 2,168,817 | ||||
|
| |||||||
393,585,397 | ||||||||
|
| |||||||
Colorado 2.1% |
| |||||||
Colorado Health Facilities Authority, Evangelical Lutheran Good Samaritan, Revenue Bonds | 1,180,000 | 1,313,753 | ||||||
Colorado State Board of Governors University Enterprise System, Revenue Bonds | 15,000,000 | 17,044,350 | ||||||
Denver Convention Center Hotel Authority, Revenue Bonds | 1,305,000 | 1,478,956 | ||||||
5.00%, due 12/1/31 | 1,395,000 | 1,575,373 | ||||||
5.00%, due 12/1/32 | 2,500,000 | 2,813,300 | ||||||
5.00%, due 12/1/36 | 1,000,000 | 1,105,640 | ||||||
Rampart Range Metropolitan District No. 1, Revenue Bonds | 13,205,000 | 14,896,825 | ||||||
Regional Transportation District, Certificates of Participation | 19,920,000 | 20,792,098 | ||||||
Vista Ridge Metropolitan District, Unlimited General Obligation | 1,250,000 | 1,390,850 | ||||||
|
| |||||||
62,411,145 | ||||||||
|
| |||||||
Connecticut 2.1% |
| |||||||
City of Hartford CT, Unlimited General Obligation | 2,500,000 | 2,655,725 | ||||||
Series C, Insured: AGM | 7,470,000 | 8,192,498 | ||||||
Series C, Insured: AGM | 2,500,000 | 2,720,200 | ||||||
City of Hartford CT, Unrefunded, Unlimited General Obligation | ||||||||
Series A | 895,000 | 949,058 | ||||||
Series A, Insured: AGM | 195,000 | 205,825 |
14 | MainStay MacKay 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) | ||||||||
Connecticut (continued) |
| |||||||
Connecticut State Health & Educational Facility Authority, Quinnipiac University, Revenue Bonds | $ | 10,425,000 | $ | 11,540,058 | ||||
State of Connecticut Special Tax, Transportation Infrastructure, Revenue Bonds | 5,000,000 | 5,466,850 | ||||||
Series A, Insured: BAM | 14,470,000 | 16,462,953 | ||||||
Series A | 13,000,000 | 14,417,780 | ||||||
|
| |||||||
62,610,947 | ||||||||
|
| |||||||
District of Columbia 1.0% |
| |||||||
District of Columbia, Friendship Public Charter School, Inc., Revenue Bonds | 1,125,000 | 1,201,219 | ||||||
5.00%, due 6/1/42 | 5,500,000 | 5,800,960 | ||||||
District of Columbia, Gallery Place Project, Tax Allocation | 525,000 | 564,154 | ||||||
District of Columbia, KIPP Charter School, Revenue Bonds | 1,000,000 | 1,176,480 | ||||||
6.00%, due 7/1/48 | 1,575,000 | 1,852,956 | ||||||
Metropolitan Washington Airports Authority Dulles Toll Road, Revenue Bonds | 7,140,000 | 8,943,136 | ||||||
Series C, Insured: AGC | 8,000,000 | 10,068,160 | ||||||
|
| |||||||
29,607,065 | ||||||||
|
| |||||||
Florida 1.6% |
| |||||||
City of Miami Beach FL Parking, Revenue Bonds | 1,990,000 | 2,234,770 | ||||||
Insured: BAM | 2,500,000 | 2,767,750 | ||||||
City of Orlando FL, Unrefunded Third Lien, Tourist Development Tax, Revenue Bonds | 4,375,000 | 4,386,287 |
Principal Amount | Value | |||||||
Florida (continued) |
| |||||||
County of Miami-Dade FL Aviation, Miami International Airport, Revenue Bonds Insured: AGM | $ | 210,000 | $ | 212,591 | ||||
County of Miami-Dade FL Aviation, Revenue Bonds | 750,000 | 862,598 | ||||||
County of Miami-Dade Florida Water & Sewer System, Revenue Bonds | 9,500,000 | 9,694,275 | ||||||
Series B | 8,500,000 | 9,731,650 | ||||||
Series B | 10,000,000 | 11,420,300 | ||||||
JEA Electric System, Revenue Bonds | 4,500,000 | 4,664,385 | ||||||
Orange County Health Facilities Authority, Presbyterian Retirement Communities, Revenue Bonds | 1,500,000 | 1,644,435 | ||||||
|
| |||||||
47,619,041 | ||||||||
|
| |||||||
Georgia 0.1% |
| |||||||
Dalton GA, Board of Water Light & Sinking Fund Commissioners, Revenue Bonds | 2,055,000 | 2,392,472 | ||||||
|
| |||||||
Guam 1.4% |
| |||||||
Antonio B Won Pat International Airport Authority, Revenue Bonds | 5,000,000 | 5,713,550 | ||||||
Guam Government, Waterworks Authority, Revenue Bonds | 1,750,000 | 1,867,758 | ||||||
5.00%, due 1/1/46 | 2,500,000 | 2,642,200 | ||||||
Guam Power Authority, Revenue Bonds | 5,610,000 | 6,081,577 | ||||||
Series A, Insured: AGM | 655,000 | 705,763 | ||||||
Territory of Guam, Revenue Bonds | 8,350,000 | 8,838,391 | ||||||
Series A | 3,085,000 | 3,186,095 | ||||||
Series A | 2,000,000 | 2,087,780 | ||||||
Series A | 2,700,000 | 2,983,905 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Guam (continued) |
| |||||||
Territory of Guam, Section 30, Revenue Bonds | $ | 2,265,000 | $ | 2,491,953 | ||||
Series A | 1,250,000 | 1,344,700 | ||||||
Series A | 2,290,000 | 2,444,575 | ||||||
Series A | 1,000,000 | 1,063,340 | ||||||
|
| |||||||
41,451,587 | ||||||||
|
| |||||||
Hawaii 0.1% |
| |||||||
State of Hawaii Department of Budget & Finance, Hawaiian Electric Co., Revenue Bonds | 3,000,000 | 3,148,020 | ||||||
|
| |||||||
Idaho 0.3% |
| |||||||
Idaho Health Facilities Authority, Trinity Health Credit Group, Revenue Bonds | 7,850,000 | 8,835,253 | ||||||
|
| |||||||
Illinois 12.9% |
| |||||||
Carol Stream Park District, Unlimited General Obligation | 3,985,000 | 4,417,492 | ||||||
Chicago Board of Education, School Reform, Unlimited General Obligation | 19,995,000 | 13,637,190 | ||||||
Chicago Board of Education, Special Tax | 19,485,000 | 22,691,841 | ||||||
Chicago Board of Education, Unlimited General Obligation | 16,000,000 | 16,312,960 | ||||||
Series A, Insured: AGM | 11,455,000 | 12,420,427 | ||||||
Chicago O’Hare International Airport, Prerefunded Third Lien, Revenue Bonds | 1,815,000 | 1,979,857 | ||||||
Chicago O’Hare International Airport, Unrefunded Third Lien, Revenue Bonds | 435,000 | 470,039 |
Principal Amount | Value | |||||||
Illinois (continued) |
| |||||||
Chicago Park District, Limited General Obligation | $ | 1,000,000 | $ | 1,125,050 | ||||
Series A | 750,000 | 836,220 | ||||||
Series A | 1,000,000 | 1,101,430 | ||||||
Series A | 2,000,000 | 2,167,860 | ||||||
Chicago Transit Authority, Second Lien, Revenue Bonds | 10,000,000 | 10,675,000 | ||||||
Chicago, Unlimited General Obligation | 20,000,000 | 22,146,400 | ||||||
City of Chicago IL Motor Fuel Tax, Revenue Bonds | 4,725,000 | 5,046,725 | ||||||
City of Chicago IL, Unlimited General Obligation | 10,000,000 | 10,423,000 | ||||||
Series A, Insured: BAM | 6,000,000 | 7,132,140 | ||||||
¨City of Chicago IL, Wastewater Transmission, Revenue Bonds | 1,000,000 | 1,092,530 | ||||||
Series B, Insured: AGM | 7,585,000 | �� | 8,561,645 | |||||
5.00%, due 1/1/33 | 2,000,000 | 2,129,560 | ||||||
5.00%, due 1/1/39 | 8,420,000 | 8,921,327 | ||||||
5.00%, due 1/1/44 | 14,840,000 | 15,630,824 | ||||||
Series A | 7,675,000 | 8,226,065 | ||||||
Series A, Insured: AGM | 4,000,000 | 4,480,960 | ||||||
City of Chicago IL, Wastewater, Revenue Bonds | 1,000,000 | 1,106,690 | ||||||
Series 2017-2, Insured: AGM | 2,000,000 | 2,287,540 | ||||||
5.00%, due 11/1/29 | 1,700,000 | 1,874,029 | ||||||
Series 2017-2, Insured: AGM | 3,000,000 | 3,405,060 | ||||||
Series 2017-2, Insured: AGM | 5,000,000 | 5,631,700 | ||||||
Series 2017-2, Insured: AGM | 10,000,000 | 11,203,100 |
16 | MainStay MacKay 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) |
| |||||||
City of Chicago IL, Wastewater, Revenue Bonds (continued) | ||||||||
Insured: AGM | $ | 4,535,000 | $ | 5,219,014 | ||||
Insured: AGM | 1,785,000 | 2,041,754 | ||||||
Insured: AGM | 3,025,000 | 3,454,853 | ||||||
City of Country Club Hills IL, Unlimited General Obligation | 455,000 | 478,109 | ||||||
Cook County Community College District No. 508, City College of Chicago, Unlimited General Obligation Insured: BAM | 5,000,000 | 5,481,550 | ||||||
Cook County Community High School District No. 212 Leyden, Revenue Bonds | 3,370,000 | 3,700,024 | ||||||
Series C, Insured: BAM | 2,610,000 | 2,862,361 | ||||||
Illinois Finance Authority, Rehab Institute of Chicago, Revenue Bonds | 9,600,000 | 10,633,440 | ||||||
Illinois Sports Facilities Authority, Revenue Bonds | 5,000,000 | 5,403,650 | ||||||
Madison County Community Unit School, District No. 7 Edwardsville, Unlimited General Obligation | 1,240,000 | 1,252,933 | ||||||
Insured: BAM | 2,475,000 | 2,539,895 | ||||||
Insured: BAM | 2,085,000 | 2,158,955 | ||||||
Metropolitan Pier & Exposition Authority, Capital Appreciation, Revenue Bonds | 14,250,000 | 8,641,485 | ||||||
Metropolitan Pier & Exposition Authority, Capital Appreciation-McCormick, Revenue Bonds | 58,750,000 | 24,438,238 |
Principal Amount | Value | |||||||
Illinois (continued) |
| |||||||
Public Building Commission of Chicago, Chicago Transit Authority, Revenue Bonds | $ | 580,000 | $ | 652,430 | ||||
Rock Island County, Public Building Commission, Revenue Bonds Insured: AGM | 500,000 | 559,090 | ||||||
Insured: AGM | 2,645,000 | 2,905,956 | ||||||
Southern Illinois University, Housing & Auxiliary Facilities System, Revenue Bonds | 1,175,000 | 1,321,969 | ||||||
Series B, Insured: BAM | 1,620,000 | 1,795,883 | ||||||
Series B, Insured: BAM | 1,000,000 | 1,103,020 | ||||||
¨State of Illinois, Unlimited General Obligation | 12,600,000 | 12,660,228 | ||||||
Series A | 30,000,000 | 30,341,400 | ||||||
Insured: AGM | 9,000,000 | 9,166,680 | ||||||
United City of Yorkville, Special Tax Insured: AGM | 3,780,000 | 4,178,866 | ||||||
Village of Bellwood IL, Unlimited General Obligation | 1,500,000 | 1,664,445 | ||||||
Village of Crestwood IL, Alternative Revenue Source, Unlimited General Obligation | 750,000 | 818,100 | ||||||
Series B, Insured: BAM | 850,000 | 927,180 | ||||||
Series B, Insured: BAM | 955,000 | 1,039,661 | ||||||
Village of Oswego IL, Unlimited General Obligation | 7,670,000 | 8,624,301 | ||||||
Village of Rosemont IL, Corporate Purpose Bond, Unlimited General Obligation | 8,090,000 | 8,801,111 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Illinois (continued) |
| |||||||
Village of Rosemont IL, Corporate Purpose Bond, Unlimited General Obligation (continued) | ||||||||
Series A, Insured: AGM | $ | 5,925,000 | $ | 6,414,227 | ||||
|
| |||||||
378,415,469 | ||||||||
|
| |||||||
Indiana 0.7% |
| |||||||
Indiana Finance Authority, Educational Facilities-Butler University, Revenue Bonds | 2,100,000 | 2,272,515 | ||||||
Series A | 2,215,000 | 2,393,662 | ||||||
Series B | 2,210,000 | 2,388,259 | ||||||
Series B | 2,320,000 | 2,505,414 | ||||||
Indiana Finance Authority, Sisters of St. Francis, Health Services, Revenue Bonds | 10,000,000 | 10,000,000 | ||||||
Indianapolis Local Public Improvement Bond Bank, Unrefunded-Waterworks Project, Revenue Bonds | 885,000 | 905,001 | ||||||
|
| |||||||
20,464,851 | ||||||||
|
| |||||||
Iowa 0.1% |
| |||||||
City of Coralville IA, Certificates of Participation | 545,000 | 571,896 | ||||||
Series E | 1,405,000 | 1,481,783 | ||||||
Series E | 1,320,000 | 1,396,428 | ||||||
|
| |||||||
3,450,107 | ||||||||
|
| |||||||
Kansas 0.7% |
| |||||||
City of Hutchinson KS, Hutchinson Regional Medical Center, Inc., Revenue Bonds | 565,000 | 621,178 | ||||||
5.00%, due 12/1/28 | 410,000 | 447,921 | ||||||
5.00%, due 12/1/30 | 500,000 | 541,665 | ||||||
5.00%, due 12/1/36 | 1,150,000 | 1,220,782 |
Principal Amount | Value | |||||||
Kansas (continued) |
| |||||||
Kansas Development Finance Authority, KU Health System, Revenue Bonds | $ | 3,400,000 | $ | 3,400,000 | ||||
Sedgwick County Unified School District No. 266 Maize, Unlimited General Obligation | 3,000,000 | 3,430,830 | ||||||
University of Kansas Hospital Authority, KU Health System, Revenue Bonds | 2,500,000 | 2,807,500 | ||||||
5.00%, due 9/1/34 | 5,000,000 | 5,580,250 | ||||||
5.00%, due 9/1/35 | 2,800,000 | 3,115,280 | ||||||
|
| |||||||
21,165,406 | ||||||||
|
| |||||||
Kentucky 0.3% |
| |||||||
City of Ashland KY, King’s Daughters Medical Center Project, Revenue Bonds | 1,070,000 | 1,098,826 | ||||||
Series A | 1,525,000 | 1,640,763 | ||||||
Kentucky Economic Development Finance Authority, Louisville Arena Project, Revenue Bonds | 6,250,000 | 6,821,125 | ||||||
|
| |||||||
9,560,714 | ||||||||
|
| |||||||
Louisiana 0.7% |
| |||||||
City of Shreveport LA, Unlimited General Obligation | 2,285,000 | 2,607,939 | ||||||
Insured: BAM | 5,355,000 | 5,980,143 | ||||||
City of Shreveport LA, Water & Sewer, Revenue Bonds | 2,750,000 | 2,818,200 | ||||||
Louisiana Local Government Environmental Facilities & Community Development Authority, McNeese State University Student Parking Co., Revenue Bonds | 335,000 | 354,370 | ||||||
Insured: AGM | 350,000 | 368,137 | ||||||
Louisiana Public Facilities Authority, Loyola University, Revenue Bonds | 2,930,000 | 3,237,562 |
18 | MainStay MacKay 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) | ||||||||
Louisiana (continued) |
| |||||||
Louisiana Public Facilities Authority, Unrefunded-Ochsner Clinic Foundation Project, Revenue Bonds | $ | 2,010,000 | $ | 2,221,070 | ||||
Louisiana Stadium & Exposition District, Revenue Bonds | 1,485,000 | 1,648,543 | ||||||
Terrebonne Parish LA, Sales & Use Tax, Morganza Levee Project, Revenue Bonds | 1,155,000 | 585,146 | ||||||
Series B, Insured: AGM | 1,520,000 | 733,141 | ||||||
Series B, Insured: AGM | 1,000,000 | 440,170 | ||||||
|
| |||||||
20,994,421 | ||||||||
|
| |||||||
Maryland 1.0% |
| |||||||
Maryland Health & Higher Educational Facilities Authority, Peninsula Regional Medical Center, Revenue Bonds | 3,600,000 | 3,886,524 | ||||||
Maryland Stadium Authority, Construction & Revitalization, Revenue Bonds | 22,400,000 | 25,436,320 | ||||||
|
| |||||||
29,322,844 | ||||||||
|
| |||||||
Massachusetts 1.1% |
| |||||||
Massachusetts Development Finance Agency, UMass Boston Student Housing Project, Revenue Bonds | 1,200,000 | 1,333,872 | ||||||
5.00%, due 10/1/31 | 1,200,000 | 1,327,404 | ||||||
5.00%, due 10/1/32 | 1,240,000 | 1,364,074 | ||||||
5.00%, due 10/1/33 | 1,500,000 | 1,646,670 | ||||||
5.00%, due 10/1/34 | 2,170,000 | 2,373,937 | ||||||
Massachusetts Development Finance Agency, WGBH Educational Foundation, Revenue Bonds | 1,000,000 | 1,054,840 | ||||||
Massachusetts Educational Financing Authority, Revenue Bonds | 1,315,000 | 1,360,867 | ||||||
Series I | 1,520,000 | 1,582,320 |
Principal Amount | Value | |||||||
Massachusetts (continued) |
| |||||||
Massachusetts Health & Educational Facilities Authority, Harvard University, Revenue Bonds | $ | 12,550,000 | $ | 12,550,000 | ||||
Massachusetts State Development Finance Agency, Prerefunded-Suffolk University, Revenue Bonds | 1,285,000 | 1,346,089 | ||||||
Massachusetts State Development Finance Agency, Unrefunded-Suffolk University, Revenue Bonds | 715,000 | 748,398 | ||||||
Series A | 2,310,000 | 2,411,917 | ||||||
Metropolitan Boston Transit Parking Corp., Revenue Bonds | 2,000,000 | 2,168,140 | ||||||
|
| |||||||
31,268,528 | ||||||||
|
| |||||||
Michigan 3.0% |
| |||||||
City of Detroit MI, Sewage Disposal System, Senior Lien, Revenue Bonds | 2,000,000 | 2,005,680 | ||||||
Series C-1, Insured: AGM | 5,000,000 | 5,290,800 | ||||||
Detroit City School District, Improvement School Building & Site, Unlimited General Obligation | 750,000 | 820,605 | ||||||
Series A, Insured: Q-SBLF | 7,500,000 | 8,182,200 | ||||||
Series A, Insured: Q-SBLF | 3,620,000 | 3,937,764 | ||||||
Series A, Insured: Q-SBLF | 4,535,000 | 4,899,115 | ||||||
Great Lakes Water Authority, Sewage Disposal System, Revenue Bonds Senior Lien-Series A | 14,150,000 | 15,140,641 | ||||||
Great Lakes Water Authority, Water Supply System, Revenue Bonds Senior Lien-Series A | 5,000,000 | 5,371,400 | ||||||
Senior Lien-Series A | 5,550,000 | 6,088,128 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Michigan (continued) |
| |||||||
Lincoln Consolidated School District, Unlimited General Obligation | $ | 2,030,000 | $ | 2,349,583 | ||||
Series A, Insured: AGM | 1,455,000 | 1,672,813 | ||||||
Series A, Insured: AGM | 1,500,000 | 1,667,925 | ||||||
Livonia Public School District, Unlimited General Obligation | 4,365,000 | 4,831,138 | ||||||
Michigan Finance Authority, Great Lakes Water, Revenue Bonds | 2,500,000 | 2,741,025 | ||||||
Series C-3, Insured: AGM | 3,000,000 | 3,313,920 | ||||||
Series C-1 | 2,500,000 | 2,705,450 | ||||||
Michigan Finance Authority, Local Government Loan Program, Revenue Bonds | 500,000 | 560,055 | ||||||
Series D-1 | 500,000 | 552,805 | ||||||
Series D-1 | 500,000 | 550,130 | ||||||
Series D1, Insured: AGM | 2,000,000 | 2,203,380 | ||||||
Series D6, Insured: NATL-RE | 7,400,000 | 8,031,664 | ||||||
Saginaw City School District, Unlimited General Obligation | 260,000 | 291,621 | ||||||
Insured: Q-SBLF | 350,000 | 391,262 | ||||||
Insured: Q-SBLF | 750,000 | 835,073 | ||||||
Insured: Q-SBLF | 250,000 | 274,135 | ||||||
Insured: Q-SBLF | 350,000 | 382,263 | ||||||
Insured: Q-SBLF | 425,000 | 463,254 |
Principal Amount | Value | |||||||
Michigan (continued) |
| |||||||
Wayne County Michigan, Capital Improvement, Limited General Obligation | $ | 2,500,000 | $ | 2,505,450 | ||||
|
| |||||||
88,059,279 | ||||||||
|
| |||||||
Minnesota 0.2% |
| |||||||
City of Minneapolis MN/St. Paul Housing & Redevelopment Authority, Allina Health Systems, Revenue Bonds | 3,565,000 | 3,565,000 | ||||||
Housing & Redevelopment Authority of The City of St. Paul Minnesota, Fairview Health Services, Revenue Bonds | 1,000,000 | 1,028,770 | ||||||
|
| |||||||
4,593,770 | ||||||||
|
| |||||||
Mississippi 0.1% |
| |||||||
Mississippi Development Bank, Hinds County School District Project, Revenue Bonds | 1,510,000 | 1,721,219 | ||||||
|
| |||||||
Missouri 0.7% |
| |||||||
City of Kansas MO, Improvement Downtown Arena Project, Revenue Bonds | 10,055,000 | 11,012,638 | ||||||
Health & Educational Facilities Authority of the State of Missouri, SSM Health Care, Revenue Bonds | 4,000,000 | 4,418,120 | ||||||
Health & Educational Facilities Authority of the State of Missouri, St. Lukes Health System, Inc., Revenue Bonds | 5,000,000 | 5,652,150 | ||||||
Joplin Industrial Development Authority, Freeman Health System, Revenue Bonds | 605,000 | 647,877 | ||||||
|
| |||||||
21,730,785 | ||||||||
|
| |||||||
Montana 0.4% |
| |||||||
Missoula County Elementary School District No. 1 School Building, Unlimited General Obligation | 495,000 | 536,451 | ||||||
4.00%, due 7/1/31 | 345,000 | 370,734 |
20 | MainStay MacKay 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) | ||||||||
Montana (continued) |
| |||||||
Missoula County Elementary School District No. 1 School Building, Unlimited General Obligation (continued) | ||||||||
4.00%, due 7/1/32 | $ | 590,000 | $ | 633,518 | ||||
4.00%, due 7/1/33 | 555,000 | 593,650 | ||||||
Missoula High School District No. 1 School Building, Unlimited General Obligation | 585,000 | 633,988 | ||||||
4.00%, due 7/1/31 | 335,000 | 359,988 | ||||||
4.00%, due 7/1/33 | 350,000 | 372,935 | ||||||
4.00%, due 7/1/34 | 370,000 | 391,826 | ||||||
4.00%, due 7/1/35 | 515,000 | 544,123 | ||||||
Montana Facilities Finance Authority, Revenue Bonds | 1,790,000 | 2,029,126 | ||||||
5.00%, due 2/15/31 | 1,500,000 | 1,690,605 | ||||||
5.00%, due 2/15/32 | 775,000 | 869,713 | ||||||
5.00%, due 2/15/33 | 1,320,000 | 1,477,054 | ||||||
5.00%, due 2/15/34 | 1,200,000 | 1,336,032 | ||||||
|
| |||||||
11,839,743 | ||||||||
|
| |||||||
Nebraska 2.2% |
| |||||||
¨Central Plains Energy, Project No. 3, Revenue Bonds | 5,190,000 | 5,654,609 | ||||||
5.00%, due 9/1/42 | 13,960,000 | 15,209,699 | ||||||
Series A | 20,000,000 | 23,575,600 | ||||||
5.25%, due 9/1/37 | 15,535,000 | 17,083,063 | ||||||
Douglas County Hospital Authority No. 2, Children’s Hospital, Revenue Bonds | 700,000 | 700,000 | ||||||
Hospital Authority No 1 of Lancaster County, Bryan Health Medical Center, Revenue Bonds | 1,700,000 | 1,700,000 | ||||||
|
| |||||||
63,922,971 | ||||||||
|
| |||||||
New Hampshire 0.2% |
| |||||||
City of Manchester NH, General Airport, Revenue Bonds | 1,800,000 | 1,944,090 | ||||||
New Hampshire Health & Education Facilities Authority, Southern University, Revenue Bonds | 905,000 | 1,030,062 | ||||||
5.00%, due 1/1/32 | 950,000 | 1,076,407 |
Principal Amount | Value | |||||||
New Hampshire (continued) |
| |||||||
New Hampshire Health & Education Facilities Authority, Southern University, Revenue Bonds (continued) | ||||||||
5.00%, due 1/1/33 | $ | 1,000,000 | $ | 1,128,680 | ||||
5.00%, due 1/1/34 | 1,050,000 | 1,178,268 | ||||||
5.00%, due 1/1/35 | 600,000 | 671,994 | ||||||
|
| |||||||
7,029,501 | ||||||||
|
| |||||||
New Jersey 4.4% |
| |||||||
Atlantic County Improvement Authority, Stockton University-Atlantic City, Revenue Bonds | 2,670,000 | 3,031,251 | ||||||
Series A, Insured: AGM | 1,305,000 | 1,475,537 | ||||||
Series A, Insured: AGM | 1,395,000 | 1,571,956 | ||||||
Series A, Insured: AGM | 1,855,000 | 2,078,991 | ||||||
City of Atlantic City NJ, Unlimited General Obligation | 6,970,000 | 7,036,912 | ||||||
Series B, Insured: AGM | 4,500,000 | 5,037,750 | ||||||
Series A, Insured: BAM | 1,250,000 | 1,369,425 | ||||||
New Brunswick Parking Authority, Revenue Bonds | 5,880,000 | 6,792,517 | ||||||
Series A, Insured: BAM | 2,370,000 | 2,728,320 | ||||||
Series A, Insured: BAM | 4,605,000 | 5,282,902 | ||||||
Series A, Insured: BAM | 6,780,000 | 7,745,879 | ||||||
New Jersey Building Authority, Unrefunded, Revenue Bonds | 2,015,000 | 2,263,308 | ||||||
Series A, Insured: BAM | 1,805,000 | 2,038,387 | ||||||
New Jersey Economic Development Authority, MSU Student Housing Project, Revenue Bonds | 4,500,000 | 4,811,715 | ||||||
New Jersey Economic Development Authority, Revenue Bonds | 1,000,000 | 1,099,600 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New Jersey (continued) |
| |||||||
New Jersey Economic Development Authority, Revenue Bonds (continued) | ||||||||
Series A, Insured: BAM | $ | 2,000,000 | $ | 2,273,680 | ||||
5.50%, due 1/1/26 (b) | 1,000,000 | 1,136,540 | ||||||
New Jersey Educational Facilities Authority, Stockton University, Revenue Bonds | 2,500,000 | 2,826,700 | ||||||
Series A, Insured: BAM | 5,000,000 | 5,634,250 | ||||||
Series A, Insured: BAM | 3,000,000 | 3,366,810 | ||||||
New Jersey Health Care Facilities Financing Authority, Hackensack Meridian Health, Inc., Revenue Bonds | 10,000,000 | 11,385,400 | ||||||
New Jersey Health Care Facilities Financing Authority, Virtua Health, Revenue Bonds | 2,900,000 | 2,900,000 | ||||||
New Jersey Higher Education Student Assistance Authority, Student Loan, Revenue Bonds | 1,875,000 | 1,879,425 | ||||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds | 30,000,000 | 14,816,700 | ||||||
New Jersey Turnpike Authority, Revenue Bonds | 4,000,000 | 4,391,080 | ||||||
Newark Housing Authority, Revenue Bonds Insured: AGM | 500,000 | 523,290 | ||||||
Insured: AGM | 250,000 | 259,378 | ||||||
Insured: AGM | 250,000 | 258,065 | ||||||
Insured: AGM | 225,000 | 231,419 | ||||||
Insured: AGM | 750,000 | 854,198 | ||||||
Insured: AGM | 1,740,000 | 1,936,063 |
Principal Amount | Value | |||||||
New Jersey (continued) |
| |||||||
¨Tobacco Settlement Financing Corp., Revenue Bonds | $ | 3,000,000 | $ | 3,439,800 | ||||
Series A | 10,000,000 | 11,183,500 | ||||||
Series A | 1,500,000 | 1,666,785 | ||||||
Series A | 2,900,000 | 3,212,156 | ||||||
|
| |||||||
128,539,689 | ||||||||
|
| |||||||
New Mexico 0.1% |
| |||||||
City of Farmington NM, Revenue Bonds | 2,000,000 | 2,138,660 | ||||||
|
| |||||||
New York 18.7% |
| |||||||
Build NYC Resource Corp., Royal Charter Properties, Revenue Bonds Insured: AGM | 975,000 | 1,020,562 | ||||||
Insured: AGM | 1,025,000 | 1,095,202 | ||||||
Insured: AGM | 1,075,000 | 1,169,751 | ||||||
Insured: AGM | 740,000 | 818,174 | ||||||
City of New York NY, Unlimited General Obligation | 26,400,000 | 31,454,280 | ||||||
County of Nassau NY, Limited General Obligation | 4,135,000 | 4,676,313 | ||||||
Series C | 6,625,000 | 7,393,831 | ||||||
Series C | 6,965,000 | 7,757,896 | ||||||
Long Island Power Authority, Electric System, Revenue Bonds | 10,000,000 | 11,029,700 | ||||||
Long Island Power Authority, Revenue Bonds | 10,000,000 | 11,059,900 | ||||||
Series B | 8,970,000 | 9,900,010 |
22 | MainStay MacKay 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 York (continued) |
| |||||||
Metropolitan Transportation Authority, Green, Revenue Bonds | $ | 4,500,000 | $ | 5,129,640 | ||||
Metropolitan Transportation Authority, Revenue Bonds | 20,000,000 | 23,199,600 | ||||||
New York City Transitional Finance Authority, Building Aid, Revenue Bonds | 6,060,000 | 6,798,532 | ||||||
Series S-2 | 5,000,000 | 5,629,450 | ||||||
Series S-1 | 10,000,000 | 11,122,300 | ||||||
Series S-1 | 11,880,000 | 13,251,784 | ||||||
¨New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds | 4,000,000 | 4,640,400 | ||||||
Series B-1 | 10,000,000 | 11,264,700 | ||||||
5.00%, due 5/1/33 | 10,000,000 | 11,412,700 | ||||||
Series B-1 | 5,000,000 | 5,762,850 | ||||||
Series A-2 | 7,795,000 | 8,984,283 | ||||||
Series A1 | 5,100,000 | 5,738,520 | ||||||
Series E-1 | 2,500,000 | 2,777,425 | ||||||
5.00%, due 8/1/45 | 25,000,000 | 28,383,500 | ||||||
New York Counties Tobacco Trust VI, Tobacco Settlement Pass Through, Revenue Bonds | 4,255,000 | 4,525,022 | ||||||
New York Liberty Development Corp., Bank of America, Revenue Bonds Class 2 | 5,000,000 | 5,290,650 | ||||||
New York Liberty Development Corp., Revenue Bonds | 12,315,000 | 13,316,086 | ||||||
New York Liberty Development Corp., World Trade Center, Revenue Bonds | 5,000,000 | 5,434,600 | ||||||
5.75%, due 11/15/51 | 18,990,000 | 21,066,177 |
Principal Amount | Value | |||||||
New York (continued) |
| |||||||
New York State Dormitory Authority, New York University, Revenue Bonds | $ | 6,610,000 | $ | 7,456,278 | ||||
New York State Dormitory Authority, Revenue Bonds | 4,190,000 | 4,737,256 | ||||||
¨New York State Dormitory Authority, Sales Tax, Revenue Bonds | 5,000,000 | 5,760,900 | ||||||
5.00%, due 3/15/40 | 22,000,000 | 25,090,780 | ||||||
Series B, Insured: MBIA | 26,080,000 | 30,048,854 | ||||||
5.00%, due 3/15/41 | 20,000,000 | 22,793,200 | ||||||
5.00%, due 3/15/44 | 5,000,000 | 5,681,750 | ||||||
New York State Dormitory Authority, State Personal Income Tax, Revenue Bonds | 13,490,000 | 15,426,759 | ||||||
New York State Dormitory Authority, University Facilities, Revenue Bonds | 1,000,000 | 1,141,950 | ||||||
Series A | 1,000,000 | 1,138,540 | ||||||
¨New York State Energy Research & Development Authority, Niagara Mohawk Power Corp., Revenue Bonds (a) | 10,280,000 | 10,280,000 | ||||||
Insured: AMBAC | 10,680,000 | 10,680,000 | ||||||
Insured: AMBAC | 25,150,000 | 25,150,000 | ||||||
New York State Urban Development Corp., Personal Income Tax, Revenue Bonds | 12,350,000 | 14,275,488 | ||||||
New York Transportation Development Corp., LaGuardia Airport Terminal B Redevelopment Project, Revenue Bonds (b) | 10,925,000 | 11,286,399 | ||||||
Series A, Insured: AGM | 7,635,000 | 7,793,732 | ||||||
Series A, Insured: AGM | 16,240,000 | 16,541,577 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New York (continued) |
| |||||||
Rensselaer City School District, Certificates of Participation Insured: AGM | $ | 1,060,000 | $ | 1,233,405 | ||||
Insured: AGM | 1,000,000 | 1,158,870 | ||||||
Insured: AGM | 1,880,000 | 2,146,546 | ||||||
Insured: AGM | 2,000,000 | 2,259,060 | ||||||
Syracuse Industrial Development Agency, Carousel Center Project, Revenue Bonds (b) | 1,615,000 | 1,764,048 | ||||||
Series A | 2,100,000 | 2,286,480 | ||||||
Triborough Bridge & Tunnel Authority, Revenue Bonds | 8,560,000 | 9,847,681 | ||||||
Series B | 3,600,000 | 4,120,164 | ||||||
Series C-2 | 15,000,000 | 17,177,250 | ||||||
TSASC, Inc., Revenue Bonds | 2,000,000 | 2,216,820 | ||||||
Series A | 5,000,000 | 5,501,350 | ||||||
Series A | 2,865,000 | 3,142,991 | ||||||
|
| |||||||
549,241,966 | ||||||||
|
| |||||||
North Carolina 0.0%‡ |
| |||||||
North Carolina Medical Care Commission, North Carolina Baptist Hospital, Revenue Bonds | 1,000,000 | 1,063,990 | ||||||
|
| |||||||
North Dakota 0.1% |
| |||||||
City of Grand Forks ND, Altru Health System, Revenue Bonds | 4,050,000 | 4,262,423 | ||||||
|
| |||||||
Ohio 0.7% |
| |||||||
City of Cleveland OH, Airport System, Revenue Bonds | 3,000,000 | 3,236,880 |
Principal Amount | Value | |||||||
Ohio (continued) |
| |||||||
City of Cleveland OH, Income Tax, Bridges & Roadways Improvements, Revenue Bonds, | $ | 1,500,000 | $ | 1,662,662 | ||||
Clermont County Port Authority, W. Clermont Local School District Project, Revenue Bonds | 650,000 | 740,382 | ||||||
Insured: BAM | 2,200,000 | 2,499,508 | ||||||
Insured: BAM | 1,335,000 | 1,511,901 | ||||||
Cleveland-Cuyahoga County Port Authority, Revenue Bonds | 1,980,000 | 2,173,842 | ||||||
County of Hamilton OH, Christ Hospital Project, Revenue Bonds | 2,000,000 | 2,210,060 | ||||||
Franklin County OH, Trinity Health Group, Revenue Bonds | 5,000,000 | 5,627,550 | ||||||
Ohio Higher Educational Facility Commission, Kenyon College Project, Revenue Bonds | 1,645,000 | 1,831,477 | ||||||
|
| |||||||
21,494,262 | ||||||||
|
| |||||||
Oklahoma 1.1% |
| |||||||
Garfield County Educational Facilities Authority, Enid Public Schools Project, Revenue Bonds | 1,800,000 | 2,082,222 | ||||||
Series A | 3,780,000 | 4,333,467 | ||||||
Series A | 5,000,000 | 5,716,250 | ||||||
Series A | 4,620,000 | 5,267,216 | ||||||
Lincoln County Educational Facilities Authority, Stroud Public Schools Project, Revenue Bonds | 3,200,000 | 3,605,696 | ||||||
5.00%, due 9/1/29 | 2,370,000 | 2,661,273 | ||||||
Oklahoma State Municipal Power Authority, Revenue Bonds | 250,000 | 287,875 | ||||||
Series A | 900,000 | 1,033,011 |
24 | MainStay MacKay 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 (continued) |
| |||||||
Oklahoma State Municipal Power Authority, Revenue Bonds (continued) | ||||||||
Series A | $ | 805,000 | $ | 915,060 | ||||
Series A | 650,000 | 732,699 | ||||||
Oklahoma State Turnpike Authority, Revenue Bonds 2nd | 5,500,000 | 6,225,890 | ||||||
Tulsa Airports Improvement Trust, Revenue Bonds | 500,000 | 527,370 | ||||||
|
| |||||||
33,388,029 | ||||||||
|
| |||||||
Pennsylvania 2.4% |
| |||||||
City of Philadelphia PA, Unlimited General Obligation | 5,125,000 | 5,620,792 | ||||||
Commonwealth Financing Authority, Tobacco Master Settlement Payment, Revenue Bonds | 7,250,000 | 7,291,687 | ||||||
County of Lancaster PA, Unlimited General Obligation | 500,000 | 528,410 | ||||||
Series A, Insured: BAM | 420,000 | 441,836 | ||||||
Insured: AGM | 1,390,000 | 1,597,013 | ||||||
Erie City Water Authority, Revenue Bonds | 1,280,000 | 1,446,106 | ||||||
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds | 4,270,000 | 4,988,428 | ||||||
Pennsylvania Turnpike Commission, Revenue Bonds | 6,625,000 | 7,163,016 | ||||||
Philadelphia Gas Works Co., 1998 General Ordinance, Revenue Bonds Series 14T | 2,300,000 | 2,608,660 |
Principal Amount | Value | |||||||
Pennsylvania (continued) |
| |||||||
State Public School Building Authority, Philadelphia Community College, Revenue Bonds | $ | 5,505,000 | $ | 6,172,151 | ||||
State Public School Building Authority, Philadelphia School District, Revenue Bonds | 30,000,000 | 33,759,600 | ||||||
|
| |||||||
71,617,699 | ||||||||
|
| |||||||
Puerto Rico 7.6% |
| |||||||
¨Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation | 25,000 | 23,855 | ||||||
Series A, Insured: AGM | 715,000 | 730,108 | ||||||
Series A, Insured: AGC | 575,000 | 576,351 | ||||||
Series A, Insured: AGC | 525,000 | 526,124 | ||||||
Series A-4, Insured: AGM | 5,170,000 | 5,355,603 | ||||||
Series A, Insured: AGM | 28,270,000 | 29,303,551 | ||||||
Insured: AGM | 1,430,000 | 1,498,397 | ||||||
Series A, Insured: NATL-RE | 440,000 | 440,898 | ||||||
Series A, Insured: AGM | 1,930,000 | 2,045,086 | ||||||
Series C, Insured: AGM | 700,000 | 705,474 | ||||||
Series A, Insured: NATL-RE | 550,000 | 564,311 | ||||||
Series A, Insured: NATL-RE | 4,850,000 | 5,029,692 | ||||||
Series C, Insured: AGM | 1,150,000 | 1,159,879 | ||||||
Series C-7, Insured: NATL-RE | 2,240,000 | 2,243,898 | ||||||
Commonwealth of Puerto Rico, Unrefunded, Unlimited General Obligation | 280,000 | 280,274 | ||||||
Insured: AGC | 500,000 | 501,990 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Commonwealth, Aqueduct & Sewer Authority, Revenue Bonds | $ | 4,350,000 | $ | 4,360,570 | ||||
Series A, Insured: AGC | 14,410,000 | 14,435,794 | ||||||
Series A, Insured: AGC | 870,000 | 932,753 | ||||||
Puerto Rico Convention Center District Authority, Revenue Bonds | 4,675,000 | 4,675,234 | ||||||
Puerto Rico Electric Power Authority, Revenue Bonds | 3,115,000 | 3,114,938 | ||||||
Series UU, Insured: AGC | 2,240,000 | 2,240,515 | ||||||
Series UU, Insured: NATL-RE | 2,865,000 | 2,871,790 | ||||||
Series NN, Insured: NATL-RE | 1,140,000 | 1,065,592 | ||||||
Series TT, Insured: AGM | 480,000 | 481,656 | ||||||
Series MM, Insured: NATL-RE | 2,600,000 | 2,652,936 | ||||||
Series RR, Insured: NATL-RE | 1,200,000 | 1,201,848 | ||||||
Series RR, Insured: NATL-RE | 1,450,000 | 1,450,536 | ||||||
Series PP, Insured: NATL-RE | 1,105,000 | 1,105,221 | ||||||
Series SS, Insured: NATL-RE | 825,000 | 825,165 | ||||||
Series UU, Insured: AGM | 2,280,000 | 2,286,772 | ||||||
Series PP, Insured: NATL-RE | 2,915,000 | 2,915,233 | ||||||
Series UU, Insured: AGM | 4,415,000 | 4,427,494 | ||||||
Series UU, Insured: AGC | 580,000 | 581,363 | ||||||
Series TT, Insured: AGM | 500,000 | 501,070 | ||||||
Series RR, Insured: AGC | 1,220,000 | 1,222,355 | ||||||
Series SS, Insured: AGM | 550,000 | 550,836 | ||||||
Series VV, Insured: NATL-RE | 1,875,000 | 1,904,362 |
Principal Amount | Value | |||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Electric Power Authority, Revenue Bonds (continued) | ||||||||
Series VV, Insured: NATL-RE | $ | 1,425,000 | $ | 1,427,294 | ||||
Series VV, Insured: NATL-RE | 2,000,000 | 1,971,440 | ||||||
Series VV, Insured: NATL-RE | 535,000 | 522,069 | ||||||
Series VV, Insured: NATL-RE | 595,000 | 577,489 | ||||||
¨Puerto Rico Highway & Transportation Authority, Revenue Bonds | 2,195,000 | 2,246,604 | ||||||
Series N, Insured: NATL-RE | 5,525,000 | 5,446,103 | ||||||
Series CC, Insured: AGM | 1,925,000 | 2,143,256 | ||||||
Series N, Insured: NATL-RE | 5,030,000 | 4,934,430 | ||||||
Series N, Insured: AGC | 4,580,000 | 5,094,517 | ||||||
Series CC, Insured: AGM | 2,115,000 | 2,339,380 | ||||||
Series N, Insured: AGC | 17,880,000 | 19,775,280 | ||||||
Series N, Insured: AGM | 1,145,000 | 1,266,370 | ||||||
Series N, Insured: AGC | 85,000 | 93,940 | ||||||
Series L, Insured: AGC | 2,955,000 | 3,272,963 | ||||||
Series E, Insured: AGM | 670,000 | 715,989 | ||||||
Series N, Insured: AGM | 625,000 | 695,875 | ||||||
Series N, Insured: AGC, AGM | 10,285,000 | 11,638,815 | ||||||
Series CC, Insured: AGC | 1,730,000 | 1,969,259 | ||||||
Puerto Rico Highway & Transportation Authority, Unrefunded, Revenue Bonds | 2,240,000 | 2,244,794 | ||||||
Series J, Insured: NATL-RE | 650,000 | 637,455 | ||||||
Puerto Rico Municipal Finance Agency, Revenue Bonds | 820,000 | 822,567 | ||||||
Series A, Insured: AGM | 145,000 | 145,489 |
26 | MainStay MacKay 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) | ||||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Municipal Finance Agency, Revenue Bonds (continued) | ||||||||
Series A, Insured: AGM | $ | 290,000 | $ | 290,621 | ||||
Series A, Insured: AGM | 1,720,000 | 1,722,614 | ||||||
Series C, Insured: AGM | 1,195,000 | 1,233,563 | ||||||
Series C, Insured: AGC | 210,000 | 220,418 | ||||||
Series C, Insured: AGC | 340,000 | 366,595 | ||||||
Puerto Rico Public Buildings Authority, Government Facilities, Revenue Bonds | 265,000 | 272,256 | ||||||
Series K, Insured: AGM | 1,150,000 | 1,172,045 | ||||||
Series M-3, Insured: NATL-RE | 300,000 | 300,438 | ||||||
Series M-3, Insured: NATL-RE | 7,465,000 | 7,477,989 | ||||||
Puerto Rico Sales Tax Financing Corp., Revenue Bonds | 25,000,000 | 5,860,500 | ||||||
Series A, Insured: NATL-RE | 59,580,000 | 11,899,913 | ||||||
Series A, Insured: AMBAC | 950,000 | 161,567 | ||||||
Series A, Insured: AGM | 7,305,000 | 7,432,837 | ||||||
Series C, Insured: AGM | 6,595,000 | 6,780,122 | ||||||
|
| |||||||
221,962,380 | ||||||||
|
| |||||||
Rhode Island 1.2% |
| |||||||
Providence Public Buildings Authority, Revenue Bonds | 1,565,000 | 1,715,600 | ||||||
Rhode Island Health & Educational Building Corp., Hospital Financing-Lifespan Obligated Group, Revenue Bonds | 5,000,000 | 5,652,150 | ||||||
Rhode Island Health & Educational Building Corp., Revenue Bonds | 6,115,000 | 6,840,361 |
Principal Amount | Value | |||||||
Rhode Island (continued) |
| |||||||
¨Tobacco Settlement Financing Corp., Revenue Bonds | $ | 20,000,000 | $ | 21,541,400 | ||||
|
| |||||||
35,749,511 | ||||||||
|
| |||||||
South Carolina 3.9% |
| |||||||
Piedmont Municipal Power Agency, Revenue Bonds | 10,345,000 | 11,357,982 | ||||||
South Carolina Jobs-Economic Development Authority, Palmetto Health, Revenue Bonds | 420,000 | 435,910 | ||||||
Series A | 3,755,000 | 4,289,487 | ||||||
¨South Carolina Public Service Authority, Revenue Bonds | 5,000,000 | 5,533,250 | ||||||
Series A | 10,000,000 | 11,069,800 | ||||||
Series C | 5,165,000 | 5,528,926 | ||||||
Series A | 4,050,000 | 4,302,477 | ||||||
Series A | 33,900,000 | 36,295,035 | ||||||
Series B | 2,500,000 | 2,681,875 | ||||||
South Carolina Public Service Authority, Santee Cooper Project, Revenue Bonds | 6,445,000 | 6,938,429 | ||||||
Series D | 2,595,000 | 2,794,945 | ||||||
Series C | 3,310,000 | 3,500,755 | ||||||
South Carolina Transportation Infrastructure Bank, Revenue Bonds | 15,130,000 | 17,052,872 | ||||||
Sumter Two School Facilities Inc., Sumter School District Project, Revenue Bonds Insured: BAM | 1,100,000 | 1,237,038 | ||||||
|
| |||||||
113,018,781 | ||||||||
|
| |||||||
South Dakota 0.1% |
| |||||||
Harrisburg School District No. 41-2, Unlimited General Obligation | 1,370,000 | 1,439,199 | ||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Portfolio of Investments April 30, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Tennessee 0.4% |
| |||||||
Johnson City Health & Educational Facilities Board, Mountain States Health Alliance, Revenue Bonds | $ | 3,605,000 | $ | 3,814,234 | ||||
Series A | 6,500,000 | 6,977,100 | ||||||
|
| |||||||
10,791,334 | ||||||||
|
| |||||||
Texas 4.6% |
| |||||||
Bexar County Hospital District, Limited General Obligation | 4,200,000 | 4,325,412 | ||||||
Central Texas Turnpike System, Revenue Bonds | 5,000,000 | 5,455,000 | ||||||
Series B | 1,445,000 | 1,581,639 | ||||||
City of Donna TX, Tax & Toll Bridge, Limited General Obligation Insured: BAM | 1,035,000 | 1,145,900 | ||||||
City of Houston, Limited General Obligation | 5,000,000 | 5,842,350 | ||||||
Harris County Cultural Education Facilities Finance Corp., Memorial Hermann Health System, Revenue Bonds | 4,280,000 | 4,732,268 | ||||||
Harris County-Houston Sports Authority Cap Appreciation, Senior Lien, Revenue Bonds | 17,115,000 | 5,685,090 | ||||||
Houston Higher Education Finance Corp., Prerefunded-Cosmos Foundation, Inc., Revenue Bonds | 565,000 | 635,794 | ||||||
North Harris County Regional Water Authority, Senior Lien, Revenue Bonds Insured: BAM | 3,215,000 | 3,522,322 | ||||||
North Texas Tollway Authority, Revenue Bonds | 1,400,000 | 1,545,670 | ||||||
Series A | 2,950,000 | 3,249,543 |
Principal Amount | Value | |||||||
Texas (continued) |
| |||||||
North Texas Tollway Authority, Revenue Bonds (continued) | ||||||||
Series A, Insured: BAM | $ | 9,500,000 | $ | 10,422,830 | ||||
Series B | 22,140,000 | 23,942,639 | ||||||
Tarrant County Cultural Education Facilities Finance Corp., Buckner Retirement Services, Revenue Bonds | 1,245,000 | 1,383,880 | ||||||
Series A | 1,305,000 | 1,467,916 | ||||||
Series A | 1,370,000 | 1,556,539 | ||||||
Series A | 1,440,000 | 1,648,454 | ||||||
Texas Municipal Gas Acquisition & Supply Corp. III, Revenue Bonds | 17,100,000 | 18,572,139 | ||||||
5.00%, due 12/15/31 | 4,575,000 | 4,958,568 | ||||||
Texas Private Activity Bond Surface Transportation Corp., Senior Lien, LBJ Infrastructure, Revenue Bonds | 5,005,000 | 5,495,740 | ||||||
7.50%, due 6/30/32 | 4,095,000 | 4,558,718 | ||||||
7.50%, due 6/30/33 | 5,500,000 | 6,110,445 | ||||||
Texas Private Activity Bond Surface Transportation Corp., Senior Lien, NTE Mobility, Revenue Bonds | 6,800,000 | 7,314,012 | ||||||
Texas Public Finance Authority, Financing System-Texas Southern University, Revenue Bonds | 1,000,000 | 1,026,880 | ||||||
Insured: BAM | 1,295,000 | 1,324,384 | ||||||
Texas State Municipal Power Agency, Revenue Bonds | 2,500,000 | 2,644,050 | ||||||
5.00%, due 9/1/47 | 2,750,000 | 2,905,265 | ||||||
Viridian Municipal Management District, Unlimited General Obligation Insured: BAM | 500,000 | 597,195 | ||||||
|
| |||||||
133,650,642 | ||||||||
|
|
28 | MainStay MacKay 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) | ||||||||
U.S. Virgin Islands 1.8% |
| |||||||
Virgin Islands Public Finance Authority, Matching Fund Loan, Revenue Bonds | $ | 5,100,000 | $ | 4,041,750 | ||||
Series A | 6,960,000 | 5,080,800 | ||||||
Series A | 5,000,000 | 3,612,500 | ||||||
Virgin Islands Public Finance Authority, Revenue Bonds | 5,000,000 | 5,283,000 | ||||||
Series C | 18,500,000 | 12,903,750 | ||||||
Series A, Insured: AGM | 15,655,000 | 16,445,734 | ||||||
Series C, Insured: AGM | 5,920,000 | 6,283,370 | ||||||
|
| |||||||
53,650,904 | ||||||||
|
| |||||||
Utah 0.0%‡ |
| |||||||
City of Herriman UT, Special Assessment, Towne Centre Assessment Area | 55,000 | 58,315 | ||||||
|
| |||||||
Virginia 1.5% |
| |||||||
Chesapeake Bay Bridge & Tunnel District, Revenue Bonds | 15,250,000 | 16,930,092 | ||||||
Hampton Roads Sanitation District, Revenue Bonds | 3,540,000 | 4,170,863 | ||||||
Series A | 2,500,000 | 2,929,750 | ||||||
Virginia Commonwealth Transportation Board, Revenue Bonds | 4,750,000 | 5,662,760 | ||||||
Series A | 4,000,000 | 4,791,200 | ||||||
Series A | 3,750,000 | 4,474,313 | ||||||
Series A | 4,500,000 | 5,340,060 | ||||||
|
| |||||||
44,299,038 | ||||||||
|
|
Principal Amount | Value | |||||||
Wisconsin 0.2% |
| |||||||
Wisconsin Center District, Junior Dedicated, Revenue Bonds | $ | 3,665,000 | $ | 3,910,372 | ||||
Series A | 2,850,000 | 3,033,283 | ||||||
|
| |||||||
6,943,655 | ||||||||
|
| |||||||
Wyoming 0.1% |
| |||||||
West Park Hospital District, Revenue Bonds | 250,000 | 263,650 | ||||||
Series A | 1,000,000 | 1,079,890 | ||||||
|
| |||||||
1,343,540 | ||||||||
|
| |||||||
Total Municipal Bonds | 2,894,938,550 | |||||||
|
| |||||||
Total Investments | 98.5 | % | 2,894,938,550 | |||||
Other Assets, Less Liabilities | 1.5 | 43,334,414 | ||||||
Net Assets | 100.0 | % | $ | 2,938,272,964 |
‡ | 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, 2018. |
(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. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Portfolio of Investments April 30, 2018 (Unaudited) (continued)
As of April 30, 2018, the Fund held the following futures contracts1:
Type | Number of Contracts (Short) | Expiration Date | Value at Trade Date | Current Notional Amount | Unrealized Appreciation (Depreciation)2 | |||||||||||||||
10-Year United States Treasury Note | (3,215 | ) | June 2018 | $ | (385,038,842 | ) | $ | (384,594,375 | ) | $ | 444,467 | |||||||||
United States Treasury Long Bond | (1,003 | ) | June 2018 | (143,112,892 | ) | (144,275,281 | ) | (1,162,389 | ) | |||||||||||
|
|
|
|
|
| |||||||||||||||
$ | (528,151,734 | ) | $ | (528,869,656 | ) | $ | (717,922 | ) | ||||||||||||
|
|
|
|
|
|
1. | As of April 30, 2018, cash in the amount of $5,049,950 was on deposit with a broker or futures commission merchant 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, 2018. |
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 following is a summary of the fair valuations according to the inputs used as of April 30, 2018, for valuing the Fund’s assets and liabilities.
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Municipal Bonds | $ | — | $ | 2,894,938,550 | $ | — | $ | 2,894,938,550 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | — | 2,894,938,550 | — | 2,894,938,550 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts (b) | 444,467 | — | — | 444,467 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 444,467 | $ | 2,894,938,550 | $ | — | $ | 2,895,383,017 | ||||||||
|
|
|
|
|
|
|
|
Liability Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts (b) | $ | (1,162,389 | ) | $ | — | $ | — | $ | (1,162,389 | ) | ||||||
|
|
|
|
|
|
|
|
(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, 2018, the Fund did not have any transfers among levels. (See Note 2)
As of April 30, 2018, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
30 | MainStay MacKay 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, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 2,894,938,550 | ||
Cash | 11,553,314 | |||
Cash collateral on deposit at broker for futures contracts | 5,049,950 | |||
Receivables: | ||||
Interest | 36,265,753 | |||
Fund shares sold | 5,002,968 | |||
Investment securities sold | 10,000 | |||
Other assets | 136,024 | |||
|
| |||
Total assets | 2,952,956,559 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 7,747,542 | |||
Investment securities purchased | 2,038,612 | |||
Manager (See Note 3) | 1,024,664 | |||
Variation margin on futures contracts | 997,416 | |||
NYLIFE Distributors (See Note 3) | 418,117 | |||
Transfer agent (See Note 3) | 209,646 | |||
Professional fees | 58,828 | |||
Shareholder communication | 33,401 | |||
Custodian | 7,923 | |||
Trustees | 4,670 | |||
Dividend payable | 2,137,839 | |||
Accrued expenses | 4,937 | |||
|
| |||
Total liabilities | 14,683,595 | |||
|
| |||
Net assets | $ | 2,938,272,964 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 2,976,304 | ||
Additional paid-in capital | 2,971,972,622 | |||
|
| |||
2,974,948,926 | ||||
Distributions in excess of net investment income | (590,399 | ) | ||
Accumulated net realized gain (loss) on investments and futures transactions | (4,780,616 | ) | ||
Net unrealized appreciation (depreciation) on investments and futures contracts | (31,304,947 | ) | ||
|
| |||
Net assets | $ | 2,938,272,964 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 1,537,461,487 | ||
|
| |||
Shares of beneficial interest outstanding | 155,755,085 | |||
|
| |||
Net asset value per share outstanding | $ | 9.87 | ||
Maximum sales charge (4.50% of offering price) | 0.47 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.34 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 9,825,862 | ||
|
| |||
Shares of beneficial interest outstanding | 991,164 | |||
|
| |||
Net asset value per share outstanding | $ | 9.91 | ||
Maximum sales charge (4.50% of offering price) | 0.47 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.38 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 15,909,120 | ||
|
| |||
Shares of beneficial interest outstanding | 1,612,150 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.87 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 226,607,753 | ||
|
| |||
Shares of beneficial interest outstanding | 22,950,472 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.87 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 1,148,468,742 | ||
|
| |||
Shares of beneficial interest outstanding | 116,321,490 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.87 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 31 |
Statement of Operations for the six months ended April 30, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 57,631,850 | ||
Other income | 8,844 | |||
|
| |||
Total income | 57,640,694 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 6,150,859 | |||
Distribution/Service—Class A (See Note 3) | 1,958,047 | |||
Distribution/Service—Investor Class (See Note 3) | 12,397 | |||
Distribution/Service—Class B (See Note 3) | 41,057 | |||
Distribution/Service—Class C (See Note 3) | 582,502 | |||
Transfer agent (See Note 3) | 1,398,137 | |||
Registration | 106,922 | |||
Professional fees | 96,470 | |||
Shareholder communication | 60,645 | |||
Trustees | 31,913 | |||
Custodian | 5,697 | |||
Miscellaneous | 48,747 | |||
|
| |||
Total expenses | 10,493,393 | |||
|
| |||
Net investment income (loss) | 47,147,301 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (644,593 | ) | ||
Futures transactions | 24,787,097 | |||
|
| |||
Net realized gain (loss) on investments and futures transactions | 24,142,504 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (61,918,216 | ) | ||
Futures contracts | (5,814,741 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | (67,732,957 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and futures transactions | (43,590,453 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 3,556,848 | ||
|
|
32 | MainStay MacKay 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, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 47,147,301 | $ | 78,832,051 | ||||
Net realized gain (loss) on investments and futures transactions | 24,142,504 | (3,302,731 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | (67,732,957 | ) | (33,704,651 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 3,556,848 | 41,824,669 | ||||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (24,866,740 | ) | (40,986,410 | ) | ||||
Investor Class | (158,326 | ) | (477,109 | ) | ||||
Class B | (241,734 | ) | (529,314 | ) | ||||
Class C | (3,426,992 | ) | (7,154,854 | ) | ||||
Class I | (18,453,551 | ) | (29,684,366 | ) | ||||
|
| |||||||
Total dividends to shareholders | (47,147,343 | ) | (78,832,053 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 478,476,677 | 1,493,056,476 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 35,417,595 | 57,536,646 | ||||||
Cost of shares redeemed | (385,057,968 | ) | (1,116,800,081 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 128,836,304 | 433,793,041 | ||||||
|
| |||||||
Net increase (decrease) in net assets | 85,245,809 | 396,785,657 | ||||||
Net Assets | ||||||||
Beginning of period | 2,853,027,155 | 2,456,241,498 | ||||||
|
| |||||||
End of period | $ | 2,938,272,964 | $ | 2,853,027,155 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (590,399 | ) | $ | (590,357 | ) | ||
|
|
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
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class A | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.33 | $ | 10.04 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.16 | 0.31 | 0.32 | 0.35 | 0.39 | 0.38 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.70 | (0.72 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.01 | 0.15 | 0.57 | 0.25 | 1.09 | (0.34 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.31 | ) | (0.32 | ) | (0.35 | ) | (0.39 | ) | (0.37 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 9.87 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.33 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (a) | 0.07 | % | 1.50 | % | 5.73 | % | 2.58 | % | 11.86 | % | (3.52 | %) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.17 | %†† | 3.05 | % | 3.04 | % | 3.51 | % | 3.99 | % | 3.72 | % | ||||||||||||
Net expenses | 0.80 | %†† | 0.81 | % | 0.80 | % | 0.81 | % | 0.78 | % | 0.78 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.80 | %†† | 0.81 | % | 0.80 | % | 0.82 | % | 0.83 | % | 0.83 | % | ||||||||||||
Portfolio turnover rate | 20 | % | 62 | % | 47 | % | 46 | % | 68 | % | 111 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 1,537,461 | $ | 1,564,955 | $ | 1,248,065 | $ | 761,278 | $ | 427,586 | $ | 417,984 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
�� | ||||||||||||||||||||||||
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.06 | $ | 10.23 | $ | 9.97 | $ | 10.08 | $ | 9.38 | $ | 10.08 | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.16 | 0.31 | 0.32 | 0.35 | 0.39 | 0.36 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.17 | ) | 0.26 | (0.11 | ) | 0.69 | (0.70 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.01 | 0.14 | 0.58 | 0.24 | 1.08 | (0.34 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.16 | ) | (0.31 | ) | (0.32 | ) | (0.35 | ) | (0.38 | ) | (0.36 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 9.91 | $ | 10.06 | $ | 10.23 | $ | 9.97 | $ | 10.08 | $ | 9.38 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (a) | 0.08 | % | 1.43 | % | 5.83 | % | 2.47 | % | 11.76 | % | (3.45 | %) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.19 | %†† | 3.10 | % | 3.11 | % | 3.54 | % | 3.94 | % | 3.67 | % | ||||||||||||
Net expenses | 0.78 | %†† | 0.79 | % | 0.79 | % | 0.82 | % | 0.84 | % | 0.84 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.78 | %†† | 0.79 | % | 0.79 | % | 0.83 | % | 0.89 | % | 0.89 | % | ||||||||||||
Portfolio turnover rate | 20 | % | 62 | % | 47 | % | 46 | % | 68 | % | 111 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 9,826 | $ | 10,216 | $ | 16,344 | $ | 17,259 | $ | 18,264 | $ | 19,094 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
34 | MainStay MacKay 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.01 | $ | 10.18 | $ | 9.92 | $ | 10.03 | $ | 9.33 | $ | 10.03 | ||||||||||||
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|
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|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.15 | 0.28 | 0.29 | 0.33 | 0.35 | 0.34 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.17 | ) | 0.26 | (0.11 | ) | 0.71 | (0.70 | ) | ||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.01 | 0.11 | 0.55 | 0.22 | 1.06 | (0.36 | ) | |||||||||||||||||
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|
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| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.28 | ) | (0.29 | ) | (0.33 | ) | (0.36 | ) | (0.34 | ) | ||||||||||||
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| |||||||||||||
Net asset value at end of period | $ | 9.87 | $ | 10.01 | $ | 10.18 | $ | 9.92 | $ | 10.03 | $ | 9.33 | ||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (a) | 0.05 | % | 1.17 | % | 5.58 | % | 2.21 | % | 11.52 | % | (3.73 | %) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 2.94 | %†† | 2.85 | % | 2.84 | % | 3.28 | % | 3.69 | % | 3.41 | % | ||||||||||||
Net expenses | 1.03 | %†† | 1.04 | % | 1.04 | % | 1.07 | % | 1.09 | % | 1.09 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.03 | %†† | 1.04 | % | 1.04 | % | 1.08 | % | 1.14 | % | 1.14 | % | ||||||||||||
Portfolio turnover rate | 20 | % | 62 | % | 47 | % | 46 | % | 68 | % | 111 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 15,909 | $ | 17,068 | $ | 19,318 | $ | 16,806 | $ | 12,439 | $ | 12,459 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.34 | $ | 10.04 | ||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.15 | 0.28 | 0.29 | 0.33 | 0.36 | 0.35 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.69 | (0.71 | ) | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | — | 0.12 | 0.54 | 0.23 | 1.05 | (0.36 | ) | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.15 | ) | (0.28 | ) | (0.29 | ) | (0.33 | ) | (0.36 | ) | (0.34 | ) | ||||||||||||
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|
|
|
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|
|
|
|
|
| |||||||||||||
Net asset value at end of period | $ | 9.87 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.34 | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (a) | (0.05 | %) | 1.27 | % | 5.48 | % | 2.31 | % | 11.40 | % | (3.72 | %) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 2.94 | % †† | 2.85 | % | 2.81 | % | 3.28 | % | 3.68 | % | 3.42 | % | ||||||||||||
Net expenses | 1.03 | % †† | 1.04 | % | 1.04 | % | 1.07 | % | 1.09 | % | 1.09 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 1.03 | % †† | 1.04 | % | 1.04 | % | 1.08 | % | 1.14 | % | 1.14 | % | ||||||||||||
Portfolio turnover rate | 20 | % | 62 | % | 47 | % | 46 | % | 68 | % | 111 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 226,608 | $ | 241,526 | $ | 273,386 | $ | 183,509 | $ | 154,863 | $ | 150,244 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 35 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||
Class I | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
Net asset value at beginning of period | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.34 | $ | 10.04 | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net investment income (loss) | 0.17 | 0.33 | 0.34 | 0.38 | 0.41 | 0.40 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.69 | (0.71 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total from investment operations | 0.02 | 0.17 | 0.59 | 0.28 | 1.10 | (0.31 | ) | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less dividends: | ||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.33 | ) | (0.34 | ) | (0.38 | ) | (0.41 | ) | (0.39 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
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|
| |||||||||||||
Net asset value at end of period | $ | 9.87 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.34 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total investment return (a) | 0.19 | % | 1.75 | % | 5.99 | % | 2.83 | % | 12.02 | % | (3.18 | %) | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Net investment income (loss) | 3.43 | %†† | 3.31 | % | 3.29 | % | 3.78 | % | 4.21 | % | 4.00 | % | ||||||||||||
Net expenses | 0.55 | %†† | 0.56 | % | 0.55 | % | 0.56 | % | 0.53 | % | 0.54 | % | ||||||||||||
Expenses (before waiver/reimbursement) | 0.55 | %†† | 0.56 | % | 0.55 | % | 0.57 | % | 0.58 | % | 0.59 | % | ||||||||||||
Portfolio turnover rate | 20 | % | 62 | % | 47 | % | 46 | % | 68 | % | 111 | % | ||||||||||||
Net assets at end of period (in 000’s) | $ | 1,148,469 | $ | 1,019,263 | $ | 899,128 | $ | 513,893 | $ | 314,005 | $ | 236,531 |
* | Unaudited. |
†† | Annualized. |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
36 | MainStay MacKay 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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and Notes relate to the MainStay MacKay Tax Free Bond Fund (formerly known as 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 has seven classes of shares registered for sale. 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 R6 and Class T shares were registered for sale effective as of February 28, 2017. As of April 30, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $250,000 or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class I shares
are offered at NAV without a sales charge. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class R6 shares are currently expected to be offered at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class T shares. Class I and Class R6 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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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)).
37 |
Notes to Financial Statements (Unaudited) (continued)
To assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 the security’s 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, 2018, 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 the 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, 2018, 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
38 | MainStay MacKay Tax Free Bond Fund |
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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 its 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 tax 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 determinations using 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. 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.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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 all or a portion of any interest receivables when the collection of all or a portion of such 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., foreign currency, interest rate, security or securities index). The Fund is subject to risks
39 |
Notes to Financial Statements (Unaudited) (continued)
such as 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 NAVs and may result in a loss to the Fund. As of April 30, 2018, open futures contracts are shown in the Portfolio of Investments.
(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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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 secu-
rities 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, 2018, the Fund did not have any portfolio securities on loan.
(I) Municipal Bond Risk. The Fund may invest more heavily in municipal bonds from certain cities, states 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 or regions. In addition, many state and municipal governments that issue securities are under significant economic and financial stress and may not be able to satisfy their obligations. The Fund may invest a substantial amount of its assets in municipal bonds whose interest is paid solely from revenues of similar projects, such as tobacco settlement bonds. 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.
Certain of the issuers in which the Fund may invest have recently experienced, or may experience, significant financial difficulties and repeated credit rating downgrades. On May 3, 2017, the Commonwealth of Puerto Rico began proceedings to seek bankruptcy-type protections from approximately $74 billion in debt and approximately $48 billion in unfunded pension obligations. Puerto Rico’s debt restructuring of $122 billion is significantly larger than the previous largest U.S. public bankruptcy, which covered approximately $18 billion of debt for the city of Detroit. Puerto Rico’s debt restructuring process and other economic factors or developments could occur rapidly and may significantly affect the value of municipal securities of Puerto Rico. 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). The bond insurance provider pays both principal and interest when due to the bond holder. The magnitude of Puerto Rico’s debt restructuring or other adverse economic developments could pose significant strains on the ability of municipal securities insurers to meet all future claims. As of April 30, 2018, 100% of the Puerto Rico municipal securities held by the Fund were insured.
(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,
40 | MainStay MacKay Tax Free Bond Fund |
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, 2018:
Asset Derivatives
Statement of Assets and Liabilities Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net Assets—Net unrealized appreciation on investments and futures contracts (a) | $ | 444,467 | $ | 444,467 | |||||
|
| |||||||||
Total Fair Value | $ | 444,467 | $ | 444,467 | ||||||
|
|
|
|
Liability Derivatives
Statement of Assets and Liabilities Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net Assets—Net unrealized depreciation on investments and futures contracts (a) | $ | (1,162,389 | ) | $ | (1,162,389 | ) | |||
|
| |||||||||
Total Fair Value | $ | (1,162,389 | ) | $ | (1,162,389 | ) | ||||
|
|
|
|
(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, 2018:
Realized Gain (Loss)
Statement of Operations Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | 24,787,097 | $ | 24,787,097 | |||||
|
| |||||||||
Total Realized Gain (Loss) | $ | 24,787,097 | $ | 24,787,097 | ||||||
|
|
|
|
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 | $ | (5,814,741 | ) | $ | (5,814,741 | ) | |||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | (5,814,741 | ) | $ | (5,814,741 | ) | ||||
|
|
|
|
Average Notional Amount
Interest Rate Contracts Risk | Total | |||||||
Futures Contracts Short | $ | (495,825,047 | ) | $ | (495,825,047 | ) | ||
|
|
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 attributable to 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 an 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 the services performed and the 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; 0.40% from $1 billion to $5 billion; and 0.39% 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. Prior to February 28, 2018, the Fund paid the Manager a monthly fee for the services performed and the 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
41 |
Notes to Financial Statements (Unaudited) (continued)
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, 2018, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.42% 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 (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) for 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 of the Fund, except for Class R6. New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2019, 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.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $6,150,859.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Investor and Class T Class Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class T shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class T 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 0.25% 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, 2018, 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 $24,330 and $1,839, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $36,872, $18, $8,854 and $13,959, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 766,530 | ||
Investor Class | 4,012 | |||
Class B | 6,645 | |||
Class C | 94,234 | |||
Class I | 526,716 |
(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 April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 2,925,620,981 | $ | 40,056,493 | $ | (70,738,924 | ) | $ | (30,682,431 | ) |
42 | MainStay MacKay Tax Free Bond Fund |
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, 2017, for federal income tax purposes, capital loss carryforwards of $23,730,895 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) | ||||||
2019 | $ | 2,136 | $ | — | ||||
Unlimited | 21,595 | — | ||||||
Total | $23,731 | $— |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 360,676 | ||
Exempt Interest Dividends | 78,471,377 | |||
Total | $ | 78,832,053 |
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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any
revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $697,818 and $581,565, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 17,403,831 | $ | 173,757,670 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,241,903 | 22,269,416 | ||||||
Shares redeemed | (20,178,640 | ) | (200,621,161 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (532,906 | ) | (4,594,075 | ) | ||||
Shares converted into Class A (See Note 1) | 69,015 | 686,553 | ||||||
Shares converted from Class A (See Note 1) | (10,857 | ) | (107,393 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (474,748 | ) | $ | (4,014,915 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 93,905,339 | $ | 927,816,118 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,579,232 | 35,533,565 | ||||||
Shares redeemed | (62,891,318 | ) | (620,153,547 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 34,593,253 | 343,196,136 | ||||||
Shares converted into Class A (See Note 1) | 763,453 | 7,658,645 | ||||||
Shares converted from Class A (See Note 1) | (1,712,364 | ) | (16,828,308 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 33,644,342 | $ | 334,026,473 | |||||
|
|
|
| |||||
43 |
Notes to Financial Statements (Unaudited) (continued)
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 57,103 | $ | 571,907 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 14,572 | 145,373 | ||||||
Shares redeemed | (56,796 | ) | (568,544 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 14,879 | 148,736 | ||||||
Shares converted into Investor Class (See Note 1) | 18,446 | 183,894 | ||||||
Shares converted from Investor Class (See Note 1) | (57,615 | ) | (575,287 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (24,290 | ) | $ | (242,657 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 196,152 | $ | 1,957,547 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 42,322 | 421,396 | ||||||
Shares redeemed | (171,826 | ) | (1,712,187 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 66,648 | 666,756 | ||||||
Shares converted into Investor Class (See Note 1) | 93,929 | 931,126 | ||||||
Shares converted from Investor Class (See Note 1) | (743,260 | ) | (7,495,883 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (582,683 | ) | $ | (5,898,001 | ) | |||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 32,264 | $ | 323,968 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 22,276 | 221,200 | ||||||
Shares redeemed | (127,875 | ) | (1,271,893 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (73,335 | ) | (726,725 | ) | ||||
Shares converted from Class B (See Note 1) | (18,840 | ) | (187,767 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (92,175 | ) | $ | (914,492 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 165,734 | $ | 1,630,271 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 48,735 | 483,079 | ||||||
Shares redeemed | (377,160 | ) | (3,748,282 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (162,691 | ) | (1,634,932 | ) | ||||
Shares converted from Class B (See Note 1) | (30,900 | ) | (304,987 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (193,591 | ) | $ | (1,939,919 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 1,538,797 | $ | 15,360,341 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 259,378 | 2,576,950 | ||||||
Shares redeemed | (2,952,443 | ) | (29,404,005 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,154,268 | ) | $ | (11,466,714 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 4,227,857 | $ | 41,961,057 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 534,813 | 5,304,569 | ||||||
Shares redeemed | (7,501,945 | ) | (74,279,922 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (2,739,275 | ) | $ | (27,014,296 | ) | |||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 28,956,047 | $ | 288,462,791 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,027,279 | 10,204,656 | ||||||
Shares redeemed | (15,388,860 | ) | (153,192,365 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 14,594,466 | $ | 145,475,082 | |||||
|
|
|
| |||||
Year ended October 31, 2017 : | ||||||||
Shares sold | 52,446,921 | $ | 519,691,483 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,590,436 | 15,794,037 | ||||||
Shares redeemed | (42,229,809 | ) | (416,906,143 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 11,807,548 | 118,579,377 | ||||||
Shares converted into Class I (See Note 1) | 1,632,319 | 16,039,407 | ||||||
|
|
|
| |||||
Net increase (decrease) | 13,439,867 | $ | 134,618,784 | |||||
|
|
|
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Note 10–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
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, 2018, events and transactions subsequent to April 30, 2018, 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 MacKay 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 (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay Tax Free Bond Fund (now known as the MainStay MacKay 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 decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, together with responses from New York Life Investments and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
45 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of MacKay Shields and continuous analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and MacKay Shields’ track record 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, resources and history. The Board considered that New York Life Investments’ and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-
46 | MainStay MacKay Tax Free Bond Fund |
term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the
Board recognized 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, including reputational and other indirect benefits.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to regis-
47 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
tered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board noted that, following discussions with the Board, New York Life Investments had proposed an additional management fee breakpoint for the Fund, effective February 28, 2018.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Invest-
ments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of the Agreements.
48 | MainStay MacKay 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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).
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MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1737619 MS126-18 | MST10-06/18 (NYLIM) NL013 |
MainStay MacKay Unconstrained Bond Fund (Formerly known as MainStay Unconstrained Bond Fund)
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 shares2 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years or Since | Ten Years | Gross Expense Ratio3 | |||||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/1997 | | –4.64 –0.15 | %
| | –2.59 2.00 | %
| | 1.08 2.02 | %
| | 4.36 4.84 | %
| | 1.13 1.13 | %
| ||||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –4.65 –0.16 |
| | –2.63 1.96 | | | 1.03 1.97 | | | 4.25 4.73 | | | 1.15 1.15 |
| ||||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 2/28/1997 | | | –5.46 –0.54 |
| | –3.75 1.21 | | | 0.86 1.21 | | | 3.94 3.94 | | | 1.90 1.90 |
| ||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within | With sales charges Excluding sales charges | | 9/1/1998 | | | –1.52 –0.54 |
| | 0.22 1.21 | | | 1.21 1.21 | | | 3.95 3.95 | | | 1.90 1.90 |
| ||||||||
Class I Shares | No Sales Charge | 1/2/2004 | –0.03 | 2.25 | 2.27 | 5.12 | 0.88 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 2/28/2014 | –0.20 | 2.01 | 1.72 | N/A | 1.23 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | –0.21 | 1.76 | 6.33 | N/A | 1.48 | |||||||||||||||||||||
Class R6 Shares | No Sales Charge | 2/28/2018 | –0.09 | N/A | –0.09 | N/A | 0.72 |
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, if any, 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | Six Months | One Year | Five Years | Ten Years | ||||||||||||
Bloomberg Barclays U.S. Aggregate Bond Index4 | –1.87 | % | –0.32 | % | 1.47 | % | 3.57 | % | ||||||||
ICE BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index5 | 0.69 | 1.30 | 0.59 | 0.74 | ||||||||||||
Morningstar Nontraditional Bond Category Average6 | 0.54 | 2.56 | 1.61 | 4.04 |
4. | The Bloomberg Barclays U.S. Aggregate Bond Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg 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 Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Fund has selected the ICE BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index as a secondary benchmark. The ICE 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. 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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Fund has selected the Morningstar Nontraditional Bond Category Average as an additional benchmark. 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. Results 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 MacKay Unconstrained Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2,3 | ||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 998.50 | $ | 6.14 | $ | 1,018.60 | $ | 6.21 | 1.24 | % | ||||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 998.40 | $ | 6.24 | $ | 1,018.50 | $ | 6.31 | 1.26 | % | ||||||||||||
Class B Shares | $ | 1,000.00 | $ | 994.60 | $ | 9.94 | $ | 1,014.80 | $ | 10.04 | 2.01 | % | ||||||||||||
Class C Shares | $ | 1,000.00 | $ | 994.60 | $ | 9.94 | $ | 1,014.80 | $ | 10.04 | 2.01 | % | ||||||||||||
Class I Shares | $ | 1,000.00 | $ | 999.70 | $ | 4.91 | $ | 1,019.90 | $ | 4.96 | 0.99 | % | ||||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 998.00 | $ | 6.69 | $ | 1,018.10 | $ | 6.76 | 1.34 | % | ||||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 997.90 | $ | 7.93 | $ | 1,016.90 | $ | 8.00 | 1.59 | % | ||||||||||||
Class R6 Shares4,5 | $ | 1,000.00 | $ | 999.10 | $ | 1.45 | $ | 1,006.90 | $ | 1.46 | 0.87 | % |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 days for Class A, Investor Class, Class B, Class C, Class I, Class R2 and Class R3 shares (to reflect the six-month period) and 61 days for Class R6 shares (to reflect the since-inception period. The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
3. | Expenses are inclusive of dividends and interest on investments sold short. |
4. | The inception date was February 28, 2018. |
5. | Expenses paid during the period reflect ongoing costs for the period from inception through April 30, 2018. Had these shares been offered for the full six-month period ended April 30, 2018, and had the Fund provided a hypothetical 5% annualized return, expenses paid during the period would have been $4.36 for Class R6 shares and the ending account value would have been $1,020.48 for Class R6 shares. |
7 |
Portfolio Composition as of April 30, 2018 (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, 2018 (excluding short-term investment) (Unaudited)
1. | Morgan Stanley, 3.125%–7.30%, due 5/13/19–1/20/27 |
2. | Bank of America Corp., 3.004%–8.57%, due 1/11/23–1/29/37 |
3. | Goldman Sachs Group, Inc., 2.35%–5.25%, due 7/27/21–6/5/23 |
4. | Kreditanstalt Fuer Wiederaufbau, 1.00%–1.50%, due 6/11/18–2/6/19 |
5. | Citigroup, Inc., 2.35%–6.30%, due 8/2/21–1/24/39 |
6. | AT&T, Inc., 3.20%–5.30%, due 3/1/22–8/14/58 |
7. | Lennar Corp., 4.50%–8.375%, due 6/15/19–12/15/21 |
8. | PepsiCo, Inc., 1.35%–2.00%, due 5/2/19–4/15/21 |
9. | Microsoft Corp., 1.10%–1.85%, due 8/8/19–2/6/20 |
10. | Liberty Mutual Group, Inc., 6.50%–10.75%, due 3/15/35–6/15/88 |
8 | MainStay MacKay Unconstrained Bond Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Louis N. Cohen, CFA, Joseph Cantwell, Shu-Yang Tan, CFA, and Matt Jacob of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Unconstrained Bond Fund perform relative to its benchmarks and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MacKay Unconstrained Bond Fund returned –0.15% for Class A shares, –0.16% for Investor Class shares and –0.54% for Class B and Class C shares for the six months ended April 30, 2018. Over the same period, the Fund returned –0.03% for Class I shares, –0.20% for Class R2 shares, and –0.21% for Class R3 shares. For the six months ended April 30, 2018, all of the above share classes outperformed the –1.87% return of the Bloomberg Barclays U.S. Aggregate Bond Index,1 which is the Fund’s primary benchmark. Over the same period, all of the above share classes underperformed the 0.69% return of the ICE BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index,1 which is the Fund’s secondary benchmark, and the 0.54% return of the Morningstar Nontraditional Bond Category Average,2 which is an additional benchmark of the Fund. From February 28, 2018, when Class R6 shares were first offered for sale, through April 30, 2018, Class R6 shares returned –0.09%. See page 5 for Fund returns with applicable sales charges.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Unconstrained Bond Fund was renamed MainStay MacKay Unconstrained Bond Fund. For more information on this change, please refer to the supplement dated December 15, 2017. On February 28, 2018, Joseph Cantwell, Shu-Yang Tan and Matt Jacob were added as portfolio managers to the Fund and Michael Kimble was removed.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
During the reporting period, the Fund used U.S. Treasury futures and swaps to manage the Fund’s duration.3 This position had a positive impact on the Fund’s performance during the reporting period.
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s outperformance relative to the Bloomberg Barclays U.S. Aggregate Bond Index during the reporting period resulted
primarily from overweight positions in spread product4—specifically, bank loans, high-yield corporate bonds and investment-grade corporate bonds. The Federal Reserve raised the federal funds target range twice during the reporting period, so spread assets—which typically react less to interest-rate changes than do U.S. Treasury securities and mortgages—outperformed. Though credit spreads did widen a bit in the first quarter of 2018, they ended the reporting period tighter than when the reporting period began. Bank loans were the best-performing asset class during the reporting period. All sectors in which the Fund held bank loan positions had positive absolute returns during the reporting period, with holdings in the consumer cyclical, industrial and financial sectors performing the best. While both high-yield corporate bonds and investment-grade corporate bonds generated negative absolute returns during the reporting period, the Fund’s positions outperformed the Bloomberg Barclays U.S. Aggregate Bond Index. In the corporate-bond component of the Fund, industrials had the strongest performance, while the Fund’s financial positions were laggards. The Fund’s underweight positions relative to the Bloomberg Barclays U.S. Aggregate Bond Index in U.S. Treasury securities and mortgages also contributed positively to the Fund’s relative performance, as both asset classes were negatively affected by the Federal Reserve’s rate hikes. (Contributions take weightings and total returns into account.) The Fund’s duration management also had a positive effect on relative performance during the reporting period.
What was the Fund’s duration strategy during the reporting period?
To reduce the Fund’s sensitivity to interest rates, we maintained a duration that was significantly shorter than that of the Bloomberg Barclays U.S. Aggregate Bond Index. As of April 30, 2018, the Fund’s duration was 1.1 years. As of the same date, the duration of the Index was approximately 6.0 years.
Which sectors were the strongest contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, bank loans were the most substantial positive contributors to the Fund’s relative performance. Among the Fund’s bank loan positions, all sectors generated positive absolute returns during the reporting period, with holdings in the consumer cyclical, industrial and financial sectors providing the strongest performance. As mentioned, high-yield
1. | See footnote on page 6 for more information about this index. |
2. | See footnote on page 6 for more information on Morningstar Nontraditional Bond 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 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 terms “spread product” and “spread assets” refer to asset classes that typically trade at a spread to comparable U.S. Treasury securities. 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. |
9 |
corporate bonds and investment-grade corporate bonds both generated negative absolute returns during the reporting period, but they outperformed relative to the Bloomberg Barclays U.S. Aggregate Bond Index. In the corporate bond component of the Fund, industrials held up the best, while financial positions were laggards.
Did the Fund make any significant purchases or sales during the reporting period?
During the reporting period we purchased corporate bonds of health care services company CVS as a new issue because we had favorable view of the company and the security’s yield was good relative to its peers. We swapped out of long-maturity bonds of Rogers Communications to buy the same company’s bonds maturing in 2025 to shorten maturity based on a flat credit curve. Finally, we sold bonds in hotel operator Wyndham Worldwide because of concerns about the credit’s valuation.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, we moderately decreased the Fund’s allocation to high-yield corporate bonds and bank loans. Over the same period, we increased the Fund’s allocation to investment-grade corporate bonds.
How was the Fund positioned at the end of the reporting period?
As of April 30, 2018, the Fund was overweight relative to the Bloomberg Barclays U.S. Aggregate Bond Index in bank loans and in high-yield and investment-grade corporate bonds. As of the same date, the Fund was underweight relative to the Index in U.S. Treasury securities, agency debentures and mortgage-backed 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 MacKay Unconstrained Bond Fund |
Portfolio of Investments April 30, 2018 (Unaudited)
Principal Amount | Value | |||||||
Long-Term Bonds 99.9%† Asset-Backed Securities 0.1% |
| |||||||
Home Equity 0.0%‡ |
| |||||||
First NLC Trust | $ | 336,576 | $ | 210,451 | ||||
JPMorgan Mortgage Acquisition Trust | 125,356 | 88,606 | ||||||
MASTR Asset-Backed Securities Trust | 88,943 | 43,028 | ||||||
Morgan Stanley ABS Capital I, Inc. | 89,125 | 43,810 | ||||||
|
| |||||||
385,895 | ||||||||
|
| |||||||
Student Loans 0.1% |
| |||||||
KeyCorp Student Loan Trust | 480,220 | 478,364 | ||||||
|
| |||||||
Total Asset-Backed Securities | 864,259 | |||||||
|
| |||||||
Corporate Bonds 83.1% | ||||||||
Advertising 0.2% | ||||||||
Lamar Media Corp. | 2,695,000 | 2,755,638 | ||||||
|
| |||||||
Aerospace & Defense 1.2% |
| |||||||
Moog, Inc. | 5,505,000 | 5,628,862 | ||||||
Orbital ATK, Inc. (c) |
| |||||||
5.25%, due 10/1/21 | 2,250,000 | 2,295,000 | ||||||
5.50%, due 10/1/23 | 4,045,000 | 4,237,138 | ||||||
Rockwell Collins, Inc. | 3,350,000 | 3,181,648 | ||||||
|
| |||||||
15,342,648 | ||||||||
|
| |||||||
Agriculture 0.6% |
| |||||||
Philip Morris International, Inc. | 8,215,000 | 8,149,936 | ||||||
|
|
Principal Amount | Value | |||||||
Airlines 1.5% |
| |||||||
Continental Airlines, Inc. | ||||||||
Series 2007-1, Class A | $ | 2,728,270 | $ | 2,904,516 | ||||
Series 2003-ERJ-1 | 14,261 | 14,403 | ||||||
Series 2005-ERJ1 | 261,209 | 279,820 | ||||||
Delta Air Lines, Inc. | ||||||||
Series 2011-1, Class A | 664,249 | 676,272 | ||||||
Series 2007-1, Class A | 1,375,576 | 1,510,795 | ||||||
U.S. Airways Group, Inc. | ||||||||
Series 2012-1, Class A | 1,998,644 | 2,167,829 | ||||||
Series 2010-1, Class A | 5,617,885 | 6,065,631 | ||||||
United Airlines, Inc. | 4,730,327 | 4,757,763 | ||||||
|
| |||||||
18,377,029 | ||||||||
|
| |||||||
Auto Manufacturers 2.4% |
| |||||||
Daimler Finance North America LLC | 6,950,000 | 6,861,614 | ||||||
Ford Holdings LLC | 93,000 | 124,621 | ||||||
Ford Motor Co. | ||||||||
7.45%, due 7/16/31 | 39,000 | 46,169 | ||||||
8.90%, due 1/15/32 | 3,009,000 | 3,930,773 | ||||||
Ford Motor Credit Co. LLC | 3,345,000 | 3,317,188 | ||||||
General Motors Co. | 2,620,000 | 2,516,739 | ||||||
General Motors Financial Co., Inc. | 8,590,000 | 8,473,323 | ||||||
Toyota Motor Credit Corp. | 5,700,000 | 5,604,115 | ||||||
|
| |||||||
30,874,542 | ||||||||
|
| |||||||
Auto Parts & Equipment 0.8% |
| |||||||
LKQ European Holdings B.V. | EUR 3,005,000 | 3,624,054 | ||||||
Schaeffler Finance B.V. | $ | 6,490,000 | 6,595,463 | |||||
|
| |||||||
10,219,517 | ||||||||
|
| |||||||
Banks 19.4% |
| |||||||
¨Bank of America Corp. | ||||||||
3.004%, due 12/20/23 (a)(c)(d) | 7,718,000 | 7,489,774 |
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund’s 10 largest holdings or issuers held, as of April 30, 2018, 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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Banks (continued) | ||||||||
Bank of America Corp. (continued) | ||||||||
3.248%, due 10/21/27 (c) | $ | 5,170,000 | $ | 4,814,788 | ||||
3.30%, due 1/11/23 | 510,000 | 504,154 | ||||||
4.25%, due 10/22/26 | 7,260,000 | 7,194,717 | ||||||
5.125% (3 Month LIBOR + 3.387%), | 4,990,000 | 5,052,874 | ||||||
6.11%, due 1/29/37 | 2,807,000 | 3,269,708 | ||||||
6.30% (3 Month LIBOR + 4.553%), | 3,570,000 | 3,779,559 | ||||||
8.57%, due 11/15/24 | 1,645,000 | 2,043,969 | ||||||
Bank of New York Mellon Corp. (d) | ||||||||
2.661% (3 Month LIBOR + 0.634%), | 4,660,000 | 4,512,572 | ||||||
4.625% (3 Month LIBOR + 3.131%), | 5,050,000 | 4,860,625 | ||||||
Barclays Bank PLC | 8,037,000 | 8,271,179 | ||||||
BB&T Corp. | 6,370,000 | 6,228,279 | ||||||
Capital One Financial Corp. | ||||||||
4.20%, due 10/29/25 (c) | 800,000 | 781,506 | ||||||
5.55% (3 Month LIBOR + 3.80%), | 1,535,000 | 1,581,050 | ||||||
¨Citigroup, Inc. | ||||||||
2.35%, due 8/2/21 | 5,000,000 | 4,850,557 | ||||||
3.878%, due 1/24/39 (d) | 3,905,000 | 3,634,791 | ||||||
6.30% (3 Month LIBOR + 3.423%), | 10,800,000 | 11,040,300 | ||||||
Citizens Financial Group, Inc. | 2,270,000 | 2,280,487 | ||||||
¨Goldman Sachs Group, Inc. | ||||||||
2.35%, due 11/15/21 | 9,335,000 | 9,009,069 | ||||||
2.908% (3 Month LIBOR + 1.053%), | 4,285,000 | 4,143,227 | ||||||
3.00%, due 4/26/22 | 7,000,000 | 6,841,210 | ||||||
3.625%, due 1/22/23 | 7,257,000 | 7,227,112 | ||||||
5.25%, due 7/27/21 | 6,047,000 | 6,396,673 | ||||||
JPMorgan Chase & Co. | 7,595,000 | 7,898,800 | ||||||
¨Kreditanstalt Fuer Wiederaufbau | ||||||||
1.00%, due 6/11/18 | 10,610,000 | 10,598,223 | ||||||
1.50%, due 2/6/19 | 12,800,000 | 12,713,035 | ||||||
Lloyds Banking Group PLC | ||||||||
4.582%, due 12/10/25 | 3,465,000 | 3,425,988 | ||||||
4.65%, due 3/24/26 | 1,985,000 | 1,972,730 | ||||||
¨Morgan Stanley | ||||||||
3.125%, due 1/23/23 | 6,380,000 | 6,234,935 | ||||||
3.625%, due 1/20/27 | 6,055,000 | 5,839,846 | ||||||
3.70%, due 10/23/24 | 6,700,000 | 6,613,954 |
Principal Amount | Value | |||||||
Banks (continued) | ||||||||
Morgan Stanley (continued) | ||||||||
4.00%, due 7/23/25 | $ | 1,920,000 | $ | 1,914,268 | ||||
4.875%, due 11/1/22 | 4,287,000 | 4,450,235 | ||||||
5.00%, due 11/24/25 | 2,465,000 | 2,556,710 | ||||||
5.45% (3 Month LIBOR + 3.61%), | 11,425,000 | 11,610,656 | ||||||
7.30%, due 5/13/19 | 3,000,000 | 3,135,688 | ||||||
PNC Bank N.A. | 3,925,000 | 3,697,722 | ||||||
Royal Bank of Canada | 5,565,000 | 5,464,978 | ||||||
Royal Bank of Scotland Group PLC | 8,746,000 | 8,882,226 | ||||||
Santander Holdings USA, Inc. | ||||||||
3.40%, due 1/18/23 | 1,500,000 | 1,453,353 | ||||||
3.70%, due 3/28/22 (c) | 2,000,000 | 1,982,417 | ||||||
4.40%, due 7/13/27 | 1,445,000 | 1,415,651 | ||||||
Santander UK Group Holdings PLC | 2,650,000 | 2,596,255 | ||||||
Toronto-Dominion Bank | 6,995,000 | 6,695,149 | ||||||
U.S. Bank N.A. | ||||||||
1.40%, due 4/26/19 | 3,730,000 | 3,686,347 | ||||||
2.00%, due 1/24/20 | 3,205,000 | 3,155,815 | ||||||
US Bancorp | 3,410,000 | 3,397,925 | ||||||
Wells Fargo & Co. (d) | ||||||||
3.584% (3 Month LIBOR + 1.31%), due 5/22/28 | 2,145,000 | 2,045,721 | ||||||
5.90% (3 Month LIBOR + 3.11%), due 6/15/24 (e) | 3,690,000 | 3,754,575 | ||||||
Wells Fargo Bank N.A. | 2,000,000 | 1,981,246 | ||||||
|
| |||||||
244,982,628 | ||||||||
|
| |||||||
Beverages 2.3% |
| |||||||
Anheuser-Busch InBev Worldwide, Inc. | 4,205,000 | 4,271,523 | ||||||
Constellation Brands, Inc. | 6,765,000 | 7,055,267 | ||||||
Dr Pepper Snapple Group, Inc. | 4,768,000 | 4,735,431 | ||||||
¨PepsiCo, Inc. | ||||||||
1.35%, due 10/4/19 | 7,170,000 | 7,045,816 | ||||||
1.55%, due 5/2/19 | 2,050,000 | 2,031,508 | ||||||
2.00%, due 4/15/21 | 4,040,000 | 3,935,297 | ||||||
|
| |||||||
29,074,842 | ||||||||
|
| |||||||
Building Materials 1.1% |
| |||||||
Masco Corp. | ||||||||
4.45%, due 4/1/25 | 5,116,000 | 5,170,229 | ||||||
7.125%, due 3/15/20 | 290,000 | 309,265 |
12 | MainStay MacKay 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) | ||||||||
Building Materials (continued) |
| |||||||
Standard Industries, Inc. | $ | 8,400,000 | $ | 8,510,250 | ||||
|
| |||||||
13,989,744 | ||||||||
|
| |||||||
Chemicals 1.9% |
| |||||||
Air Liquide Finance S.A. (a) | ||||||||
1.375%, due 9/27/19 | 4,135,000 | 4,046,292 | ||||||
1.75%, due 9/27/21 | 2,785,000 | 2,648,855 | ||||||
Ashland LLC | 2,970,000 | 2,995,988 | ||||||
Braskem Netherlands Finance B.V. (a) | ||||||||
3.50%, due 1/10/23 | 1,870,000 | 1,767,169 | ||||||
4.50%, due 1/10/28 | 2,505,000 | 2,347,185 | ||||||
Dow Chemical Co. | 693,000 | 733,842 | ||||||
Mexichem S.A.B. de C.V. | 2,600,000 | 2,425,020 | ||||||
WR Grace & Co-Conn | 6,410,000 | 6,584,929 | ||||||
|
| |||||||
23,549,280 | ||||||||
|
| |||||||
Commercial Services 0.4% |
| |||||||
Service Corp. International | ||||||||
4.625%, due 12/15/27 | 675,000 | 660,015 | ||||||
5.375%, due 1/15/22 | 1,835,000 | 1,868,030 | ||||||
5.375%, due 5/15/24 (c) | 2,200,000 | 2,261,050 | ||||||
|
| |||||||
4,789,095 | ||||||||
|
| |||||||
Computers 1.3% |
| |||||||
Apple, Inc. | 6,765,000 | 6,723,488 | ||||||
Hewlett Packard Enterprise Co. | 2,520,000 | 2,590,195 | ||||||
International Business Machines Corp. | 4,500,000 | 4,435,087 | ||||||
NCR Corp. | 2,100,000 | 2,173,500 | ||||||
|
| |||||||
15,922,270 | ||||||||
|
| |||||||
Cosmetics & Personal Care 0.6% |
| |||||||
Estee Lauder Cos., Inc. | 2,785,000 | 2,730,946 | ||||||
Unilever Capital Corp. | 4,500,000 | 4,405,678 | ||||||
|
| |||||||
7,136,624 | ||||||||
|
| |||||||
Diversified Financial Services 2.8% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | ||||||||
3.50%, due 5/26/22 | 4,430,000 | 4,351,143 | ||||||
4.50%, due 5/15/21 | 1,465,000 | 1,499,194 | ||||||
Air Lease Corp. | ||||||||
2.125%, due 1/15/20 | 3,275,000 | 3,213,067 |
Principal Amount | Value | |||||||
Diversified Financial Services (continued) |
| |||||||
Air Lease Corp. (continued) | ||||||||
2.625%, due 7/1/22 | $ | 2,040,000 | $ | 1,956,135 | ||||
3.25%, due 3/1/25 | 4,000,000 | 3,752,511 | ||||||
Capital One Bank USA N.A. | 3,000,000 | 2,911,453 | ||||||
GE Capital International Funding Co. | 6,800,000 | 6,645,400 | ||||||
Peachtree Corners Funding Trust | 1,690,000 | 1,670,223 | ||||||
Protective Life Global Funding (a) | ||||||||
1.555%, due 9/13/19 | 4,200,000 | 4,124,457 | ||||||
2.161%, due 9/25/20 | 1,355,000 | 1,322,825 | ||||||
Springleaf Finance Corp. | 3,100,000 | 3,220,125 | ||||||
|
| |||||||
34,666,533 | ||||||||
|
| |||||||
Electric 4.8% |
| |||||||
Appalachian Power Co. | 1,800,000 | 1,727,066 | ||||||
Baltimore Gas & Electric Co. | 4,150,000 | 3,767,892 | ||||||
CMS Energy Corp. |
| |||||||
3.875%, due 3/1/24 | 3,818,000 | 3,825,472 | ||||||
6.25%, due 2/1/20 | 1,980,000 | 2,080,810 | ||||||
Consolidated Edison, Inc. | 2,815,000 | 2,760,179 | ||||||
Entergy Arkansas, Inc. | 1,235,000 | 1,220,338 | ||||||
FirstEnergy Transmission LLC | 5,533,000 | 6,214,123 | ||||||
Florida Power & Light Co. | 2,680,000 | 2,600,141 | ||||||
Great Plains Energy, Inc. | ||||||||
4.85%, due 6/1/21 | 5,200,000 | 5,362,916 | ||||||
5.292%, due 6/15/22 (g) | 663,000 | 696,473 | ||||||
IPALCO Enterprises, Inc. | 8,560,000 | 8,538,600 | ||||||
MidAmerican Energy Co. | 6,000,000 | 5,739,344 | ||||||
Potomac Electric Power Co. | 1,305,000 | 1,320,515 | ||||||
Public Service Electric & Gas Co. | 3,405,000 | 3,229,504 | ||||||
Public Service Enterprise Group, Inc. | 3,500,000 | 3,366,553 | ||||||
Southwestern Electric Power Co. | 2,750,000 | 2,589,356 | ||||||
WEC Energy Group, Inc. | 5,495,000 | 5,447,358 | ||||||
|
| |||||||
60,486,640 | ||||||||
|
|
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Electronics 0.6% |
| |||||||
Honeywell International, Inc. | $ | 7,840,000 | $ | 7,686,147 | ||||
|
| |||||||
Entertainment 0.7% |
| |||||||
Eldorado Resorts, Inc. | 4,515,000 | 4,768,969 | ||||||
Scientific Games International, Inc. | 3,775,000 | 3,646,461 | ||||||
|
| |||||||
8,415,430 | ||||||||
|
| |||||||
Environmental Controls 0.3% |
| |||||||
Waste Management, Inc. | 3,880,000 | 3,678,636 | ||||||
|
| |||||||
Food 3.2% |
| |||||||
Kerry Group Financial Services | 4,595,000 | 4,501,472 | ||||||
Kroger Co. | 4,130,000 | 4,045,039 | ||||||
Mondelez International Holdings Netherlands B.V. (a) | ||||||||
1.625%, due 10/28/19 | 4,500,000 | 4,410,910 | ||||||
2.00%, due 10/28/21 | 4,885,000 | 4,651,803 | ||||||
Premier Foods Finance PLC | GBP | 4,500,000 | 6,257,098 | |||||
Smithfield Foods, Inc. (a) | ||||||||
2.70%, due 1/31/20 | $ | 4,005,000 | 3,942,594 | |||||
3.35%, due 2/1/22 | 2,490,000 | 2,411,886 | ||||||
Sysco Corp. | 5,240,000 | 4,945,949 | ||||||
Tyson Foods, Inc. | 5,450,000 | 5,438,389 | ||||||
|
| |||||||
40,605,140 | ||||||||
|
| |||||||
Forest Products & Paper 0.7% |
| |||||||
Georgia-Pacific LLC | ||||||||
5.40%, due 11/1/20 (a) | 4,375,000 | 4,605,451 | ||||||
8.00%, due 1/15/24 | 2,945,000 | 3,606,486 | ||||||
International Paper Co. | 693,000 | 903,215 | ||||||
|
| |||||||
9,115,152 | ||||||||
|
| |||||||
Gas 0.8% |
| |||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | ||||||||
5.50%, due 5/20/25 | 2,825,000 | 2,775,563 | ||||||
5.625%, due 5/20/24 (c) | 2,708,000 | 2,694,460 | ||||||
5.75%, due 5/20/27 | 1,890,000 | 1,819,125 | ||||||
NiSource, Inc. | 3,120,000 | 2,989,834 | ||||||
|
| |||||||
10,278,982 | ||||||||
|
|
Principal Amount | Value | |||||||
Health Care—Products 1.3% |
| |||||||
Abbott Laboratories | $ | 5,180,000 | $ | 5,107,912 | ||||
Becton Dickinson & Co. | 2,860,000 | 2,751,603 | ||||||
Medtronic Global Holdings SCA | 4,780,000 | 4,741,088 | ||||||
Stryker Corp. | 2,179,000 | 2,149,709 | ||||||
Zimmer Biomet Holdings, Inc. | 1,895,000 | 1,876,969 | ||||||
|
| |||||||
16,627,281 | ||||||||
|
| |||||||
Health Care—Services 0.4% |
| |||||||
Laboratory Corp. of America Holdings | 5,500,000 | 5,501,480 | ||||||
|
| |||||||
Holding Company—Diversified 0.3% |
| |||||||
CK Hutchison International (17) II, Ltd. | 3,855,000 | 3,614,863 | ||||||
|
| |||||||
Home Builders 3.9% |
| |||||||
D.R. Horton, Inc. | ||||||||
3.75%, due 3/1/19 | 2,750,000 | 2,762,142 | ||||||
5.75%, due 8/15/23 | 4,250,000 | 4,629,369 | ||||||
KB Home | 2,250,000 | 2,407,500 | ||||||
¨Lennar Corp. | ||||||||
4.50%, due 6/15/19 | 3,300,000 | 3,324,750 | ||||||
4.50%, due 11/15/19 | 4,740,000 | 4,793,325 | ||||||
6.25%, due 12/15/21 (a) | 2,875,000 | 3,031,328 | ||||||
8.375%, due 1/15/21 (a) | 4,560,000 | 5,050,200 | ||||||
MDC Holdings, Inc. | ||||||||
5.50%, due 1/15/24 | 7,025,000 | 7,156,719 | ||||||
5.625%, due 2/1/20 | 1,608,000 | 1,652,220 | ||||||
Meritage Homes Corp. | 7,800,000 | 8,560,500 | ||||||
Toll Brothers Finance Corp. | 5,750,000 | 6,080,625 | ||||||
|
| |||||||
49,448,678 | ||||||||
|
| |||||||
Insurance 4.4% |
| |||||||
Jackson National Life Global Funding | 2,830,000 | 2,792,411 | ||||||
¨Liberty Mutual Group, Inc. (a) |
| |||||||
6.50%, due 3/15/35 | 870,000 | 1,045,355 | ||||||
7.80%, due 3/7/87 | 7,453,000 | 9,018,130 | ||||||
10.75% (3 Month LIBOR + 7.12%), | 938,000 | 1,444,520 | ||||||
Lincoln National Corp. | 3,537,000 | 3,413,205 |
14 | MainStay MacKay 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) | ||||||||
MassMutual Global Funding II | $ | 3,600,000 | $ | 3,496,718 | ||||
Oil Insurance, Ltd. | 5,727,000 | 5,526,555 | ||||||
Pricoa Global Funding I | 2,725,000 | 2,686,932 | ||||||
Protective Life Corp. | 3,621,000 | 5,267,146 | ||||||
Provident Cos., Inc. | 2,960,000 | 3,554,173 | ||||||
Prudential Financial, Inc. | ||||||||
3.878%, due 3/27/28 | 800,000 | 795,683 | ||||||
4.418%, due 3/27/48 | 2,500,000 | 2,534,997 | ||||||
Scottish Widows, Ltd. | GBP | 6,500,000 | 9,958,962 | |||||
Voya Financial, Inc. | $ | 1,240,000 | 1,184,654 | |||||
XLIT, Ltd. | 2,600,000 | 2,589,910 | ||||||
|
| |||||||
55,309,351 | ||||||||
|
| |||||||
Internet 1.2% |
| |||||||
Amazon.com, Inc. | 5,250,000 | 5,203,798 | ||||||
Booking Holdings, Inc. | 6,700,000 | 6,494,784 | ||||||
Expedia Group, Inc. | 3,485,000 | 3,676,137 | ||||||
|
| |||||||
15,374,719 | ||||||||
|
| |||||||
Iron & Steel 1.2% |
| |||||||
ArcelorMittal | 2,530,000 | 2,998,050 | ||||||
Steel Dynamics, Inc. | 7,666,000 | 7,780,990 | ||||||
Vale Overseas, Ltd. | 4,330,000 | 4,775,557 | ||||||
|
| |||||||
15,554,597 | ||||||||
|
| |||||||
Lodging 0.9% |
| |||||||
Marriott International, Inc. | ||||||||
4.00%, due 4/15/28 | 6,960,000 | 6,812,395 | ||||||
6.75%, due 5/15/18 | 946,000 | 947,462 | ||||||
7.15%, due 12/1/19 | 2,341,000 | 2,481,894 | ||||||
Wyndham Worldwide Corp. | 980,000 | 973,333 | ||||||
|
| |||||||
11,215,084 | ||||||||
|
|
Principal Amount | Value | |||||||
Machinery—Construction & Mining 0.5% |
| |||||||
Caterpillar Financial Services Corp. | $ | 6,640,000 | $ | 6,560,911 | ||||
|
| |||||||
Media 0.5% |
| |||||||
Sky PLC | 1,480,000 | 1,479,103 | ||||||
Time Warner Entertainment Co., L.P. | 1,087,000 | 1,280,203 | ||||||
Vrio Finco 1, LLC / Vrio Finco 2, Inc. | 3,965,000 | 3,950,131 | ||||||
|
| |||||||
6,709,437 | ||||||||
|
| |||||||
Mining 0.3% |
| |||||||
Anglo American Capital PLC | 3,000,000 | 3,042,913 | ||||||
FMG Resources (August 2006) Pty, Ltd. | 368,734 | 406,345 | ||||||
|
| |||||||
3,449,258 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 1.9% |
| |||||||
Amsted Industries, Inc. | 7,860,000 | 7,845,302 | ||||||
Siemens Financieringsmaatschappij N.V. (a) |
| |||||||
2.15%, due 5/27/20 | 1,900,000 | 1,867,889 | ||||||
2.70%, due 3/16/22 | 3,320,000 | 3,250,630 | ||||||
Textron Financial Corp. | 11,250,000 | 10,378,125 | ||||||
|
| |||||||
23,341,946 | ||||||||
|
| |||||||
Oil & Gas 4.3% |
| |||||||
Anadarko Petroleum Corp. | 19,735,000 | 8,293,114 | ||||||
Andeavor | ||||||||
5.125%, due 4/1/24 | 8,050,000 | 8,337,331 | ||||||
5.125%, due 12/15/26 | 2,000,000 | 2,111,295 | ||||||
Chevron Corp. | 3,200,000 | 3,179,413 | ||||||
Gazprom OAO Via Gaz Capital S.A. | 2,520,000 | 2,904,300 | ||||||
Murphy Oil USA, Inc. | 7,318,000 | 7,546,688 | ||||||
Petrobras Global Finance B.V. | 9,350,000 | 10,027,875 | ||||||
Petroleos Mexicanos | 8,225,000 | 7,940,415 | ||||||
QEP Resources, Inc. | 3,350,000 | 3,350,000 | ||||||
|
| |||||||
53,690,431 | ||||||||
|
| |||||||
Packaging & Containers 1.2% |
| |||||||
Crown European Holdings S.A. | EUR | 7,700,000 | 10,166,125 |
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) | ||||||||
Packaging & Containers (continued) |
| |||||||
WestRock Co. | $ | 2,735,000 | $ | 2,586,607 | ||||
WestRock MWV LLC | 1,800,000 | 1,898,008 | ||||||
|
| |||||||
14,650,740 | ||||||||
|
| |||||||
Pharmaceuticals 1.9% |
| |||||||
CVS Health Corp. | 3,750,000 | 3,767,503 | ||||||
CVS Pass-Through Trust | 53,621 | 56,100 | ||||||
Eli Lilly & Co. | 2,200,000 | 2,132,793 | ||||||
Endo Dac / Endo Finance LLC / Endo Finco, Inc. | 3,865,000 | 2,811,787 | ||||||
Johnson & Johnson | 5,450,000 | 5,304,591 | ||||||
Pfizer, Inc. | 9,540,000 | 9,533,417 | ||||||
|
| |||||||
23,606,191 | ||||||||
|
| |||||||
Pipelines 0.7% |
| |||||||
Kinder Morgan, Inc. | ||||||||
5.625%, due 11/15/23 (a) | 2,449,000 | 2,606,979 | ||||||
7.75%, due 1/15/32 | 2,035,000 | 2,542,673 | ||||||
MPLX, L.P. | 560,000 | 538,795 | ||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | 3,725,000 | 3,715,688 | ||||||
|
| |||||||
9,404,135 | ||||||||
|
| |||||||
Real Estate 0.4% |
| |||||||
American Tower Corp. | 5,500,000 | 5,272,275 | ||||||
|
| |||||||
Real Estate Investment Trusts 1.3% |
| |||||||
Crown Castle International Corp. | ||||||||
3.20%, due 9/1/24 | 5,715,000 | 5,432,633 | ||||||
5.25%, due 1/15/23 | 2,625,000 | 2,769,217 | ||||||
Digital Realty Trust, L.P. | 3,605,000 | 3,425,187 | ||||||
Host Hotels & Resorts, L.P. | 472,000 | 461,099 | ||||||
Iron Mountain, Inc. (a) | ||||||||
4.875%, due 9/15/27 | 2,764,000 | 2,601,615 | ||||||
5.25%, due 3/15/28 | 1,793,000 | 1,687,661 | ||||||
Ventas Realty, L.P. / Ventas Capital Corp. | 1,000 | 989 | ||||||
|
| |||||||
16,378,401 | ||||||||
|
|
Principal Amount | Value | |||||||
Retail 2.6% |
| |||||||
Alimentation Couche-Tard, Inc. | $ | 3,415,000 | $ | 3,369,253 | ||||
AutoZone, Inc. | 3,565,000 | 3,438,423 | ||||||
Brinker International, Inc. | 1,875,000 | 1,874,062 | ||||||
Darden Restaurants, Inc. | 4,847,000 | 4,714,341 | ||||||
QVC, Inc. | 6,500,000 | 6,564,722 | ||||||
Starbucks Corp. | 4,279,000 | 3,955,715 | ||||||
TJX Cos., Inc. | 10,505,000 | 9,367,611 | ||||||
|
| |||||||
33,284,127 | ||||||||
|
| |||||||
Semiconductors 1.4% |
| |||||||
NXP B.V. / NXP Funding LLC (a) | ||||||||
4.125%, due 6/1/21 | 6,300,000 | 6,315,750 | ||||||
4.625%, due 6/15/22 | 2,960,000 | 2,982,200 | ||||||
Sensata Technologies B.V. | 8,700,000 | 8,678,250 | ||||||
|
| |||||||
17,976,200 | ||||||||
|
| |||||||
Software 1.0% |
| |||||||
First Data Corp. (a) | ||||||||
5.00%, due 1/15/24 | 270,000 | 272,025 | ||||||
7.00%, due 12/1/23 | 525,000 | 549,349 | ||||||
¨Microsoft Corp. | ||||||||
1.10%, due 8/8/19 | 6,040,000 | 5,932,724 | ||||||
1.85%, due 2/6/20 | 6,190,000 | 6,108,318 | ||||||
|
| |||||||
12,862,416 | ||||||||
|
| |||||||
Telecommunications 3.5% |
| |||||||
¨AT&T, Inc. | ||||||||
3.20%, due 3/1/22 | 5,840,000 | 5,770,539 | ||||||
5.15%, due 2/14/50 | 6,825,000 | 6,914,930 | ||||||
5.30%, due 8/14/58 | 6,150,000 | 6,230,710 | ||||||
Hughes Satellite Systems Corp. | 2,250,000 | 2,317,500 | ||||||
Rogers Communications, Inc. | ||||||||
3.625%, due 12/15/25 | 6,760,000 | 6,588,817 | ||||||
4.30%, due 2/15/48 | 2,260,000 | 2,177,284 | ||||||
T-Mobile USA, Inc. | 3,000,000 | 3,108,750 | ||||||
Telefonica Emisiones SAU | ||||||||
4.103%, due 3/8/27 | 2,755,000 | 2,721,760 | ||||||
5.462%, due 2/16/21 | 1,000 | 1,058 | ||||||
VEON Holdings B.V. | 3,345,000 | 3,173,703 | ||||||
Verizon Communications, Inc. | ||||||||
4.125%, due 3/16/27 | 685,000 | 684,898 | ||||||
5.15%, due 9/15/23 | 3,573,000 | 3,842,061 | ||||||
|
| |||||||
43,532,010 | ||||||||
|
|
16 | MainStay MacKay 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) | ||||||||
Textiles 0.4% |
| |||||||
Cintas Corp. No 2 | $ | 4,920,000 | $ | 4,825,997 | ||||
|
| |||||||
Total Corporate Bonds | 1,048,286,981 | |||||||
|
| |||||||
Foreign Bonds 0.1% | ||||||||
Barclays Bank PLC | GBP | 449,000 | 750,936 | |||||
|
| |||||||
Total Foreign Bonds | 750,936 | |||||||
|
| |||||||
Loan Assignments 16.6% (b) | ||||||||
Advertising 0.6% |
| |||||||
Outfront Media Capital LLC | $ | 7,878,750 | 7,919,554 | |||||
|
| |||||||
Auto Parts & Equipment 0.7% |
| |||||||
TI Group Automotive Systems LLC | 8,836,082 | 8,900,974 | ||||||
|
| |||||||
Beverage, Food & Tobacco 0.2% |
| |||||||
Pinnacle Foods Finance LLC | 2,997,086 | 3,017,658 | ||||||
|
| |||||||
Building Materials 1.1% |
| |||||||
Builders FirstSource, Inc. | 2,695,704 | 2,709,182 | ||||||
Quikrete Holdings, Inc. | 11,250,000 | 11,293,594 | ||||||
|
| |||||||
14,002,776 | ||||||||
|
| |||||||
Buildings & Real Estate 0.4% |
| |||||||
Realogy Corp. | 4,842,684 | 4,866,897 | ||||||
|
|
Principal Amount | Value | |||||||
Chemicals 0.4% |
| |||||||
Axalta Coating Systems U.S. Holdings, Inc. | $ | 4,554,310 | $ | 4,571,033 | ||||
|
| |||||||
Commercial Services 2.0% |
| |||||||
Allied Universal Holdco LLC | 8,575,000 | 8,407,788 | ||||||
Global Payments, Inc. | 2,549,250 | 2,565,639 | ||||||
KAR Auction Services, Inc. | 5,702,327 | 5,713,019 | ||||||
USAGM HoldCo LLC | 8,750,000 | 8,607,812 | ||||||
|
| |||||||
25,294,258 | ||||||||
|
| |||||||
Computers 0.3% |
| |||||||
Tempo Acquisition LLC | 4,079,175 | 4,099,571 | ||||||
|
| |||||||
Containers, Packaging & Glass 0.8% |
| |||||||
Berry Plastics Group, Inc. | 3,485,839 | 3,506,172 | ||||||
BWAY Holding Co. |
| |||||||
2017 Term Loan B | 10,350 | 10,404 | ||||||
2017 Term Loan B | 4,098,600 | 4,119,945 | ||||||
Reynolds Group Holdings, Inc. | 2,782,713 | 2,799,474 | ||||||
|
| |||||||
10,435,995 | ||||||||
|
|
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Loan Assignments (continued) | ||||||||
Electrical Components & Equipment 0.3% |
| |||||||
Electro Rent Corp. | $ | 3,298,250 | $ | 3,331,232 | ||||
|
| |||||||
Electronics 0.5% |
| |||||||
Dell, Inc. | 6,083,702 | 6,102,173 | ||||||
|
| |||||||
Entertainment 0.2% |
| |||||||
Mohegan Tribal Gaming Authority | 2,886,656 | 2,872,222 | ||||||
|
| |||||||
Environmental Controls 0.9% |
| |||||||
Advanced Disposal Services, Inc. | 5,800,000 | 5,833,895 | ||||||
GFL Environmental, Inc. | 5,910,000 | 5,910,000 | ||||||
|
| |||||||
11,743,895 | ||||||||
|
| |||||||
Food Services 0.1% |
| |||||||
Aramark Services, Inc. | 1,867,668 | 1,878,173 | ||||||
|
| |||||||
Hand & Machine Tools 0.4% |
| |||||||
Milacron LLC | 4,611,032 | 4,626,401 | ||||||
|
| |||||||
Health Care—Products 0.7% |
| |||||||
Ortho-Clinical Diagnostics S.A. | 7,217,617 | 7,259,378 | ||||||
Sterigenics-Nordion Holdings LLC | 975,150 | 979,721 | ||||||
|
| |||||||
8,239,099 | ||||||||
|
|
Principal Amount | Value | |||||||
Health Care—Services 0.5% |
| |||||||
INC Research Holdings, Inc. | $ | 6,076,172 | $ | 6,088,513 | ||||
|
| |||||||
Household Products & Wares 0.8% |
| |||||||
KIK Custom Products, Inc. | 5,510,478 | 5,559,075 | ||||||
Prestige Brands, Inc. | 4,954,429 | 4,977,432 | ||||||
|
| |||||||
10,536,507 | ||||||||
|
| |||||||
Insurance 0.4% |
| |||||||
MPH Acquisition Holdings LLC | 4,417,867 | 4,439,957 | ||||||
|
| |||||||
Lodging 0.8% |
| |||||||
Boyd Gaming Corp. | 339,131 | 340,732 | ||||||
Hilton Worldwide Finance LLC | 9,196,081 | 9,270,164 | ||||||
|
| |||||||
9,610,896 | ||||||||
|
| |||||||
Machinery—Diversified 0.7% |
| |||||||
Titan Acquisition, Ltd. | 3,750,000 | 3,753,518 | ||||||
Zebra Technologies Corp. | 4,624,439 | 4,652,981 | ||||||
|
| |||||||
8,406,499 | ||||||||
|
| |||||||
Media 0.6% |
| |||||||
Nielsen Finance LLC | 3,925,350 | 3,942,524 |
18 | MainStay MacKay 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) | ||||||||
Media (continued) |
| |||||||
Virgin Media Bristol LLC | $ | 4,100,000 | $ | 4,119,360 | ||||
|
| |||||||
8,061,884 | ||||||||
|
| |||||||
Mining, Steel, Iron & Non-Precious Metals 0.3% |
| |||||||
Gates Global LLC | 4,021,748 | 4,044,998 | ||||||
|
| |||||||
Pharmaceuticals 0.4% |
| |||||||
Change Healthcare Holdings, Inc. | 5,430,150 | 5,449,666 | ||||||
|
| |||||||
Retail 0.1% |
| |||||||
1011778 B.C. Unlimited Liability Co. | 1,554,267 | 1,556,533 | ||||||
|
| |||||||
Software 0.3% |
| |||||||
First Data Corp. | 3,662,825 | 3,675,308 | ||||||
|
| |||||||
Telecommunications 1.8% |
| |||||||
Level 3 Financing, Inc. | 9,000,000 | 9,032,139 | ||||||
SBA Senior Finance II LLC | 8,698,453 | 8,716,572 | ||||||
Sprint Communications, Inc. | 5,098,500 | 5,109,656 | ||||||
|
| |||||||
22,858,367 | ||||||||
|
| |||||||
Transportation 0.3% |
| |||||||
XPO Logistics, Inc. | 3,285,000 | 3,301,964 | ||||||
|
| |||||||
Total Loan Assignments | 209,933,003 | |||||||
|
|
Principal Amount | Value | |||||||
Mortgage-Backed Securities 0.0%‡ | ||||||||
Commercial Mortgage Loans |
| |||||||
Bayview Commercial Asset Trust Series 2006-4A, Class A1 | $ | 24,403 | $ | 23,367 | ||||
Wells Fargo Mortgage Backed Securities Trust | 77,505 | 78,372 | ||||||
|
| |||||||
101,739 | ||||||||
|
| |||||||
Total Mortgage-Backed Securities | 101,739 | |||||||
|
| |||||||
U.S. Government & Federal Agencies 0.0%‡ | ||||||||
United States Treasury Notes 0.0%‡ |
| |||||||
2.125%, due 8/15/21 | 70,000 | 68,770 | ||||||
|
| |||||||
Total U.S. Government & Federal Agencies |
| 68,770 | ||||||
|
| |||||||
Total Long-Term Bonds | 1,260,005,688 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 0.0%‡† | ||||||||
Commercial Services & Supplies 0.0%‡ |
| |||||||
Quad/Graphics, Inc. | 14 | 346 | ||||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, Inc. (h)(i)(k)(l) | 22 | 13,624 | ||||||
|
| |||||||
Total Common Stocks | 13,970 | |||||||
|
| |||||||
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, 2018 (Unaudited) (continued)
Principal Amount | Value | |||||||
Short-Term Investment 2.0% | ||||||||
Repurchase Agreement 2.0% |
| |||||||
Fixed Income Clearing Corp. | $ | 25,937,279 | $ | 25,937,279 | ||||
|
| |||||||
Total Short-Term Investment | 25,937,279 | |||||||
|
| |||||||
Total Investments, Before Investments Sold Short | 101.9 | % | 1,285,956,937 | |||||
|
| |||||||
Investments Sold Short (3.0%) Corporate Bonds Sold Short (3.0%) |
| |||||||
Advertising (3.0%) |
| |||||||
Noble Energy, Inc. | ||||||||
4.15%, due 12/15/21 | (3,000,000 | ) | (3,049,905 | ) | ||||
3.90%, due 11/15/24 | (12,115,000 | ) | (12,058,932 | ) | ||||
Netflix, Inc. | (10,400,000 | ) | (9,720,776 | ) | ||||
Altice France | (12,700,000 | ) | (12,303,125 | ) | ||||
|
| |||||||
Total Corporate Bonds Sold Short (Proceeds $36,756,475) | (37,132,738 | ) | ||||||
|
| |||||||
Total Investments Sold Short (Proceeds $36,756,475) | (37,132,738 | ) | ||||||
|
| |||||||
Total Investments, Net of Investments Sold Short | 98.9 | 1,248,824,199 | ||||||
Other Assets, Less Liabilities | 1.1 | 13,330,444 | ||||||
Net Assets | 100.0 | % | $ | 1,262,154,643 |
‡ | 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) | Floating rate—Rate shown was the rate in effect as of April 30, 2018. |
(c) | 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(K)). |
(d) | Fixed to floating rate—Rate shown was the rate in effect as of April 30, 2018. |
(e) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(f) | Coupon rate may change based on changes of the underlying collateral or prepayments of principal. The coupon rate shown represents the rate at period end. |
(g) | Step coupon—Rate shown was the rate in effect as of April 30, 2018. |
(h) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of April 30, 2018, the total market value of fair valued securities was $69,724, which represented less than one-tenth of a percent of the Fund’s net assets. |
(i) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(j) | 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, 2018. |
(k) | Illiquid security—As of April 30, 2018, the total market value of this security deemed illiquid under procedures approved by the Board of Trustees was $13,624, which represented less than one-tenth of a percent of the Fund’s net assets. |
(l) | Restricted security. |
20 | MainStay MacKay Unconstrained Bond 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, 2018, the Fund held the following foreign currency forward contracts1:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
USD | 14,611,604 | EUR | 11,661,000 | JPMorgan Chase Bank N.A. | 5/2/18 | $ | 529,784 | |||||||||||||||
USD | 14,353,329 | EUR | 11,708,000 | JPMorgan Chase Bank N.A. | 8/1/18 | 115,681 | ||||||||||||||||
USD | 18,511,382 | GBP | 12,932,000 | JPMorgan Chase Bank N.A. | 5/2/18 | 707,906 | ||||||||||||||||
USD | 17,970,786 | GBP | 12,837,000 | JPMorgan Chase Bank N.A. | 8/1/18 | 219,725 | ||||||||||||||||
Total unrealized appreciation |
| $ | 1,573,096 | |||||||||||||||||||
EUR | 11,661,000 | USD | 14,198,145 | JPMorgan Chase Bank N.A. | 5/2/18 | $ | (116,325 | ) | ||||||||||||||
GBP | 12,932,000 | USD | 18,027,596 | JPMorgan Chase Bank N.A. | 5/2/18 | (224,120 | ) | |||||||||||||||
Total unrealized depreciation |
| (340,445 | ) | |||||||||||||||||||
Net unrealized appreciation |
| $ | 1,232,651 |
1. | Foreign Currency Forward Contracts are subject to limitations such that they cannot be “sold or repurchased,” although the Fund would be able to exit the transaction through other means, such as through the execution of an offsetting transaction. |
As of April 30, 2018, the Fund held the following futures contracts1:
Type | Number of Contracts Long (Short) | Expiration Date | Value at Trade Date | Current Notional Amount | Unrealized Appreciation (Depreciation)2 | |||||||||||||||
United States Treasury Long Bond | (228 | ) | June 2018 | $ | (32,753,096 | ) | $ | (32,796,375 | ) | $ | (43,279 | ) | ||||||||
2-Year United States Treasury Note | (2,855 | ) | June 2018 | (607,082,792 | ) | (605,393,831 | ) | 1,688,961 | ||||||||||||
10-Year United States Treasury Note | 481 | June 2018 | 57,854,467 | 57,539,625 | (314,842 | ) | ||||||||||||||
Euro Bund | (373 | ) | June 2018 | (70,807,700 | ) | (71,502,000 | ) | (694,300 | ) | |||||||||||
|
|
|
|
|
| |||||||||||||||
$ | (652,789,121 | ) | $ | (652,152,581 | ) | $ | 636,540 | |||||||||||||
|
|
|
|
|
|
1. | As of April 30, 2018, cash in the amount of $2,355,566 was on deposit with a broker or futures commission merchant 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, 2018. |
Swap Contracts
As of April 30, 2018, the Fund held the following centrally cleared interest rate swap agreements1:
Notional Amount | Currency | Expiration Date | Payments made by Fund | Payments Received by Fund | Payment Received | Upfront (Paid) | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||
$725,000,000 | USD | 7/22/2018 | Fixed 0.937% | 3-Month USD-LIBOR | Quarterly | $ | (5,875 | ) | $ | 2,428,937 | $ | 2,423,062 | ||||||||||||||||||
250,000,000 | USD | 8/8/2019 | Fixed 1.621% | 3-Month USD-LIBOR | Quarterly | 37,765 | 3,075,000 | 3,112,765 | ||||||||||||||||||||||
150,000,000 | USD | 11/9/2019 | Fixed 1.83% | 3-Month USD-LIBOR | Quarterly | (10,509 | ) | 1,873,913 | 1,863,404 | |||||||||||||||||||||
40,000,000 | USD | 3/16/2023 | Fixed 2.793% | 3-Month USD-LIBOR | Quarterly | — | 209,410 | 209,410 | ||||||||||||||||||||||
41,000,000 | USD | 3/29/2023 | Fixed 2.762% | 3-Month USD-LIBOR | Quarterly | — | 283,620 | 283,620 | ||||||||||||||||||||||
$ | 21,381 | $ | 7,870,880 | $ | 7,892,261 |
As of April 30, 2018, the Fund held the following OTC credit default swap contracts:
Reference Entity | Counterparty | Termination Date | Buy/Sell Protection2 | Notional Amount (000)3 | (Pay)/ Receive Fixed Rate4 | Payment Received | Upfront Premiums Received/ (Paid) | Value | Unrealized Appreciation/ (Depreciation)5 | |||||||||||||||||||||||||||
Staples, Inc. | Credit Suisse First Boston | 6/20/2019 | Buy | 7,000 | 1.00% | Quarterly | $ | (111,060 | ) | $ | (31,625 | ) | $ | (142,685 | ) | |||||||||||||||||||||
$ | (111,060 | ) | $ | (31,625 | ) | $ | (142,685 | ) |
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, 2018 (Unaudited) (continued)
The following abbreviations are used in the preceding pages:
EUR—Euro
GBP—British Pound Sterling
LIBOR—London Interbank Offered Rate
1. | As of April 30, 2018, cash in the amount of $2,139,318 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, 2018. |
The following is a summary of the fair valuations according to the inputs used as of April 30, 2018, 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 | $ | — | $ | 864,259 | $ | — | $ | 864,259 | ||||||||
Corporate Bonds | — | 1,048,286,981 | — | 1,048,286,981 | ||||||||||||
Foreign Bonds | — | 750,936 | — | 750,936 | ||||||||||||
Loan Assignments (b) | — | 206,601,771 | 3,331,232 | 209,933,003 | ||||||||||||
Mortgage-Backed Securities | — | 101,739 | — | 101,739 | ||||||||||||
U.S. Government & Federal Agencies | — | 68,770 | — | 68,770 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 1,256,674,456 | 3,331,232 | 1,260,005,688 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (c) | 346 | — | 13,624 | 13,970 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 25,937,279 | — | 25,937,279 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 346 | 1,282,611,735 | 3,344,856 | 1,285,956,937 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contract (d) | — | 1,573,096 | — | 1,573,096 | ||||||||||||
Futures Contracts (d) | 1,688,961 | — | — | 1,688,961 | ||||||||||||
Interest Rate Swap Contracts (d) | — | 7,892,261 | — | 7,892,261 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | 1,688,961 | 9,465,357 | — | 11,154,318 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 1,689,307 | $ | 1,292,077,092 | $ | 3,344,856 | $ | 1,297,111,255 | ||||||||
|
|
|
|
|
|
|
|
22 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Liability Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Long-Term Bonds Sold Short | ||||||||||||||||
Corporate Bonds Sold Short | $ | — | $ | (37,132,738 | ) | $ | — | $ | (37,132,738 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds Sold Short | — | (37,132,738 | ) | — | (37,132,738 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (d) | — | (340,445 | ) | — | (340,445 | ) | ||||||||||
Futures Contracts (d) | (1,052,421 | ) | — | — | (1,052,421 | ) | ||||||||||
Credit Default Swap Contracts (d) | — | (142,685 | ) | — | (142,685 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | (1,052,421 | ) | (483,130 | ) | — | (1,535,551 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities Sold Short and Other Financial Instruments | $ | (1,052,421 | ) | $ | (37,615,868 | ) | $ | — | $ | (38,668,289 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
Total Short-Term Investments Sold Short and Other Financial Instruments | $ | (1,052,421 | ) | $ | (37,615,868 | ) | $ | — | $ | (38,668,289 | ) | |||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $3,331,232 is held in Electrical Components & Equipment within the Loan Assignments section of the Portfolio of Investments. |
(c) | The Level 3 security valued at $13,624 is held in Media within the Common Stocks section of the Portfolio of Investments. |
(d) | 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.
As of April 30, 2018, a security with a market value of $8,531,250 transferred from Level 3 to Level 2 as the fair value obtained from an independent pricing service, utilized significant other observable inputs. As of October 31, 2017, the fair value obtained for this security, as determined by an independent pricing service, utilized significant unobservable inputs.
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, 2017 | 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, 2018 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at April 30, 2018 (b) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Commercial Services | $ | 8,531,250 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (8,531,250 | ) | $ | — | $ | — | |||||||||||||||||||
Electrical Components & Equipment | 3,356,387 | 3,532 | 216 | (12,203 | ) | — | (16,700 | ) | — | — | 3,331,232 | (12,203 | ) | |||||||||||||||||||||||||||
Iron & Steel | 7,103,396 | 1,196 | 9,041 | (63,116 | ) | — | (7,050,517 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Media | 14,929 | — | — | (1,305 | ) | — | — | — | — | 13,624 | (1,305 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 19,005,962 | $ | 4,728 | $ | 9,257 | $ | (76,624 | ) | $ | — | $ | (7,067,217 | ) | $ | — | $ | (8,531,250 | ) | $ | 3,344,856 | $ | (13,508 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | 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. | 23 |
Statement of Assets and Liabilities as of April 30, 2018 (Unaudited)
Assets | ||||
Investment in securities before investments sold short, at value (identified cost $1,297,949,924) | $ | 1,285,956,937 | ||
Cash collateral on deposit at broker for futures contracts | 2,355,566 | |||
Cash collateral on deposit at broker for swap contracts | 2,139,318 | |||
Cash denominated in foreign currencies | 390,126 | |||
Receivables: | ||||
Dividends and interest | 11,218,209 | |||
Fund shares sold | 1,027,020 | |||
Investment securities sold | 161,058 | |||
Variation margin on centrally cleared swap contracts | 31,419 | |||
Unrealized appreciation on foreign currency forward contracts | 1,573,096 | |||
Other assets | 114,835 | |||
Premiums paid for OTC swap contracts | 111,060 | |||
|
| |||
Total assets | 1,305,078,644 | |||
|
| |||
Liabilities | ||||
Investments sold short (proceeds $36,756,475) | 37,132,738 | |||
Due to custodian | 63,484 | |||
Payables: | ||||
Fund shares redeemed | 2,855,143 | |||
Interest on investments sold short | 750,491 | |||
Manager (See Note 3) | 598,119 | |||
NYLIFE Distributors (See Note 3) | 192,730 | |||
Transfer agent (See Note 3) | 178,390 | |||
Broker fees and charges on short sales | 156,044 | |||
Variation margin on futures contracts | 65,902 | |||
Professional fees | 53,206 | |||
Shareholder communication | 39,784 | |||
Custodian | 12,414 | |||
Trustees | 2,648 | |||
Unrealized depreciation on foreign currency forward contracts | 340,445 | |||
Dividend payable | 332,375 | |||
Unrealized depreciation on OTC swap contracts | 142,685 | |||
Accrued expenses | 7,403 | |||
|
| |||
Total liabilities | 42,924,001 | |||
|
| |||
Net assets | $ | 1,262,154,643 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 1,440,515 | ||
Additional paid-in capital | 1,441,695,499 | |||
|
| |||
1,443,136,014 | ||||
Distributions in excess of net investment income | (1,762,075 | ) | ||
Accumulated net realized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | (176,451,631 | ) | ||
Net unrealized appreciation (depreciation) on investments, swap contracts and futures contracts | (3,606,871 | ) | ||
Net unrealized appreciation (depreciation) on investments sold short | (376,263 | ) | ||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies and foreign currency forward contracts | 1,215,469 | |||
|
| |||
Net assets | $ | 1,262,154,643 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 259,604,210 | ||
|
| |||
Shares of beneficial interest outstanding | 29,629,045 | |||
|
| |||
Net asset value per share outstanding | $ | 8.76 | ||
Maximum sales charge (4.50% of offering price) | 0.41 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.17 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 21,027,560 | ||
|
| |||
Shares of beneficial interest outstanding | 2,380,680 | |||
|
| |||
Net asset value per share outstanding | $ | 8.83 | ||
Maximum sales charge (4.50% of offering price) | 0.42 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.25 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 13,164,094 | ||
|
| |||
Shares of beneficial interest outstanding | 1,510,000 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.72 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 148,506,569 | ||
|
| |||
Shares of beneficial interest outstanding | 17,048,089 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.71 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 764,682,554 | ||
|
| |||
Shares of beneficial interest outstanding | 87,193,143 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.77 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 1,038,870 | ||
|
| |||
Shares of beneficial interest outstanding | 118,625 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.76 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 122,623 | ||
|
| |||
Shares of beneficial interest outstanding | 13,990 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.77 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 54,008,163 | ||
|
| |||
Shares of beneficial interest outstanding | 6,157,887 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.77 | ||
|
|
24 | MainStay MacKay 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 Operations for the six months ended April 30, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 25,043,989 | ||
Dividends | 548 | |||
Other income | 3,964 | |||
|
| |||
Total income | 25,048,501 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 3,699,218 | |||
Distribution/Service—Class A (See Note 3) | 347,869 | |||
Distribution/Service—Investor Class (See Note 3) | 26,535 | |||
Distribution/Service—Class B (See Note 3) | 70,777 | |||
Distribution/Service—Class C (See Note 3) | 783,285 | |||
Distribution/Service—Class R2 (See Note 3) | 1,007 | |||
Distribution/Service—Class R3 (See Note 3) | 298 | |||
Transfer agent (See Note 3) | 1,089,017 | |||
Interest on investments sold short | 909,372 | |||
Broker fees and charges on short sales | 437,203 | |||
Registration | 69,743 | |||
Professional fees | 65,582 | |||
Shareholder communication | 62,610 | |||
Interest expense | 38,299 | |||
Trustees | 14,833 | |||
Custodian | 12,627 | |||
Shareholder service (See Note 3) | 463 | |||
Miscellaneous | 28,202 | |||
|
| |||
Total expenses | 7,656,940 | |||
|
| |||
Net investment income (loss) | 17,391,561 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (1,212,249 | ) | ||
Futures transactions | 8,355,275 | |||
Swap transactions | 2,903,272 | |||
Foreign currency forward transactions | (2,066,894 | ) | ||
Foreign currency transactions | (142,976 | ) | ||
|
| |||
Net realized gain (loss) on investments, futures transactions, swap transactions and foreign currency transactions | 7,836,428 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: |
| |||
Investments | (30,580,226 | ) | ||
Investments sold short | 1,555,881 | |||
Futures contracts | (1,588,243 | ) | ||
Swap contracts | 2,818,282 | |||
Foreign currency forward contracts | 1,435,747 | |||
Translation of other assets and liabilities in foreign currencies | (22,905 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | (26,381,464 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | (18,545,036 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (1,153,475 | ) | |
|
|
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, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 17,391,561 | $ | 38,560,437 | ||||
Net realized gain (loss) on investments, futures transactions, swap transactions and foreign currency transactions | 7,836,428 | 8,347,977 | ||||||
Net change in unrealized appreciation (depreciation) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | (26,381,464 | ) | 16,406,413 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (1,153,475 | ) | 63,314,827 | |||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (3,966,286 | ) | (11,903,949 | ) | ||||
Investor Class | (300,373 | ) | (1,038,268 | ) | ||||
Class B | (147,763 | ) | (465,521 | ) | ||||
Class C | (1,644,960 | ) | (5,354,418 | ) | ||||
Class I | (12,651,242 | ) | (29,662,522 | ) | ||||
Class R2 | (11,725 | ) | (22,874 | ) | ||||
Class R3 | (1,520 | ) | (2,527 | ) | ||||
Class R6 | (321,084 | ) | — | |||||
|
| |||||||
(19,044,953 | ) | (48,450,079 | ) | |||||
|
| |||||||
Return of capital: | ||||||||
Class A | — | (174,809 | ) | |||||
Investor Class | — | (15,247 | ) | |||||
Class B | — | (6,836 | ) | |||||
Class C | — | (78,629 | ) | |||||
Class I | — | (435,593 | ) | |||||
Class R2 | — | (336 | ) | |||||
Class R3 | — | (37 | ) | |||||
|
| |||||||
— | (711,487 | ) | ||||||
|
| |||||||
Total dividends to shareholders | (19,044,953 | ) | (49,161,566 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | $ | 180,727,831 | $ | 338,495,940 | ||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 17,180,336 | 43,219,924 | ||||||
Cost of shares redeemed | (260,847,864 | ) | (470,140,388 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (62,939,697 | ) | (88,424,524 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (83,138,125 | ) | (74,271,263 | ) |
2018 | 2017 | |||||||
Net Assets | ||||||||
Beginning of period | 1,345,292,768 | 1,419,564,031 | ||||||
|
| |||||||
End of period | $ | 1,262,154,643 | $ | 1,345,292,768 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (1,762,075 | ) | $ | (108,683 | ) | ||
|
|
26 | MainStay MacKay 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 A | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | $ | 9.28 | $ | 9.22 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.25 | 0.35 | 0.36 | 0.36 | 0.40 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | 0.15 | 0.08 | (0.63 | ) | (0.05 | ) | 0.06 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.00 | )‡ | (0.02 | ) | 0.02 | 0.01 | (0.01 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.01 | ) | 0.40 | 0.41 | (0.25 | ) | 0.32 | 0.45 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | (0.39 | ) | ||||||||||||||||
Return of capital | — | (0.00 | )‡ | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.13 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | (0.39 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.76 | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | $ | 9.28 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (0.15 | %) | 4.65 | % | 4.94 | % | (2.70 | %) | 3.48 | % | 4.96 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.62 | % †† | 2.79 | % | 4.04 | % | 4.01 | % | 3.81 | % | 4.25 | % | ||||||||||||||||
Net expenses (excluding short sale expenses) | 1.03 | % †† | 1.01 | % | 1.00 | % | 0.96 | % | 0.98 | % | 1.00 | % | ||||||||||||||||
Expenses (including short sales expenses) | 1.24 | % †† | 1.13 | % | 1.16 | % | 1.01 | % | 1.04 | % | 1.12 | % | ||||||||||||||||
Short sale expenses | 0.21 | % †† | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | 0.12 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 41 | % | 15 | % | 22 | % | 19 | % | 23 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 259,604 | $ | 302,192 | $ | 412,834 | $ | 584,184 | $ | 675,552 | $ | 317,917 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.97 | $ | 8.88 | $ | 8.78 | $ | 9.33 | $ | 9.34 | $ | 9.28 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.24 | 0.35 | 0.36 | 0.36 | 0.39 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | 0.16 | 0.10 | (0.63 | ) | (0.05 | ) | 0.06 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | (0.01 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.01 | ) | 0.40 | 0.42 | (0.25 | ) | 0.32 | 0.44 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | (0.38 | ) | ||||||||||||||||
Return of capital | — | (0.00 | )‡ | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.13 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | (0.38 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.83 | $ | 8.97 | $ | 8.88 | $ | 8.78 | $ | 9.33 | $ | 9.34 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (0.16 | %) | 4.59 | % | 5.00 | % | (2.70 | %) | 3.42 | % | 4.76 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.59 | % †† | 2.74 | % | 4.01 | % | 3.99 | % | 3.78 | % | 4.12 | % | ||||||||||||||||
Net expenses (excluding short sale expenses) | 1.05 | % †† | 1.03 | % | 1.02 | % | 0.98 | % | 1.00 | % | 1.15 | % | ||||||||||||||||
Expenses (including short sales) | 1.26 | % †† | 1.15 | % | 1.18 | % | 1.03 | % | 1.06 | % | 1.27 | % | ||||||||||||||||
Short sale expenses | 0.21 | % †† | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | 0.12 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 41 | % | 15 | % | 22 | % | 19 | % | 23 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 21,028 | $ | 22,033 | $ | 31,851 | $ | 32,498 | $ | 31,690 | $ | 28,341 |
* | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class B | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.86 | $ | 8.77 | $ | 8.68 | $ | 9.23 | $ | 9.24 | $ | 9.18 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.08 | 0.18 | 0.28 | 0.29 | 0.28 | 0.31 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.15 | 0.10 | (0.62 | ) | (0.04 | ) | 0.07 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | (0.01 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.05 | ) | 0.33 | 0.35 | (0.31 | ) | 0.25 | 0.37 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.09 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | (0.31 | ) | ||||||||||||||||
Return of capital | — | (0.00 | )‡ | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | (0.31 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.72 | $ | 8.86 | $ | 8.77 | $ | 8.68 | $ | 9.23 | $ | 9.24 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (0.54 | %) | 3.86 | % | 4.16 | % | (3.45 | %) | 2.71 | % | 4.05 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.84 | % †† | 2.00 | % | 3.26 | % | 3.24 | % | 3.03 | % | 3.38 | % | ||||||||||||||||
Net expenses (excluding short sales expenses) | 1.80 | % †† | 1.78 | % | 1.77 | % | 1.73 | % | 1.75 | % | 1.90 | % | ||||||||||||||||
Expenses (including short sales expenses) | 2.01 | % †† | 1.90 | % | 1.93 | % | 1.78 | % | 1.81 | % | 2.02 | % | ||||||||||||||||
Short sale expenses | 0.21 | % †† | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | 0.12 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 41 | % | 15 | % | 22 | % | 19 | % | 23 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 13,164 | $ | 15,223 | $ | 18,313 | $ | 19,833 | $ | 22,460 | $ | 19,254 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.85 | $ | 8.76 | $ | 8.67 | $ | 9.22 | $ | 9.23 | $ | 9.18 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.08 | 0.18 | 0.28 | 0.29 | 0.28 | 0.31 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.15 | 0.10 | (0.62 | ) | (0.04 | ) | 0.06 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | (0.01 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | (0.05 | ) | 0.33 | 0.35 | (0.31 | ) | 0.25 | 0.36 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.09 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | (0.31 | ) | ||||||||||||||||
Return of capital | — | (0.00 | )‡ | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | (0.31 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.71 | $ | 8.85 | $ | 8.76 | $ | 8.67 | $ | 9.22 | $ | 9.23 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (0.54 | %) | 3.86 | % | 4.16 | % | (3.46 | %) | 2.71 | % | 4.05 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 1.82 | % †† | 2.00 | % | 3.27 | % | 3.24 | % | 3.05 | % | 3.34 | % | ||||||||||||||||
Net expenses (excluding short sale expenses) | 1.80 | % †† | 1.78 | % | 1.77 | % | 1.73 | % | 1.75 | % | 1.90 | % | ||||||||||||||||
Expenses (including short sales) | 2.01 | % †† | 1.90 | % | 1.93 | % | 1.78 | % | 1.81 | % | 2.02 | % | ||||||||||||||||
Short sale expenses | 0.21 | % †† | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | 0.12 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 41 | % | 15 | % | 22 | % | 19 | % | 23 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 148,507 | $ | 167,595 | $ | 220,513 | $ | 315,183 | $ | 345,900 | $ | 113,183 |
* | 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. For periods of less than one year, total return is not annualized. |
28 | MainStay MacKay 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 I | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 8.91 | $ | 8.82 | $ | 8.72 | $ | 9.28 | $ | 9.29 | $ | 9.23 | ||||||||||||||||
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|
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|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.13 | 0.26 | 0.37 | 0.38 | 0.38 | 0.41 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.16 | 0.11 | (0.63 | ) | (0.05 | ) | 0.07 | |||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | (0.01 | ) | ||||||||||||||||||
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|
|
|
|
|
| �� |
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|
| |||||||||||||||||
Total from investment operations | 0.00 | 0.42 | 0.45 | (0.23 | ) | 0.34 | 0.47 | |||||||||||||||||||||
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| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.14 | ) | (0.33 | ) | (0.35 | ) | (0.33 | ) | (0.35 | ) | (0.41 | ) | ||||||||||||||||
Return of capital | — | (0.00 | )‡ | — | — | — | — | |||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (0.14 | ) | (0.33 | ) | (0.35 | ) | (0.33 | ) | (0.35 | ) | (0.41 | ) | ||||||||||||||||
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|
|
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|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 8.77 | $ | 8.91 | $ | 8.82 | $ | 8.72 | $ | 9.28 | $ | 9.29 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | (0.03 | %) | 4.90 | % | 5.32 | % | (2.56 | %) | 3.73 | % | 5.32 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 2.87 | % †† | 2.99 | % | 4.30 | % | 4.25 | % | 4.08 | % | 4.45 | % | ||||||||||||||||
Net expenses (excluding short sale expenses) | 0.78 | % †† | 0.76 | % | 0.75 | % | 0.71 | % | 0.73 | % | 0.75 | % | ||||||||||||||||
Expenses (including short sales) | 0.99 | % †† | 0.88 | % | 0.91 | % | 0.76 | % | 0.79 | % | 0.87 | % | ||||||||||||||||
Short sale expenses | 0.21 | % †† | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | 0.12 | % | ||||||||||||||||
Portfolio turnover rate | 15 | % | 41 | % | 15 | % | 22 | % | 19 | % | 23 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 764,683 | $ | 837,363 | $ | 735,359 | $ | 1,263,695 | $ | 1,481,314 | $ | 294,560 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | February 28, 2014** through October 31, | ||||||||||||||||||
Class R2 | 2018* | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of period | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | $ | 9.39 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.11 | 0.23 | 0.34 | 0.35 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.12 | ) | 0.16 | 0.10 | (0.63 | ) | (0.16 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.02 | ||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.02 | ) | 0.39 | 0.41 | (0.26 | ) | 0.09 | |||||||||||||
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|
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|
|
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| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.12 | ) | (0.30 | ) | (0.32 | ) | (0.29 | ) | (0.21 | ) | ||||||||||
Return of capital | — | (0.00 | )‡ | — | — | — | ||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.12 | ) | (0.30 | ) | (0.32 | ) | (0.29 | ) | (0.21 | ) | ||||||||||
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|
|
|
|
|
|
| |||||||||||
Net asset value at end of period | $ | 8.76 | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | ||||||||||
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|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (0.20 | %) | 4.54 | % | 4.84 | % | (2.81 | %) | 0.99 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.52 | % †† | 2.63 | % | 3.97 | % | 3.87 | % | 3.78 | %†† | ||||||||||
Net expenses | 1.13 | % †† | 1.11 | % | 1.12 | % | 1.06 | % | 1.08 | %†† | ||||||||||
Expenses (including short sales) | 1.34 | % †† | 1.23 | % | 1.28 | % | 1.11 | % | 1.14 | %†† | ||||||||||
Short sale expenses | 0.21 | % †† | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | %†† | ||||||||||
Portfolio turnover rate | 15 | % | 41 | % | 15 | % | 22 | % | 19 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 1,039 | $ | 773 | $ | 662 | $ | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Financial Highlights selected per share data and ratios
Class R3 | Six months ended April 30, 2018* | Year ended October 31, 2017 | February 29, 2016** through October 31, 2016 | |||||||||
Net asset value at beginning of period | $ | 8.90 | $ | 8.81 | $ | 8.20 | ||||||
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|
|
|
|
| |||||||
Net investment income (loss) (a) | 0.10 | 0.21 | 0.21 | |||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | 0.16 | 0.86 | ||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | (0.00 | )‡ | (0.27 | ) | ||||||
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|
|
|
|
| |||||||
Total from investment operations | (0.02 | ) | 0.37 | 0.80 | ||||||||
|
|
|
|
|
| |||||||
Less dividends and distributions: | ||||||||||||
From net investment income | (0.11 | ) | (0.28 | ) | (0.19 | ) | ||||||
Return of capital | — | (0.00 | )‡ | — | ||||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.11 | ) | (0.28 | ) | (0.19 | ) | ||||||
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|
|
|
|
| |||||||
Net asset value at end of period | $ | 8.77 | $ | 8.90 | $ | 8.81 | ||||||
|
|
|
|
|
| |||||||
Total investment return (b) | (0.21 | %) | 4.28 | % | 9.77 | % | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 2.26 | % †† | 2.34 | % | 3.32 | %†† | ||||||
Net expenses | 1.38 | % †† | 1.36 | % | 1.34 | %†† | ||||||
Expenses (including short sales) | 1.59 | % †† | 1.48 | % | 1.50 | %†† | ||||||
Short sale expenses | 0.21 | % | 0.12 | % | 0.16 | % | ||||||
Portfolio turnover rate | 15 | % | 41 | % | 15 | % | ||||||
Net assets at end of period (in 000’s) | $ | 123 | $ | 114 | $ | 32 |
* | 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 R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
Class R6 | February 28, 2018* through April 30, 2018** | |||
Net asset value at beginning of period | $ | 8.83 | ||
|
| |||
Net investment income (loss) (a) | 0.05 | |||
Net realized and unrealized gain (loss) on investments | (0.06 | ) | ||
|
| |||
Total from investment operations | (0.01 | ) | ||
|
| |||
Less dividends: | ||||
From net investment income | (0.05 | ) | ||
|
| |||
Net asset value at end of period | $ | 8.77 | ||
|
| |||
Total investment return (b) | (0.09 | %) | ||
Ratios (to average net assets)/Supplemental Data: | ||||
Net investment income (loss) | 3.11 | % †† | ||
Net expenses (excluding short sale expenses) | 0.61 | % †† | ||
Expenses (before waiver/reimbursement) | 0.87 | % †† | ||
Short sale expenses | 0.26 | % †† | ||
Portfolio turnover rate | 15 | % | ||
Net assets at end of period (in 000’s) | $ | 54,008 |
* | Inception date. |
** | 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 R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
30 | MainStay MacKay Unconstrained 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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and Notes relate to the MainStay MacKay Unconstrained Bond Fund (formerly known as 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 nine 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 R6 and Class T shares were registered for sale effective as of February 28, 2017. Class R6 shares commenced operations on February 28, 2018. As of April 30, 2018, Class T shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, contingent deferred sales charge (“CDSC”) of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares purchased that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R2 and Class R6 shares are offered at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T and Class R2 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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
31 |
Notes to Financial Statements (Unaudited) (continued)
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 assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 the security’s 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, 2018, 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 the 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, 2018, a security that was fair valued in such a manner is shown in the Portfolio of Investments.
32 | MainStay MacKay Unconstrained Bond Fund |
Equity securities and warrants 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. 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 and 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.
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 NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisor conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee 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, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
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, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
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. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
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 portfolio 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 the 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 materially 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 the Subadvisor determines the liquidity of the Fund’s investments; in doing so, the Manager or the 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 are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of April 30, 2018 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, 2018, 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
33 |
Notes to Financial Statements (Unaudited) (continued)
Revenue Code”), applicable to regulated investment companies and to distribute all of its 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 tax 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 reclaimable. The Fund will accrue such taxes and reclaims 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 determinations using 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 any 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. 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.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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 all or a portion of any interest receivables when the collection of all or a portion of such 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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be limited or subject to delay, 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 risks such as 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
34 | MainStay MacKay Unconstrained Bond Fund |
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 may invest in futures contracts to help manage the duration and yield curve of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of April 30, 2018, open futures contracts are shown in the Portfolio of Investments.
(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 (“LIBOR”).
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 enter 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, 2018, 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 swap 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 (“OTC”) market 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 exchange-trading, and more types of standardized swaps are expected to be subject to mandatory clearing and exchange-trading in the future. The counterparty risk for exchange-traded and 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, 2018, 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
35 |
Notes to Financial Statements (Unaudited) (continued)
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 Statement 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 credit-worthy 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). The Fund will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally 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 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 instruments 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 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. As of April 30, 2018, open foreign currency forward contracts are shown in the Portfolio of Investments.
(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 |
36 | MainStay MacKay Unconstrained Bond Fund |
(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, 2018, the Fund did not hold any rights or warrants.
(O) Securities Sold Short. During the six-month period ended April 30, 2018, the Fund engaged in sales of securities it did not own (“short sales”) as part of its investment strategies. 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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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, 2018, 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) Debt and Foreign Securities Risk. The Fund primarily invest in high yield debt securities (commonly referred to as “junk bonds”), which are considered speculative because they present a greater risk of loss, including default, than higher rated 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. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
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 of these and other events, the Fund’s NAVs could go down and you could lose money.
In addition, loans 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.
37 |
Notes to Financial Statements (Unaudited) (continued)
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. 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, among other things, 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 Statement 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 positioning 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.
Fair value of derivative instruments as of April 30, 2018:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation on investments, swap contracts and futures contracts (a) | $ | — | $ | — | $ | 1,688,961 | $ | 1,688,961 | |||||||||
Centrally Cleared Swap Contracts | Net Assets—Net unrealized appreciation on investments, swap contracts and futures contracts (b) | — | — | 7,892,261 | 7,892,261 | |||||||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | 1,573,096 | — | — | 1,573,096 | |||||||||||||
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| |||||||||||||||||
Total Fair Value | $ | 1,573,096 | $ | — | $ | 9,581,222 | $ | 11,154,318 | ||||||||||
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38 | MainStay MacKay Unconstrained Bond Fund |
Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Credit | Interest | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized depreciation on investments, swap contracts and futures contracts (a) | $ | — | $ | — | $ | (1,052,421 | ) | $ | (1,052,421 | ) | |||||||
OTC Swap Contracts | Unrealized depreciation on OTC swap contracts | — | (142,685 | ) | — | (142,685 | ) | |||||||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | (340,445 | ) | — | — | (340,445 | ) | |||||||||||
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| |||||||||||
Total Fair Value | $ | (340,445 | ) | $ | (142,685 | ) | $ | (1,052,421 | ) | $ | (1,535,551 | ) | ||||||
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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. |
(b) | Includes cumulative appreciation (depreciation) of centrally cleared swap agreements as reported in the Portfolio of Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2018:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | — | $ | 8,355,275 | $ | 8,355,275 | |||||||||
Swap Contracts | Net realized gain (loss) on swap transactions | — | (83,632 | ) | 2,986,904 | 2,903,272 | ||||||||||||
Forward Contracts | Net realized gain (loss) on foreign currency forward transactions | (2,066,894 | ) | — | — | (2,066,894 | ) | |||||||||||
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| |||||||||||||||||
Total Realized Gain (Loss) | $ | (2,066,894 | ) | $ | (83,632 | ) | $ | 11,342,179 | $ | 9,191,653 | ||||||||
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|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | — | $ | — | $ | (1,588,243 | ) | $ | (1,588,243 | ) | |||||||
Swap Contracts | Net change in unrealized appreciation (depreciation) on swap contracts | — | (92,958 | ) | 2,911,240 | 2,818,282 | ||||||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | 1,435,747 | — | — | 1,435,747 | |||||||||||||
|
| |||||||||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 1,435,747 | $ | (92,958 | ) | $ | 1,322,997 | $ | 2,665,786 | |||||||||
|
|
Average Notional Amount
Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | |||||||||||||
Futures Contracts Long | $ | — | $ | — | $ | 58,560,498 | $ | 58,560,498 | ||||||||
Futures Contracts Short | $ | — | $ | — | $ | (714,756,074 | ) | $ | (714,756,074 | ) | ||||||
Swap Contracts Long | $ | — | $ | 7,000,000 | $ | 1,152,000,000 | $ | 1,159,000,000 | ||||||||
Forward Contracts Long | $ | 10,375,677 | $ | — | $ | — | $ | 10,375,677 | ||||||||
Forward Contracts Short | $ | (39,913,875 | ) | $ | — | $ | — | $ | (39,913,875 | ) | ||||||
|
|
39 |
Notes to Financial Statements (Unaudited) (continued)
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 attributable to 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 an 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 the services performed and the 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, 2018, the effective management fee rate was 0.57%.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 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.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $3,699,218.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is
responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Investor Class, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T 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 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 Plan for the Class R2 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 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 shares. This is in addition to any fees paid under the Class R2 Plan.
During the six-month period ended April 30, 2018, shareholder service fees incurred by the Fund were as follows:
Class R2 | $ | 403 | ||
Class R3 | 60 |
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $16,852 and $4,005, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $7,707, $12,823 and $2,381, 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
40 | MainStay MacKay Unconstrained Bond Fund |
Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 231,627 | ||
Investor Class | 20,091 | |||
Class B | 13,399 | |||
Class C | 148,283 | |||
Class I | 674,844 | |||
Class R2 | 673 | |||
Class R3 | 100 |
(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, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class A | $ | 450,510 | 0.2 | % | ||||
Class R3 | 28,556 | 23.3 | ||||||
Class R6 | 24,979 | 0.0 | ‡ |
‡ | Less than one-tenth of a percent. |
Note 4–Federal Income Tax
As of April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||||||
Investments in Securities | $ | 1,261,196,300 | $ | 11,548,027 | $ | (23,920,128 | ) | $ | (12,372,101 | ) |
As of October 31, 2017, for federal income tax purposes, capital loss carryforwards of $182,120,078 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) | ||
Unlimited | $24,995 | $157,125 |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 48,450,079 | ||
Return of Capital | 711,487 | |||
Total | $ | 49,161,566 |
Note 5–Restricted Securities
As of April 30, 2018, the Fund held the following restricted security.
Security | Date(s) of Acquisition | Shares | Cost | 4/30/18 Value | Percent of Net Assets | |||||||||||||||
ION Media Networks, Inc. | ||||||||||||||||||||
Common Stock | 3/11/14 | 22 | $ | — | $ | 13,624 | 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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and
41 |
Notes to Financial Statements (Unaudited) (continued)
the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $187,122 and $189,733, respectively.
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 4,052,208 | $ | 35,967,969 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 423,454 | 3,740,675 | ||||||
Shares redeemed | (8,862,748 | ) | (78,572,181 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (4,387,086 | ) | (38,863,537 | ) | ||||
Shares converted into Class A (See Note 1) | 116,425 | 1,030,480 | ||||||
Shares converted from Class A (See Note 1) | (54,567 | ) | (481,270 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (4,325,228 | ) | $ | (38,314,327 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 6,504,414 | $ | 57,344,117 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,221,667 | 10,741,115 | ||||||
Shares redeemed | (15,623,261 | ) | (137,648,462 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (7,897,180 | ) | (69,563,230 | ) | ||||
Shares converted into Class A (See Note 1) | 1,319,822 | 11,709,691 | ||||||
Shares converted from Class A (See Note 1) | (6,335,574 | ) | (55,695,953 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (12,912,932 | ) | $ | (113,549,492 | ) | |||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 120,202 | $ | 1,072,235 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 32,841 | 292,347 | ||||||
Shares redeemed | (197,675 | ) | (1,765,750 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (44,632 | ) | (401,168 | ) | ||||
Shares converted into Investor Class (See Note 1) | 71,925 | 639,794 | ||||||
Shares converted from Investor Class (See Note 1) | (102,671 | ) | (915,965 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (75,378 | ) | $ | (677,339 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 371,571 | $ | 3,304,500 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 115,291 | 1,021,772 | ||||||
Shares redeemed | (504,774 | ) | (4,488,274 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (17,912 | ) | (162,002 | ) | ||||
Shares converted into Investor Class (See Note 1) | 184,584 | 1,641,307 | ||||||
Shares converted from Investor Class | (1,299,121 | ) | (11,617,639 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,132,449 | ) | $ | (10,138,334 | ) | |||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 20,185 | $ | 177,413 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 14,460 | 127,087 | ||||||
Shares redeemed | (210,624 | ) | (1,854,374 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (175,979 | ) | (1,549,874 | ) | ||||
Shares converted from Class B (See Note 1) | (32,995 | ) | (290,640 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (208,974 | ) | $ | (1,840,514 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 89,558 | $ | 783,183 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 45,171 | 395,036 | ||||||
Shares redeemed | (421,641 | ) | (3,700,114 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (286,912 | ) | (2,521,895 | ) | ||||
Shares converted from Class B (See Note 1) | (83,048 | ) | (728,689 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (369,960 | ) | $ | (3,250,584 | ) | |||
|
|
|
| |||||
42 | MainStay MacKay Unconstrained Bond Fund |
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 692,987 | $ | 6,109,708 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 161,769 | 1,420,505 | ||||||
Shares redeemed | (2,740,085 | ) | (24,133,330 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,885,329 | ) | (16,603,117 | ) | ||||
Shares converted from Class C (See Note 1) | (6,738 | ) | (59,487 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,892,067 | ) | $ | (16,662,604 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,690,444 | $ | 14,793,719 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 510,867 | 4,464,460 | ||||||
Shares redeemed | (8,433,451 | ) | (73,920,932 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (6,232,140 | ) | (54,662,753 | ) | ||||
Shares converted from Class C (See Note 1) | (1,494 | ) | (13,173 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (6,233,634 | ) | $ | (54,675,926 | ) | |||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 15,323,739 | $ | 135,960,773 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,273,751 | 11,265,393 | ||||||
Shares redeemed | (17,344,633 | ) | (153,817,443 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (747,143 | ) | (6,591,277 | ) | ||||
Shares converted into Class I (See Note 1) | 8,652 | 77,088 | ||||||
Shares converted from Class I (See Note 1) | (6,069,494 | ) | (53,593,632 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (6,807,985 | ) | $ | (60,107,821 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 29,685,612 | $ | 262,008,540 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,015,175 | 26,571,767 | ||||||
Shares redeemed | (28,317,188 | ) | (250,279,904 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 4,383,599 | 38,300,403 | ||||||
Shares converted into Class I (See Note 1) | 6,216,130 | 54,704,456 | ||||||
|
|
|
| |||||
Net increase (decrease) | 10,599,729 | $ | 93,004,859 | |||||
|
|
|
| |||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 31,412 | $ | 276,755 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,329 | 11,725 | ||||||
Shares redeemed | (982 | ) | (8,728 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 31,759 | $ | 279,752 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 19,091 | $ | 168,608 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,637 | 23,210 | ||||||
Shares redeemed | (10,063 | ) | (88,228 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 11,665 | $ | 103,590 | |||||
|
|
|
|
Class R3 | Shares | Amount | ||||||
Period ended April 30, 2018: | ||||||||
Shares sold | 983 | $ | 8,750 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 172 | 1,520 | ||||||
Shares redeemed | — | — | ||||||
|
|
|
| |||||
Net increase (decrease) | 1,155 | $ | 10,270 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 10,579 | $ | 93,273 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 291 | 2,564 | ||||||
Shares redeemed | (1,643 | ) | (14,474 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 9,227 | $ | 81,363 | |||||
|
|
|
| |||||
Class R6 | Shares | Amount | ||||||
Period ended April 30, 2018: | ||||||||
Shares sold | 130,863 | $ | 1,154,228 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 36,573 | 321,084 | ||||||
Shares redeemed | (79,043 | ) | (696,058 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 88,393 | 779,254 | ||||||
Shares converted into Class R6 (See Note 1) | 6,069,494 | 53,593,632 | ||||||
|
|
|
| |||||
Net increase (decrease) | 6,157,887 | $ | 54,372,886 | |||||
|
|
|
|
Note 11–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 12–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, 2018, events and transactions subsequent to April 30, 2018, 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.
43 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay Unconstrained Bond Fund (now known as the MainStay MacKay 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 decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and MacKay Shields (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including MacKay Shields as subadvisor to the Fund, together with responses from New York Life Investments and MacKay Shields to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and MacKay Shields personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or MacKay Shields. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and MacKay Shields. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and MacKay Shields resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations
44 | MainStay MacKay Unconstrained Bond Fund |
throughout the year. 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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and MacKay Shields
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of MacKay Shields and continuous analysis of, and interactions with, MacKay Shields with respect to, among other things, Fund investment performance and risk as well as MacKay Shields’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and MacKay Shields’ track record 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, resources and history. The Board considered that New York Life Investments’ and MacKay Shields’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed MacKay Shields’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
Based on these considerations, the Board concluded, within the context of its overall determinations regarding the Agreements, that the long-
45 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
term investment performance of the Fund, along with ongoing efforts by New York Life Investments and MacKay Shields to seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and MacKay Shields in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the
Board recognized 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, including reputational and other indirect benefits.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to MacKay Shields are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services
46 | MainStay MacKay Unconstrained Bond Fund |
provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of the Agreements.
47 |
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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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).
48 | MainStay MacKay Unconstrained Bond Fund |
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MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1738547 MS126-18 | MSUB10-06/18 (NYLIM) NL016 |
MainStay MAP Equity Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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 nylinvestments.com/funds. 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 and other factors, 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 nylinvestments.com/funds.
Average Annual Total Returns for the Period-Ended April 30, 2018
Class | Sales Charge | Inception Date | 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 | | 6/9/1999 | | | –3.51 2.10 | %
| | 5.06 11.17 | %
| | 8.53 9.77 | %
| | 6.41 7.01 | %
| | 1.10 1.10 | %
| ||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –3.61 2.00 | | | 4.84 10.94 | | | 8.34 9.57 | | | 6.20 6.80 | | | 1.29 1.29 |
| ||||||||
Class B Shares3 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 6/9/1999 | | –2.90 1.63 |
| | 5.21 10.12 |
| | 8.47 8.76 | | | 6.01 6.01 | | | 2.05 2.05 |
| ||||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 6/9/1999 | | | 0.73 1.63 |
| | 9.14 10.12 | | | 8.75 8.75 | | | 6.01 6.01 | | | 2.05 2.05 |
| ||||||||
Class I Shares | No Sales Charge | 1/21/1971 | 2.22 | 11.44 | 10.03 | 7.27 | 0.85 | |||||||||||||||||||||
Class R1 Shares | No Sales Charge | 1/2/2004 | 2.19 | 11.34 | 9.93 | 7.16 | 0.95 | |||||||||||||||||||||
Class R2 Shares | No Sales Charge | 1/2/2004 | 2.06 | 11.06 | 9.65 | 6.90 | 1.20 | |||||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | 1.92 | 10.79 | 9.38 | 6.63 | 1.45 |
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, if any, 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 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. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
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® Index4 | 3.79 | % | 13.05 | % | 12.75 | % | 9.13 | % | ||||||||
S&P 500® Index5 | 3.82 | 13.27 | 12.96 | 9.02 | ||||||||||||
Morningstar Large Blend Category Average6 | 3.48 | 11.94 | 11.42 | 8.10 |
4. | The Russell 3000® Index is the Fund’s primary broad-based securities market index for comparison purposes. 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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The S&P 500® Index is the Fund’s secondary benchmark. “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. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Blend Category Average is representative of funds that represent the overall US stock market in size, growth rates and price. Stocks in the top 70% of the capitalization of the US equity market are defined as large cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios tend to invest across the spectrum of US industries, and owing to their broad exposure, the portfolios’ returns are often similar to those of the S&P 500 Index. Results are based on average total returns of similar funds 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 MAP Equity Fund |
Cost in Dollars of a $1,000 Investment in MainStay MAP 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,021.00 | $ | 5.51 | $ | 1,019.30 | $ | 5.51 | 1.10% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,020.00 | $ | 6.46 | $ | 1,018.40 | $ | 6.46 | 1.29% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,016.30 | $ | 10.20 | $ | 1,014.70 | $ | 10.19 | 2.04% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,016.30 | $ | 10.20 | $ | 1,014.70 | $ | 10.19 | 2.04% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,022.20 | $ | 4.26 | $ | 1,020.60 | $ | 4.26 | 0.85% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,021.90 | $ | 4.76 | $ | 1,020.10 | $ | 4.76 | 0.95% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,020.60 | $ | 6.01 | $ | 1,018.80 | $ | 6.01 | 1.20% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,019.20 | $ | 7.26 | $ | 1,017.60 | $ | 7.25 | 1.45% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of April 30, 2018 (Unaudited)
Media | 8.9 | % | ||
Banks | 6.9 | |||
Aerospace & Defense | 6.8 | |||
Health Care Providers & Services | 5.8 | |||
Technology Hardware, Storage & Peripherals | 5.8 | |||
Software | 5.5 | |||
Insurance | 5.0 | |||
Oil, Gas & Consumable Fuels | 4.8 | |||
IT Services | 4.7 | |||
Internet Software & Services | 4.6 | |||
Capital Markets | 4.2 | |||
Pharmaceuticals | 3.5 | |||
Specialty Retail | 3.2 | |||
Semiconductors & Semiconductor Equipment | 2.7 | |||
Chemicals | 2.4 | |||
Consumer Finance | 2.1 | |||
Health Care Equipment & Supplies | 2.1 | |||
Road & Rail | 2.1 | |||
Beverages | 1.8 | |||
Food & Staples Retailing | 1.4 | |||
Biotechnology | 1.3 | |||
Hotels, Restaurants & Leisure | 1.3 | |||
Building Products | 1.0 | |||
Equity Real Estate Investment Trusts | 1.0 |
Household Durables | 1.0 | % | ||
Electrical Equipment | 0.9 | |||
Electronic Equipment, Instruments & Components | 0.9 | |||
Machinery | 0.9 | |||
Construction & Engineering | 0.8 | |||
Industrial Conglomerates | 0.7 | |||
Internet & Direct Marketing Retail | 0.7 | |||
Construction Materials | 0.6 | |||
Multiline Retail | 0.6 | |||
Diversified Financial Services | 0.5 | |||
Energy Equipment & Services | 0.4 | |||
Diversified Telecommunication Services | 0.3 | |||
Multi-Utilities | 0.3 | |||
Tobacco | 0.3 | |||
Air Freight & Logistics | 0.2 | |||
Containers & Packaging | 0.2 | |||
Food Products | 0.2 | |||
Household Products | 0.2 | |||
Metals & Mining | 0.2 | |||
Short-Term Investment | 1.4 | |||
Other Assets, Less Liabilities | –0.2 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 12 for specific holdings within these categories.
Top Ten Holdings as of April 30, 2018 (excluding short-term investment) (Unaudited)
1. | Apple, Inc. |
2. | Microsoft Corp. |
3. | Alphabet, Inc. |
4. | Boeing Co. |
5. | Bank of America Corp. |
6. | Aetna, Inc. |
7. | Liberty SiriusXM Group |
8. | DowDuPont, Inc. |
9. | Raytheon Co. |
10. | Home Depot, Inc. |
8 | MainStay MAP Equity Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Christopher Mullarkey and James Mulvey of Markston International LLC (“Markston”), a Subadvisor to the Fund; and portfolio managers William W. Priest, CFA, Michael A. Welhoelter, CFA, and David N. Pearl of Epoch Investment Partners, Inc. (“Epoch”), a Subadvisor to the Fund.
How did MainStay MAP Equity Fund perform relative to its benchmarks and peers during the six months ended April 30, 2018?
Excluding all sales charges, MainStay MAP Equity Fund returned 2.10% for Class A shares, 2.00% for Investor Class shares, and 1.63% for Class B and Class C shares for the six months ended April 30, 2018. Over the same period, Class I shares returned 2.22%, Class R1 shares returned 2.19%, Class R2 shares returned 2.06% and Class R3 shares returned 1.92%. For the six months ended April 30, 2018, all share classes underperformed the 3.79% return of the Russell 3000® Index,1 which is the Fund’s primary benchmark; the 3.82% return of the S&P 500® Index,1 which is the Fund’s secondary benchmark; and the 3.48% return of the Morningstar Large Blend 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?
Markston
The Markston portion of the Fund slightly underperformed the Russell 3000® Index during the reporting period. Markston attributes the bulk of the relative underperformance to security selection in the consumer discretionary and information technology sectors.
Epoch
The Epoch portion of the Fund provided positive absolute returns but lagged the Russell 3000® Index during the reporting period. In the Epoch portion of the Fund, security selection had a positive effect on relative performance in the energy and health care sectors. On the other hand, certain holdings in the consumer discretionary and information technology sectors, among others, detracted from relative performance in the Epoch portion of the Fund. Underweight positions in consumer staples and utilities in the Epoch portion of the Fund added to relative performance during the reporting period.
Which sectors were the strongest contributors to the Fund’s relative performance, and which sectors were particularly weak?
Markston
The sectors that made the strongest contributions to the performance of the Markston portion of the Fund relative to the Russell 3000® Index were industrials, energy and utilities. (Contributions take weightings and total returns into account.) Strong stock selection and an overweight position in the industrials sector also contributed positively to relative
performance. The Markston portion of the Fund held a significantly underweight position in the utilities sector, which had negative returns, and had strong stock selection in the energy sector. Both sectors made positive contributions to the relative performance of the Markston portion of the Fund. The weakest sector contributions to relative performance in the Markston portion of the Fund came from consumer discretionary, information technology and financials. In each of these weak sectors, stock selection detracted from relative performance.
Epoch
In the Epoch portion of the Fund, security selection and overall positioning in the health care sector provided the largest positive contribution to relative performance. Stock selection in the consumer discretionary, financials and information technology sectors, however, more than offset those gains in the Epoch portion of the Fund. An underweight position in energy and a lack of exposure to the real estate sector also added to the relative performance of the Epoch portion of the Fund during the reporting period.
During the reporting period, which individual stocks made the strongest contributions to the Fund’s absolute performance and which stocks detracted the most?
Markston
During the reporting period, the strongest positive contributors to the absolute performance of the Markston portion of the Fund were aerospace & defense company Boeing, media company Twenty-First Century Fox, and software company Microsoft.
Boeing delivered two quarters of earnings and cash flow growth well above expectations. Margins continued to expand as production cycles on the 737 MAX and 787 hit their stride. The company also announced a $19 billion share-repurchase program and raised its quarterly dividend by 20%. The Markston portion of the Fund sold Boeing shares to accommodate redemptions.
Twenty-First Century Fox rallied after Disney announced its intention to buy the majority of Fox’s assets. Since the Markston portion of the Fund held shares of Twenty-First Century Fox and Disney, and we liked the combined strength of those two companies, we were pleased with the announcement of the proposed transaction.
Microsoft reported two very strong quarters, beating expectations across the board. The company continued to provide double-digit revenue growth along with margin expansion driven by its cloud business. Given share-price appreciation, the stock no longer looks like a traditional “value stock” based on its
1. | See footnote on page 6 for more information on this index. |
2. | See footnote on page 6 for more information on the Morningstar Large Blend Category Average. |
9 |
multiples. Our portion of the Fund continued to hold the shares, but took some profits because the cloud business appears to be early in its growth path and other units may throw off meaningful free cash flow leading Microsoft to steadily compound value for shareholders over time.
During the reporting period, the weakest contributors to absolute performance in the Markston portion of the Fund were media company Liberty Broadband, chemicals company DowDuPont and electrical equipment company Rockwell Automation.
Liberty Broadband is a holding company whose value is driven by its stake in cable provider Charter Communications. During the reporting period, the company’s stock was the most substantial detractor from absolute and relative performance in the Markston portion of the Fund. As the company integrated Time Warner Cable’s billing systems, Charter discovered an issue with small delinquent accounts that were closed, leading to a larger-than-expected drop in video subscribers in the first quarter of 2018. We believe that this is a merger integration issue rather than fundamental change in the company, which we believe is well-positioned to grow its high-margin broadband business as the traditional linear cable model slowly declines.
DowDuPont saw its shares decline, despite reporting solid results for the fourth quarter of 2017, beating expectations on EBITDA (earnings before interest, taxes, depreciation and amoritization) and earnings per share. The company’s total annual cost synergy target was raised 10% to $3.3 billion, and the timing of the separation into three independent companies was shortened by three months, with Materials Science expected to separate by the end of March 2019, and Agriculture and Specialty Products by June 1, 2019. These positives were offset by light first-quarter 2018 EBITDA guidance, which we believed was a function of management’s typical conservative approach at the start of a new year.
Rockwell Automation underperformed after the company rejected a $225 per share takeover offer from Emerson Electric, payable in cash and stock. We used the takeover offer as an opportunity to sell some of the shares in our portion of the Fund.
Epoch
During the reporting period, software company Microsoft, aerospace & defense company Boeing, and health care providers & services company UnitedHealth Group provided the largest positive contributions to absolute performance in the Epoch portion of the Fund. Over the same period, major detractors from absolute performance in the Epoch portion of the Fund included electronic equipment, instruments & components companies Universal Display and Coherent and building products company Johnson Controls International PLC.
Did the Fund make any significant purchases or sales during the reporting period?
Markston
During the reporting period, the largest purchases in the Markston portion of the Fund were positions in insurance company AIG and Chinese Internet services company Tencent Holdings, Ltd. The Markston portion of the Fund purchased shares in both companies because we identified a coincidence of our Alpha Generators that supported our time-tested, market-cap-agnostic value-with-a-catalyst investment strategy. In AIG, Markston saw a low price-to-book valuation combined with new management, insider buying by the new CEO and an intelligent capital allocation plan split between a stock buyback program and a desire to continue consolidating the insurance industry through mergers and acquisitions.
In Tencent Holdings, the Markston portion of the Fund saw significant spin-offs, looming IPOs of joint ventures, an artificially depressed stock price caused by the announcement that the company’s largest shareholder was trimming shares and the accumulation of stock by insiders by exercising options.
During the reporting period, the largest sales in the Markston portion of the Fund were Liberty SiriusXM Group and Microsoft. These sales were used for Fund-share redemptions, and in both instances, the Markston portion of the Fund took profits in securities that had long-term capital gains.
Epoch
In the Epoch portion of the Fund, new purchases during the reporting period included Costco and LGI Homes. Costco operates wholesale membership warehouses in the United States, Canada, the U.K., Mexico, Japan, Australia, Spain, France, Iceland, Taiwan and Korea. The company uses its strong cash flow to invest in new stores and technology (e.g., e-commerce operations), to pay a dividend and to buy back shares. LGI Homes is a home builder that operates primarily in the southern United States. LGI’s capital allocation priority is investing to grow the business, which we believe is appropriate given high incremental returns on capital that comfortably exceed the company’s cost of capital.
During the reporting period, the Epoch portion of the Fund closed positions in several companies, including Vectren Corporation and F5 Networks. The decision to sell Vectren was part of an effort to reduce overall exposure to the utilities sector in the Epoch portion of the Fund. We sold F5 Networks to reinvest the proceeds into Marvell Technology, which we believed had a stronger near-term risk/reward profile.
10 | MainStay MAP Equity Fund |
How did the Fund’s sector weightings change during the reporting period?
Markston
During the reporting period, the Markston portion of the Fund slightly increased its weighting relative to the Russell 3000® Index in the health care and industrials sectors. Over the same period, the Markston portion of the Fund slightly decreased its weighting relative to the benchmark in the real estate sector. The Markston portion of the Fund also reduced its position in cash, which is not a component of the Russell 3000® Index.
Epoch
During the reporting period, the Epoch portion of the Fund increased its allocations to the energy, materials, consumer discretionary, industrials and health care sectors. Over the same period, the Epoch portion of the Fund decreased its allocations to the information technology, financials, utilities and consumer staples sectors.
How was the Fund positioned at the end of the reporting period?
Markston
As of April 30, 2018, the Markston portion of the Fund maintained overweight positions relative to the Russell 3000® Index in the industrials and financials sectors. As of the same date, the Markston portion of the Fund remained underweight relative to the benchmark in the real estate and telecommunication services sectors.
Epoch
As of April 30, 2018, the most significantly underweight positions relative to the Russell 3000® Index in the Epoch portion of the Fund were in the consumer staples, energy, health care and utilities sectors. As of the same date, the most significantly overweight positions relative to the benchmark in the Epoch portion of the Fund were in the financials, materials and information technology sectors. As of April 30, 2018, the Epoch portion of the Fund did not have any exposure to the real estate or telecommunication services sectors.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
11 |
Portfolio of Investments April 30, 2018 (Unaudited)
Shares | Value | |||||||
Common Stocks 98.8%† | ||||||||
Aerospace & Defense 6.8% |
| |||||||
¨Boeing Co. | 120,830 | $ | 40,304,055 | |||||
Hexcel Corp. | 111,450 | 7,408,081 | ||||||
Northrop Grumman Corp. | 14,500 | 4,669,580 | ||||||
¨Raytheon Co. | 97,453 | 19,972,018 | ||||||
United Technologies Corp. | 49,970 | 6,003,896 | ||||||
|
| |||||||
78,357,630 | ||||||||
|
| |||||||
Air Freight & Logistics 0.2% |
| |||||||
XPO Logistics, Inc. (a) | 20,041 | 1,947,184 | ||||||
|
| |||||||
Banks 6.9% |
| |||||||
¨Bank of America Corp. | 1,005,776 | 30,092,818 | ||||||
Bank of The Ozarks, Inc. | 147,341 | 6,895,559 | ||||||
Citigroup, Inc. | 93,735 | 6,399,288 | ||||||
Citizens Financial Group, Inc. | 138,211 | 5,734,374 | ||||||
JPMorgan Chase & Co. | 110,338 | 12,002,568 | ||||||
U.S. Bancorp | 120,214 | 6,064,796 | ||||||
Wells Fargo & Co. | 158,649 | 8,243,402 | ||||||
Western Alliance Bancorp (a) | 69,360 | 4,090,853 | ||||||
|
| |||||||
79,523,658 | ||||||||
|
| |||||||
Beverages 1.8% |
| |||||||
Coca-Cola Co. | 83,871 | 3,624,066 | ||||||
Molson Coors Brewing Co., Class B | 91,867 | 6,544,605 | ||||||
PepsiCo., Inc. | 108,096 | 10,911,210 | ||||||
|
| |||||||
21,079,881 | ||||||||
|
| |||||||
Biotechnology 1.3% |
| |||||||
AbbVie, Inc. | 97,728 | 9,435,638 | ||||||
Celgene Corp. (a) | 62,930 | 5,481,203 | ||||||
|
| |||||||
14,916,841 | ||||||||
|
| |||||||
Building Products 1.0% |
| |||||||
Fortune Brands Home & Security, Inc. | 80,282 | 4,390,623 | ||||||
Johnson Controls International PLC | 210,307 | 7,123,098 | ||||||
|
| |||||||
11,513,721 | ||||||||
|
| |||||||
Capital Markets 4.2% |
| |||||||
Ameriprise Financial, Inc. | 31,294 | 4,387,732 | ||||||
Bank of New York Mellon Corp. | 71,529 | 3,899,046 | ||||||
BlackRock, Inc. | 8,941 | 4,662,731 | ||||||
Goldman Sachs Group, Inc. | 27,366 | 6,522,139 | ||||||
Morgan Stanley | 305,525 | 15,771,200 | ||||||
State Street Corp. | 132,936 | 13,264,354 | ||||||
|
| |||||||
48,507,202 | ||||||||
|
| |||||||
Chemicals 2.4% |
| |||||||
¨DowDuPont, Inc. | 351,827 | 22,249,540 | ||||||
Ecolab, Inc. | 32,868 | 4,758,300 | ||||||
|
| |||||||
27,007,840 | ||||||||
|
|
Shares | Value | |||||||
Construction & Engineering 0.8% |
| |||||||
Jacobs Engineering Group, Inc. | 151,700 | $ | 8,812,253 | |||||
|
| |||||||
Construction Materials 0.6% |
| |||||||
Martin Marietta Materials, Inc. | 33,498 | 6,524,405 | ||||||
|
| |||||||
Consumer Finance 2.1% |
| |||||||
American Express Co. | 151,285 | 14,939,394 | ||||||
Discover Financial Services | 127,371 | 9,075,184 | ||||||
|
| |||||||
24,014,578 | ||||||||
|
| |||||||
Containers & Packaging 0.2% |
| |||||||
Berry Global Group, Inc. (a) | 36,835 | 2,025,925 | ||||||
|
| |||||||
Diversified Financial Services 0.5% |
| |||||||
Berkshire Hathaway, Inc., Class B (a) | 28,340 | 5,490,308 | ||||||
|
| |||||||
Diversified Telecommunication Services 0.3% |
| |||||||
AT&T, Inc. | 119,704 | 3,914,321 | ||||||
|
| |||||||
Electrical Equipment 0.9% |
| |||||||
AMETEK, Inc. | 70,837 | 4,944,422 | ||||||
Rockwell Automation, Inc. | 35,873 | 5,902,185 | ||||||
|
| |||||||
10,846,607 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components 0.9% |
| |||||||
Coherent, Inc. (a) | 26,445 | 4,448,578 | ||||||
TE Connectivity, Ltd. | 69,077 | 6,337,815 | ||||||
|
| |||||||
10,786,393 | ||||||||
|
| |||||||
Energy Equipment & Services 0.4% |
| |||||||
Schlumberger, Ltd. | 65,992 | 4,524,412 | ||||||
|
| |||||||
Equity Real Estate Investment Trusts 1.0% |
| |||||||
HCP, Inc. | 179,037 | 4,182,305 | ||||||
UDR, Inc. | 189,362 | 6,845,436 | ||||||
|
| |||||||
11,027,741 | ||||||||
|
| |||||||
Food & Staples Retailing 1.4% |
| |||||||
Costco Wholesale Corp. | 39,479 | 7,783,679 | ||||||
Walgreens Boots Alliance, Inc. | 127,753 | 8,489,187 | ||||||
|
| |||||||
16,272,866 | ||||||||
|
| |||||||
Food Products 0.2% |
| |||||||
Mondelez International, Inc., Class A | 62,234 | 2,458,243 | ||||||
|
| |||||||
Health Care Equipment & Supplies 2.1% |
| |||||||
Abbott Laboratories | 66,332 | 3,855,879 | ||||||
Baxter International, Inc. | 9,897 | 687,841 | ||||||
Danaher Corp. | 60,069 | 6,026,122 | ||||||
Medtronic PLC | 175,381 | 14,053,280 | ||||||
|
| |||||||
24,623,122 | ||||||||
|
|
† | Percentages indicated are based on Fund net assets. |
¨ | Among the Fund's 10 largest holdings, as of April 30, 2018, excluding short-term investment. May be subject to change daily. |
12 | MainStay MAP Equity 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) | ||||||||
Health Care Providers & Services 5.8% |
| |||||||
¨Aetna, Inc. | 155,128 | $ | 27,775,668 | |||||
Centene Corp. (a) | 71,655 | 7,780,300 | ||||||
CVS Health Corp. | 180,787 | 12,624,356 | ||||||
UnitedHealth Group, Inc. | 55,284 | 13,069,138 | ||||||
Universal Health Services, Inc., Class B | 50,388 | 5,754,310 | ||||||
|
| |||||||
67,003,772 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure 1.3% |
| |||||||
Marriott International, Inc., Class A | 29,874 | 4,083,178 | ||||||
McDonald’s Corp. | 26,274 | 4,399,318 | ||||||
Starbucks Corp. | 102,194 | 5,883,309 | ||||||
|
| |||||||
14,365,805 | ||||||||
|
| |||||||
Household Durables 1.0% |
| |||||||
LGI Homes, Inc. (a) | 65,763 | 4,550,800 | ||||||
Mohawk Industries, Inc. (a) | 18,166 | 3,812,680 | ||||||
Whirlpool Corp. | 21,156 | 3,278,122 | ||||||
|
| |||||||
11,641,602 | ||||||||
|
| |||||||
Household Products 0.2% |
| |||||||
Procter & Gamble Co. | 33,856 | 2,449,143 | ||||||
|
| |||||||
Industrial Conglomerates 0.7% |
| |||||||
Honeywell International, Inc. | 54,500 | 7,885,060 | ||||||
|
| |||||||
Insurance 5.0% |
| |||||||
American International Group, Inc. | 245,849 | 13,767,544 | ||||||
Chubb, Ltd. | 70,188 | 9,522,406 | ||||||
MetLife, Inc. | 257,982 | 12,298,002 | ||||||
Travelers Cos., Inc. | 100,907 | 13,279,361 | ||||||
W.R. Berkley Corp. | 59,180 | 4,412,461 | ||||||
Willis Towers Watson PLC | 27,436 | 4,074,520 | ||||||
|
| |||||||
57,354,294 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail 0.7% |
| |||||||
Ctrip.com International, Ltd., ADR (a) | 37,036 | 1,514,772 | ||||||
Liberty Expedia Holdings, Inc., Class A (a) | 7,741 | 315,833 | ||||||
Qurate Retail Group, Inc. QVC Group., Class A (a) | 250,173 | 5,856,550 | ||||||
|
| |||||||
7,687,155 | ||||||||
|
| |||||||
Internet Software & Services 4.6% |
| |||||||
Alibaba Group Holding, Ltd., Sponsored ADR (a) | 9,419 | 1,681,668 | ||||||
¨Alphabet, Inc. (a) | ||||||||
Class A | 10,375 | 10,567,768 | ||||||
Class C | 30,256 | 30,780,336 | ||||||
eBay, Inc. (a) | 143,179 | 5,423,621 | ||||||
Tencent Holdings, Ltd., ADR | 39,970 | 1,963,726 | ||||||
VeriSign, Inc. (a) | 20,276 | 2,380,808 | ||||||
|
| |||||||
52,797,927 | ||||||||
|
|
Shares | Value | |||||||
IT Services 4.7% |
| |||||||
Automatic Data Processing, Inc. | 50,720 | $ | 5,989,018 | |||||
International Business Machines Corp. | 39,639 | 5,746,069 | ||||||
PayPal Holdings, Inc. (a) | 234,707 | 17,511,489 | ||||||
Sabre Corp. | 331,778 | 6,847,898 | ||||||
Visa, Inc., Class A | 138,751 | 17,604,727 | ||||||
|
| |||||||
53,699,201 | ||||||||
|
| |||||||
Machinery 0.9% |
| |||||||
Caterpillar, Inc. | 22,901 | 3,305,988 | ||||||
Ingersoll-Rand PLC | 80,974 | 6,792,909 | ||||||
|
| |||||||
10,098,897 | ||||||||
|
| |||||||
Media 8.9% |
| |||||||
Comcast Corp., Class A | 488,369 | 15,329,903 | ||||||
GCI Liberty, Inc., Class A (a) | 28,095 | 1,253,037 | ||||||
Liberty Broadband Corp. (a) |
| |||||||
Class A | 17,897 | 1,261,381 | ||||||
Class C | 109,434 | 7,757,776 | ||||||
Liberty Latin America, Ltd., Class A (a) | 69,928 | 1,286,675 | ||||||
Liberty Media Corp-Liberty Formula One, Class C (a) | 89,845 | 2,652,224 | ||||||
¨Liberty SiriusXM Group (a) | ||||||||
Class A | 184,860 | 7,721,602 | ||||||
Class C | 404,645 | 16,857,511 | ||||||
Lions Gate Entertainment Corp., Class B | 50,978 | 1,173,514 | ||||||
Madison Square Garden Co., Class A (a) | 44,428 | 10,796,893 | ||||||
MSG Networks, Inc., Class A (a) | 100,259 | 2,055,309 | ||||||
Time Warner, Inc. | 155,133 | 14,706,608 | ||||||
Twenty-First Century Fox, Inc., Class A | 372,084 | 13,603,391 | ||||||
Walt Disney Co. | 62,335 | 6,254,071 | ||||||
|
| |||||||
102,709,895 | ||||||||
|
| |||||||
Metals & Mining 0.2% |
| |||||||
Reliance Steel & Aluminum Co. | 24,367 | 2,142,347 | ||||||
|
| |||||||
Multi-Utilities 0.3% |
| |||||||
WEC Energy Group, Inc. | 62,147 | 3,994,809 | ||||||
|
| |||||||
Multiline Retail 0.6% |
| |||||||
Dollar General Corp. | 76,630 | 7,397,094 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 4.8% |
| |||||||
Anadarko Petroleum Corp. | 144,258 | 9,711,449 | ||||||
ConocoPhillips | 56,469 | 3,698,720 | ||||||
Enbridge, Inc. | 164,972 | 4,993,702 | ||||||
EOG Resources, Inc. | 31,769 | 3,754,143 | ||||||
Hess Corp. | 39,555 | 2,254,239 | ||||||
Marathon Petroleum Corp. | 146,240 | 10,954,838 | ||||||
Occidental Petroleum Corp. | 114,346 | 8,834,372 | ||||||
Phillips 66 | 52,230 | 5,813,721 | ||||||
Plains GP Holdings, L.P., Class A (a) | 112,310 | 2,720,148 | ||||||
Williams Cos., Inc. | 86,341 | 2,221,554 | ||||||
|
| |||||||
54,956,886 | ||||||||
|
|
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, 2018 (Unaudited) (continued)
Shares | Value | |||||||
Common Stocks (continued) | ||||||||
Pharmaceuticals 3.5% |
| |||||||
Allergan PLC | 106,796 | $ | 16,409,205 | |||||
Johnson & Johnson | 54,350 | 6,874,731 | ||||||
Merck & Co., Inc. | 79,215 | 4,663,387 | ||||||
Pfizer, Inc. | 329,273 | 12,054,685 | ||||||
|
| |||||||
40,002,008 | ||||||||
|
| |||||||
Road & Rail 2.1% |
| |||||||
CSX Corp. | 120,773 | 7,172,708 | ||||||
Union Pacific Corp. | 122,766 | 16,405,221 | ||||||
|
| |||||||
23,577,929 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 2.7% |
| |||||||
Applied Materials, Inc. | 199,540 | 9,911,152 | ||||||
Cypress Semiconductor Corp. | 271,447 | 3,957,697 | ||||||
Intel Corp. | 34,720 | 1,792,246 | ||||||
Marvell Technology Group, Ltd. | 370,808 | 7,438,409 | ||||||
Texas Instruments, Inc. | 21,015 | 2,131,552 | ||||||
Universal Display Corp. | 62,525 | 5,505,326 | ||||||
|
| |||||||
30,736,382 | ||||||||
|
| |||||||
Software 5.5% |
| |||||||
¨Microsoft Corp. | 496,907 | 46,470,743 | ||||||
Oracle Corp. | 194,015 | 8,860,665 | ||||||
PTC, Inc. (a) | 101,753 | 8,379,359 | ||||||
|
| |||||||
63,710,767 | ||||||||
|
| |||||||
Specialty Retail 3.2% |
| |||||||
CarMax, Inc. (a) | 48,430 | 3,026,875 | ||||||
¨Home Depot, Inc. | 100,798 | 18,627,471 | ||||||
Lowe’s Cos., Inc. | 119,912 | 9,884,346 | ||||||
TJX Cos., Inc. | 64,666 | 5,486,910 | ||||||
|
| |||||||
37,025,602 | ||||||||
|
|
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals 5.8% |
| |||||||
¨Apple, Inc. | 404,902 | $ | 66,914,105 | |||||
|
| |||||||
Tobacco 0.3% |
| |||||||
Philip Morris International, Inc. | 47,520 | 3,896,640 | ||||||
|
| |||||||
Total Common Stocks | 1,136,222,451 | |||||||
|
| |||||||
Principal Amount | ||||||||
Short-Term Investment 1.4% | ||||||||
Repurchase Agreement 1.4% |
| |||||||
Fixed Income Clearing Corp. | $ | 15,526,127 | 15,526,127 | |||||
|
| |||||||
Total Short-Term Investment | 15,526,127 | |||||||
|
| |||||||
Total Investments | 100.2 | % | 1,151,748,578 | |||||
Other Assets, Less Liabilities | (0.2 | ) | (1,871,101 | ) | ||||
Net Assets | 100.0 | % | $ | 1,149,877,477 |
(a) | Non-income producing security. |
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, 2018, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 1,136,222,451 | $ | — | $ | — | $ | 1,136,222,451 | ||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 15,526,127 | — | 15,526,127 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,136,222,451 | $ | 15,526,127 | $ | — | $ | 1,151,748,578 | ||||||||
|
|
|
|
|
|
|
|
(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, 2018, the Fund did not have any transfers among levels. (See Note 2)
As of April 30, 2018, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)
14 | MainStay MAP 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 Assets and Liabilities as of April 30, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 1,151,748,578 | ||
Cash | 5,983 | |||
Receivables: | ||||
Investment securities sold | 1,109,784 | |||
Dividends and interest | 1,010,215 | |||
Fund shares sold | 375,913 | |||
Other assets | 60,478 | |||
|
| |||
Total assets | 1,154,310,951 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 2,744,654 | |||
Manager (See Note 3) | 723,619 | |||
Fund shares redeemed | 550,031 | |||
NYLIFE Distributors (See Note 3) | 185,187 | |||
Transfer agent (See Note 3) | 95,397 | |||
Shareholder communication | 59,428 | |||
Professional fees | 49,149 | |||
Custodian | 14,185 | |||
Trustees | 2,138 | |||
Accrued expenses | 9,686 | |||
|
| |||
Total liabilities | 4,433,474 | |||
|
| |||
Net assets | $ | 1,149,877,477 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 285,648 | ||
Additional paid-in capital | 685,323,929 | |||
|
| |||
685,609,577 | ||||
Undistributed net investment income | 3,372,808 | |||
Accumulated net realized gain (loss) on investments and foreign currency transactions | 48,390,994 | |||
Net unrealized appreciation (depreciation) on investments | 412,507,494 | |||
Net unrealized appreciation (depreciation) on translation of other assets and liabilities in foreign currencies | (3,396 | ) | ||
|
| |||
Net assets | $ | 1,149,877,477 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 383,355,632 | ||
|
| |||
Shares of beneficial interest outstanding | 9,558,443 | |||
|
| |||
Net asset value per share outstanding | $ | 40.11 | ||
Maximum sales charge (5.50% of offering price) | 2.33 | |||
|
| |||
Maximum offering price per share outstanding | $ | 42.44 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 84,001,566 | ||
|
| |||
Shares of beneficial interest outstanding | 2,095,179 | |||
|
| |||
Net asset value per share outstanding | $ | 40.09 | ||
Maximum sales charge (5.50% of offering price) | 2.33 | |||
|
| |||
Maximum offering price per share outstanding | $ | 42.42 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 30,723,228 | ||
|
| |||
Shares of beneficial interest outstanding | 859,907 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 35.73 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 72,680,737 | ||
|
| |||
Shares of beneficial interest outstanding | 2,034,302 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 35.73 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 574,407,631 | ||
|
| |||
Shares of beneficial interest outstanding | 13,899,950 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 41.32 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 28,774 | ||
|
| |||
Shares of beneficial interest outstanding | 712 | |||
|
| |||
Net asset value and offering price per share outstanding (a) | $ | 40.40 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 2,465,063 | ||
|
| |||
Shares of beneficial interest outstanding | 61,157 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 40.31 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 2,214,846 | ||
|
| |||
Shares of beneficial interest outstanding | 55,193 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 40.13 | ||
|
|
(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, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Dividends (a) | $ | 9,890,693 | ||
Interest | 43,598 | |||
Securities lending income | 2,568 | |||
Other income | 3,837 | |||
|
| |||
Total income | 9,940,696 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 4,560,244 | |||
Distribution/Service—Class A (See Note 3) | 497,069 | |||
Distribution/Service—Investor Class (See Note 3) | 110,675 | |||
Distribution/Service—Class B (See Note 3) | 171,192 | |||
Distribution/Service—Class C (See Note 3) | 388,521 | |||
Distribution/Service—Class R2 (See Note 3) | 3,263 | |||
Distribution/Service—Class R3 (See Note 3) | 4,432 | |||
Transfer agent (See Note 3) | 603,530 | |||
Professional fees | 61,663 | |||
Registration | 53,975 | |||
Shareholder communication | 49,562 | |||
Trustees | 13,655 | |||
Custodian | 10,206 | |||
Shareholder service (See Note 3) | 3,403 | |||
Miscellaneous | 28,782 | |||
|
| |||
Total expenses before waiver/reimbursement | 6,560,172 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (29,287 | ) | ||
|
| |||
Net expenses | 6,530,885 | |||
|
| |||
Net investment income (loss) | 3,409,811 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 54,203,874 | |||
Foreign currency transactions | (1,595 | ) | ||
|
| |||
Net realized gain (loss) on investments, investments from affiliated and unaffiliated investment companies and foreign currency transactions | 54,202,279 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (28,973,269 | ) | ||
Translation of other assets and liabilities in foreign currencies | 1,525 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (28,971,744 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 25,230,535 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 28,640,346 | ||
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $26,113. |
16 | MainStay MAP Equity 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, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,409,811 | $ | 7,841,758 | ||||
Net realized gain (loss) on investments, investments from affiliated and unaffiliated investment companies and foreign currency transactions | 54,202,279 | 153,829,744 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (28,971,744 | ) | 132,520,900 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 28,640,346 | 294,192,402 | ||||||
|
| |||||||
Dividends and distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (1,858,292 | ) | (3,734,528 | ) | ||||
Investor Class | (220,606 | ) | (1,571,103 | ) | ||||
Class B | — | (170,343 | ) | |||||
Class C | — | (373,608 | ) | |||||
Class I | (4,316,193 | ) | (11,063,508 | ) | ||||
Class R1 | (20,057 | ) | (36,693 | ) | ||||
Class R2 | (9,849 | ) | (41,865 | ) | ||||
Class R3 | (1,442 | ) | (7,953 | ) | ||||
|
| |||||||
(6,426,439 | ) | (16,999,601 | ) | |||||
|
| |||||||
From net realized gain on investments: | ||||||||
Class A | (38,640,744 | ) | (3,062,641 | ) | ||||
Investor Class | (9,071,351 | ) | (1,519,616 | ) | ||||
Class B | (3,932,227 | ) | (493,374 | ) | ||||
Class C | (8,673,806 | ) | (1,082,445 | ) | ||||
Class I | (59,497,671 | ) | (7,599,967 | ) | ||||
Class R1 | (320,711 | ) | (27,325 | ) | ||||
Class R2 | (258,265 | ) | (37,835 | ) | ||||
Class R3 | (99,960 | ) | (9,188 | ) | ||||
|
| |||||||
(120,494,735 | ) | (13,832,391 | ) | |||||
|
| |||||||
Total dividends and distributions to shareholders | (126,921,174 | ) | (30,831,992 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 33,575,323 | 78,914,051 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 123,815,841 | 30,117,489 | ||||||
Cost of shares redeemed | (146,774,048 | ) | (508,018,962 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 10,617,116 | (398,987,422 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | (87,663,712 | ) | (135,627,012 | ) |
2018 | 2017 | |||||||
Net Assets | ||||||||
Beginning of period | 1,237,541,189 | 1,373,168,201 | ||||||
|
| |||||||
End of period | $ | 1,149,877,477 | $ | 1,237,541,189 | ||||
|
| |||||||
Undistributed net investment income at end of period | $ | 3,372,808 | $ | 6,389,436 | ||||
|
|
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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 43.76 | $ | 35.92 | $ | 43.32 | $ | 46.81 | $ | 43.28 | $ | 34.07 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.21 | 0.33 | 0.38 | 0.67 | 0.41 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.82 | 8.50 | (0.63 | ) | 0.50 | 4.21 | 9.19 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.93 | 8.71 | (0.30 | ) | 0.88 | 4.88 | 9.60 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.21 | ) | (0.48 | ) | (0.40 | ) | (0.67 | ) | (0.45 | ) | (0.39 | ) | ||||||||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (4.58 | ) | (0.87 | ) | (7.10 | ) | (4.37 | ) | (1.35 | ) | (0.39 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 40.11 | $ | 43.76 | $ | 35.92 | $ | 43.32 | $ | 46.81 | $ | 43.28 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 2.10 | % | 24.73 | % | (0.57 | %) | 1.80 | % | 11.55 | % | 28.47 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.53 | %†† | 0.52 | % | 0.92 | % | 0.85 | % | 1.49 | % | 1.07 | % | ||||||||||||||||
Net expenses | 1.10 | %†† | 1.10 | %(c) | 1.09 | % (c) | 1.11 | % | 1.11 | % | 1.11 | % | ||||||||||||||||
Portfolio turnover rate | 8 | % | 15 | % | 42 | % | 51 | % | 32 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 383,356 | $ | 389,582 | $ | 285,431 | $ | 336,812 | $ | 364,162 | $ | 356,657 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 43.68 | $ | 35.85 | $ | 43.27 | $ | 46.77 | $ | 43.24 | $ | 34.04 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.07 | 0.14 | 0.25 | 0.31 | 0.60 | 0.34 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.82 | 8.49 | (0.63 | ) | 0.50 | 4.21 | 9.18 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.89 | 8.63 | (0.38 | ) | 0.81 | 4.81 | 9.52 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.41 | ) | (0.34 | ) | (0.61 | ) | (0.38 | ) | (0.32 | ) | ||||||||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (4.48 | ) | (0.80 | ) | (7.04 | ) | (4.31 | ) | (1.28 | ) | (0.32 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 40.09 | $ | 43.68 | $ | 35.85 | $ | 43.27 | $ | 46.77 | $ | 43.24 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 2.00 | % | 24.50 | % | (0.79 | %) | 1.63 | % | 11.38 | % | 28.26 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.35 | %†† | 0.36 | % | 0.71 | % | 0.71 | % | 1.34 | % | 0.88 | % | ||||||||||||||||
Net expenses | 1.29 | %†† | 1.29 | %(c) | 1.29 | % (c) | 1.25 | % | 1.26 | % | 1.30 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 1.32 | %†† | 1.29 | % | 1.29 | % | 1.25 | % | 1.26 | % | 1.30 | % | ||||||||||||||||
Portfolio turnover rate | 8 | % | 15 | % | 42 | % | 51 | % | 32 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 84,002 | $ | 90,928 | $ | 139,775 | $ | 151,582 | $ | 152,202 | $ | 144,892 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
18 | MainStay MAP 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 B | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 39.43 | $ | 32.42 | $ | 39.74 | $ | 43.25 | $ | 40.08 | $ | 31.55 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.07 | ) | (0.13 | ) | (0.01 | ) | (0.01 | ) | 0.26 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.74 | 7.67 | (0.60 | ) | 0.48 | 3.89 | 8.54 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.67 | 7.54 | (0.61 | ) | 0.47 | 4.15 | 8.60 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.01 | ) | (0.28 | ) | (0.08 | ) | (0.07 | ) | |||||||||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (4.37 | ) | (0.53 | ) | (6.71 | ) | (3.98 | ) | (0.98 | ) | (0.07 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 35.73 | $ | 39.43 | $ | 32.42 | $ | 39.74 | $ | 43.25 | $ | 40.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 1.63 | % | 23.55 | % | (1.52 | %) | 0.89 | % | 10.55 | % | 27.30 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.38 | %)†† | (0.37 | %) | (0.03 | %) | (0.03 | %) | 0.63 | % | 0.16 | % | ||||||||||||||||
Net expenses | 2.04 | % †† | 2.05 | % (c) | 2.04 | % (c) | 2.00 | % | 2.01 | % | 2.05 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 2.07 | % †† | 2.05 | % | 2.04 | % | 2.00 | % | 2.01 | % | 2.05 | % | ||||||||||||||||
Portfolio turnover rate | 8 | % | 15 | % | 42 | % | 51 | % | 32 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 30,723 | $ | 35,841 | $ | 40,977 | $ | 54,423 | $ | 71,195 | $ | 82,695 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 39.43 | $ | 32.42 | $ | 39.73 | $ | 43.25 | $ | 40.08 | $ | 31.56 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | (0.07 | ) | (0.13 | ) | (0.01 | ) | (0.02 | ) | 0.25 | 0.05 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.74 | 7.67 | (0.59 | ) | 0.48 | 3.90 | 8.54 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.67 | 7.54 | (0.60 | ) | 0.46 | 4.15 | 8.59 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.01 | ) | (0.28 | ) | (0.08 | ) | (0.07 | ) | |||||||||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (4.37 | ) | (0.53 | ) | (6.71 | ) | (3.98 | ) | (0.98 | ) | (0.07 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 35.73 | $ | 39.43 | $ | 32.42 | $ | 39.73 | $ | 43.25 | $ | 40.08 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 1.63 | % | 23.55 | % | (1.52 | %) | 0.89 | % | 10.55 | % | 27.26 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.40 | %)†† | (0.37 | %) | (0.03 | %) | (0.04 | %) | 0.60 | % | 0.14 | % | ||||||||||||||||
Net expenses | 2.04 | % †† | 2.05 | % (c) | 2.04 | % (c) | 2.00 | % | 2.01 | % | 2.05 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 2.07 | % †† | 2.05 | % | 2.04 | % | 2.00 | % | 2.01 | % | 2.05 | % | ||||||||||||||||
Portfolio turnover rate | 8 | % | 15 | % | 42 | % | 51 | % | 32 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 72,681 | $ | 79,665 | $ | 92,457 | $ | 125,642 | $ | 143,427 | $ | 141,628 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | 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 I | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 45.00 | $ | 36.92 | $ | 44.35 | $ | 47.82 | $ | 44.18 | $ | 34.77 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.17 | 0.34 | 0.43 | 0.50 | 0.80 | 0.52 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.84 | 8.70 | (0.65 | ) | 0.52 | 4.29 | 9.37 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 1.01 | 9.04 | (0.22 | ) | 1.02 | 5.09 | 9.89 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.32 | ) | (0.57 | ) | (0.51 | ) | (0.79 | ) | (0.55 | ) | (0.48 | ) | ||||||||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (4.69 | ) | (0.96 | ) | (7.21 | ) | (4.49 | ) | (1.45 | ) | (0.48 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 41.32 | $ | 45.00 | $ | 36.92 | $ | 44.35 | $ | 47.82 | $ | 44.18 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 2.22 | % | 25.01 | % | (0.33 | %) | 2.06 | % | 11.82 | % | 28.79 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.79 | %†† | 0.84 | % | 1.17 | % | 1.10 | % | 1.76 | % | 1.33 | % | ||||||||||||||||
Net expenses | 0.85 | %†† | 0.85 | %(c) | 0.84 | % (c) | 0.86 | % | 0.86 | % | 0.86 | % | ||||||||||||||||
Portfolio turnover rate | 8 | % | 15 | % | 42 | % | 51 | % | 32 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 574,408 | $ | 634,730 | $ | 807,694 | $ | 1,119,884 | $ | 1,506,564 | $ | 1,417,814 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 44.07 | $ | 36.16 | $ | 43.57 | $ | 47.05 | $ | 43.49 | $ | 34.23 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.18 | 0.27 | 0.38 | 0.45 | 0.73 | 0.54 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.79 | 8.56 | (0.63 | ) | 0.50 | 4.24 | 9.14 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.97 | 8.83 | (0.25 | ) | 0.95 | 4.97 | 9.68 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.27 | ) | (0.53 | ) | (0.46 | ) | (0.73 | ) | (0.51 | ) | (0.42 | ) | ||||||||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (4.64 | ) | (0.92 | ) | (7.16 | ) | (4.43 | ) | (1.41 | ) | (0.42 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 40.40 | $ | 44.07 | $ | 36.16 | $ | 43.57 | $ | 47.05 | $ | 43.49 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 2.19 | % | 24.92 | % | (0.43 | %) | 1.94 | % | 11.71 | % | 28.63 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.86 | %†† | 0.67 | % | 1.06 | % | 1.02 | % | 1.63 | % | 1.43 | % | ||||||||||||||||
Net expenses | 0.95 | %†† | 0.95 | %(c) | 0.94 | % (c) | 0.96 | % | 0.96 | % | 0.96 | % | ||||||||||||||||
Portfolio turnover rate | 8 | % | 15 | % | 42 | % | 51 | % | 32 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 29 | $ | 3,208 | $ | 2,500 | $ | 3,607 | $ | 7,368 | $ | 6,737 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
20 | MainStay MAP 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 R2 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 43.93 | $ | 36.05 | $ | 43.44 | $ | 46.92 | $ | 43.38 | $ | 34.12 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.20 | 0.29 | 0.34 | 0.63 | 0.38 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.83 | 8.50 | (0.63 | ) | 0.49 | 4.22 | 9.21 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.92 | 8.70 | (0.34 | ) | 0.83 | 4.85 | 9.59 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.43 | ) | (0.35 | ) | (0.61 | ) | (0.41 | ) | (0.33 | ) | ||||||||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (4.54 | ) | (0.82 | ) | (7.05 | ) | (4.31 | ) | (1.31 | ) | (0.33 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 40.31 | $ | 43.93 | $ | 36.05 | $ | 43.44 | $ | 46.92 | $ | 43.38 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 2.06 | % | 24.60 | % | (0.68 | %) | 1.68 | % | 11.43 | % | 28.36 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.43 | %†† | 0.51 | % | 0.80 | % | 0.76 | % | 1.42 | % | 0.98 | % | ||||||||||||||||
Net expenses | 1.20 | %†† | 1.20 | %(c) | 1.20 | % (c) | 1.21 | % | 1.21 | % | 1.21 | % | ||||||||||||||||
Portfolio turnover rate | 8 | % | 15 | % | 42 | % | 51 | % | 32 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,465 | $ | 2,583 | $ | 3,528 | $ | 9,993 | $ | 15,956 | $ | 20,140 |
* | 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. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | 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 | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 43.71 | $ | 35.87 | $ | 43.22 | $ | 46.68 | $ | 43.16 | $ | 33.94 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 0.02 | 0.07 | 0.20 | 0.22 | 0.54 | 0.29 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.83 | 8.50 | (0.62 | ) | 0.51 | 4.17 | 9.16 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total from investment operations | 0.85 | 8.57 | (0.42 | ) | 0.73 | 4.71 | 9.45 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||||||||
From net investment income | (0.06 | ) | (0.34 | ) | (0.23 | ) | (0.49 | ) | (0.29 | ) | (0.23 | ) | ||||||||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total dividends and distributions | (4.43 | ) | (0.73 | ) | (6.93 | ) | (4.19 | ) | (1.19 | ) | (0.23 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net asset value at end of period | $ | 40.13 | $ | 43.71 | $ | 35.87 | $ | 43.22 | $ | 46.68 | $ | 43.16 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total investment return (b) | 1.92 | % | 24.29 | % | (0.91 | %) | 1.42 | % | 11.18 | % | 28.03 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.11 | %†† | 0.17 | % | 0.57 | % | 0.51 | % | 1.20 | % | 0.74 | % | ||||||||||||||||
Net expenses | 1.45 | %†† | 1.45 | %(c) | 1.44 | % (c) | 1.46 | % | 1.46 | % | 1.46 | % | ||||||||||||||||
Portfolio turnover rate | 8 | % | 15 | % | 42 | % | 51 | % | 32 | % | 29 | % | ||||||||||||||||
Net assets at end of period (in 000’s) | $ | 2,215 | $ | 1,004 | $ | 806 | $ | 1,062 | $ | 1,400 | $ | 1,696 |
* | 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. For periods of less than one year, total return is not annualized. |
(c) | 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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act’’), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds’’). These financial statements and Notes relate to the MainStay MAP 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 has ten classes of shares registered for sale. 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. Class R6 and Class T shares were registered for sale effective as of February 28, 2017. As of April 30, 2018, Class R6 and Class T shares were not yet offered for sale. Investor Class shares commenced operations on February 28, 2008. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January��1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were 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 certain redemptions of such shares made
within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R1, Class R2 and Class R3 shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without 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, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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 under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. 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, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
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”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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
22 | MainStay MAP Equity Fund |
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 assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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 | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • 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 the security’s 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, 2018, 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 the 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, 2018, 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 NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer
23 |
Notes to Financial Statements (Unaudited) (continued)
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 the Subadvisors conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee 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, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities 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. Securities valued using the amortized cost method are not valued using quoted prices in an active market 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 its 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 tax 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 reclaimable. The Fund will accrue such taxes and reclaims 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, 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 determinations using 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 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.
24 | MainStay MAP Equity Fund |
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares 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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisors to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisors will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and 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 counterparty’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, realization and/or retention of the collateral may be limited or subject to delay, 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, 2018, 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 (“SEC”). 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 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 U.S. Treasury securities at least equal at all times to the market value of the securities loaned. 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. Income earned from securities lending activity is reflected in the Statement of Operations. As of the six-month period ended April 30, 2018, the Fund did not have any portfolio securities on loan.
(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) Foreign Securities Risk. The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from
25 |
Notes to Financial Statements (Unaudited) (continued)
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, among other things, economic or political developments in a specific country, industry or region.
(M) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
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 attributable to the Fund. Markston International LLC (“Markston” or a “Subadvisor”) and Epoch Investment Partners, Inc. (“Epoch” or a “Subadvisor”), each a registered investment adviser, serve as Subadvisors to the Fund and each manages 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. 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 Epoch, 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 the services performed and the facilities furnished at an annual rate of the Fund’s the Fund’s average daily net assets as follows: 0.75% up to $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, 2018, the effective management fee rate was 0.75% 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 (excluding 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) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 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.
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $4,560,244 and waived its fees and/or reimbursed expenses in the amount of $29,287.
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.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(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, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T 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.
26 | MainStay MAP Equity Fund |
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 the Class R2 and Class R3 Plans.
During the six-month period ended April 30, 2018, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 1,211 | ||
Class R2 | 1,305 | |||
Class R3 | 887 |
(C) Sales Charges. During the six-month period ended April 30, 2018, 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 $21,262 and $14,939, respectively.
During the six-month period ended April 30, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $357, $15,243 and $977, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 127,387 | ||
Investor Class | 123,637 | |||
Class B | 47,809 | |||
Class C | 108,495 | |||
Class I | 194,034 | |||
Class R1 | 760 | |||
Class R2 | 836 | |||
Class R3 | 572 |
(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, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $ | 6,753,215 | 1.2 | % |
Note 4–Federal Income Tax
As of April 30, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 745,052,172 | $ | 437,630,336 | $ | (30,933,930 | ) | $ | 406,696,406 |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 16,999,601 | ||
Long-Term Capital Gain | 13,832,391 | |||
Total | $ | 30,831,992 |
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 1, 2017, under the 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 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 31, 2018, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. During the six-month period ended April 30, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
27 |
Notes to Financial Statements (Unaudited) (continued)
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another, subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the six-month period ended April 30, 2018, purchases and sales of securities, other than short-term securities, were $95,723 and $201,959, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 264,298 | $ | 10,996,547 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 967,327 | 38,915,574 | ||||||
Shares redeemed | (836,122 | ) | (34,785,802 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 395,503 | 15,126,319 | ||||||
Shares converted into Class A (See Note 1) | 286,056 | 11,784,373 | ||||||
Shares converted from Class A (See Note 1) | (26,224 | ) | (1,070,469 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 655,335 | $ | 25,840,223 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 533,831 | $ | 21,446,730 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 179,775 | 6,572,571 | ||||||
Shares redeemed | (1,658,830 | ) | (65,914,254 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (945,224 | ) | (37,894,953 | ) | ||||
Shares converted into Class A (See Note 1) | 1,941,210 | 81,575,433 | ||||||
Shares converted from Class A (See Note 1) | (39,513 | ) | (1,570,975 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 956,473 | $ | 42,109,505 | |||||
|
|
|
|
Investor Class | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 72,028 | $ | 3,004,998 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 230,335 | 9,270,981 | ||||||
Shares redeemed | (102,317 | ) | (4,275,423 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 200,046 | 8,000,556 | ||||||
Shares converted into Investor Class (See Note 1) | 63,023 | 2,583,654 | ||||||
Shares converted from Investor Class (See Note 1) | (249,636 | ) | (10,274,622 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 13,433 | $ | 309,588 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 191,132 | $ | 7,592,444 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 84,356 | 3,084,072 | ||||||
Shares redeemed | (373,260 | ) | (14,795,519 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (97,772 | ) | (4,119,003 | ) | ||||
Shares converted into Investor Class (See Note 1) | 185,596 | 7,378,715 | ||||||
Shares converted from Investor Class (See Note 1) | (1,904,446 | ) | (80,010,269 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,816,622 | ) | $ | (76,750,557 | ) | |||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 9,541 | $ | 357,493 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 108,629 | 3,908,458 | ||||||
Shares redeemed | (85,137 | ) | (3,167,508 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 33,033 | 1,098,443 | ||||||
Shares converted from Class B (See Note 1) | (82,095 | ) | (3,027,908 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (49,062 | ) | $ | (1,929,465 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 50,433 | $ | 1,761,431 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 19,649 | 652,938 | ||||||
Shares redeemed | (206,700 | ) | (7,409,918 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (136,618 | ) | (4,995,549 | ) | ||||
Shares converted from Class B (See Note 1) | (218,348 | ) | (7,877,051 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (354,966 | ) | $ | (12,872,600 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 38,969 | $ | 1,455,382 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 229,749 | 8,266,357 | ||||||
Shares redeemed | (254,854 | ) | (9,497,187 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 13,864 | $ | 224,552 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 87,352 | $ | 3,096,595 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 36,839 | 1,224,153 | ||||||
Shares redeemed | (955,543 | ) | (34,349,965 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (831,352 | ) | $ | (30,029,217 | ) | |||
|
|
|
|
28 | MainStay MAP Equity Fund |
Class I | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 376,988 | $ | 15,964,428 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,515,623 | 62,761,957 | ||||||
Shares redeemed | (2,096,598 | ) | (90,906,590 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (203,987 | ) | (12,180,205 | ) | ||||
Shares converted into Class I (See Note 1) | 115 | 4,972 | ||||||
|
|
|
| |||||
Net increase (decrease) | (203,872 | ) | $ | (12,175,233 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,079,409 | $ | 43,953,110 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 491,140 | 18,427,571 | ||||||
Shares redeemed | (9,358,125 | ) | (382,926,753 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (7,787,576 | ) | (320,546,072 | ) | ||||
Shares converted into Class I (See Note 1) | 12,366 | 504,147 | ||||||
|
|
|
| |||||
Net increase (decrease) | (7,775,210 | ) | $ | (320,041,925 | ) | |||
|
|
|
| |||||
Class R1 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 4,029 | $ | 172,681 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 8,414 | 340,768 | ||||||
Shares redeemed | (84,525 | ) | (3,620,011 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (72,082 | ) | $ | (3,106,562 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 12,345 | $ | 494,197 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,741 | 64,018 | ||||||
Shares redeemed | (10,423 | ) | (415,386 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 3,663 | $ | 142,829 | |||||
|
|
|
| |||||
Class R2 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 2,384 | $ | 100,135 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,319 | 255,592 | ||||||
Shares redeemed | (6,347 | ) | (267,427 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 2,356 | $ | 88,300 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 9,745 | $ | 386,926 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,062 | 75,772 | ||||||
Shares redeemed | (50,883 | ) | (2,025,153 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (39,076 | ) | $ | (1,562,455 | ) | |||
|
|
|
|
Class R3 | Shares | Amount | ||||||
Six-month period ended April 30, 2018: | ||||||||
Shares sold | 35,890 | $ | 1,523,660 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,385 | 96,153 | ||||||
Shares redeemed | (6,049 | ) | (254,100 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 32,226 | $ | 1,365,713 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 4,617 | $ | 182,618 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 448 | 16,394 | ||||||
Shares redeemed | (4,576 | ) | (182,014 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 489 | $ | 16,998 | |||||
|
|
|
|
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, 2018, events and transactions subsequent to April 30, 2018, 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 (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of the Management Agreement with respect to the MainStay MAP Equity Fund (“Fund”) and New York Life Investment Management LLC (“New York Life Investments”) and the Subadvisory Agreements between New York Life Investments and each of Markston International LLC (“Markston”) and Epoch Investment Partners, Inc. (“Epoch”) with respect to the Fund.
In reaching its decisions to approve the Agreements, the Board considered information furnished by New York Life Investments, Markston and Epoch in connection with a contract review process that took place at various meetings of the Board and its Contracts Committee between September 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments, Markston and Epoch (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates and Markston and Epoch together with responses from New York Life Investments, Markston and Epoch to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments, Markston and Epoch personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent and quality of the services provided to the Fund by New York Life Investments, Markston and Epoch; (ii) the investment performance of the Fund, New York Life Investments, Markston and Epoch; (iii) the costs of the services provided, and profits realized, by New York Life Investments, Markston and Epoch 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, Markston and Epoch. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments, Markston and Epoch. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments, Markston and Epoch resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations throughout the year. 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
30 | MainStay MAP Equity Fund |
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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments, Markston and Epoch
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of Markston and Epoch and continuous analysis of, and interactions with, Markston and Epoch with respect to, among other things, Fund investment performance and risk as well as Markston’s and Epoch’s investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent and quality of the investment advisory services that Markston and Epoch provide to the Fund.
The Board evaluated Markston’s and Epoch’s experience in serving as subadvisors to the Fund and managing other portfolios and Markston’s and Epoch’s track records and experience in providing investment advisory services, the experience of investment advisory, senior management and administrative personnel at Markston and Epoch, and Markston’s and Epoch’s overall legal and compliance environments, resources and histories. The Board considered that New York Life Investments’, Markston’s and Epoch’s policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 Markston and Epoch. The Board reviewed Markston’s and Epoch’s abilities to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent and quality of these services as a result of New York Life Investments’, Markston’s and Epoch’s experience, personnel, operations and resources.
Investment Performance
In evaluating the Fund’s investment performance, the Board considered investment performance results over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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, Markston or Epoch had taken, or had agreed with the Board to take, to seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record.
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
31 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
New York Life Investments, Markston and Epoch to seek to enhance investment returns, supported a determination to approve the continuation of 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, Markston and Epoch
The Board considered the costs of the services provided by New York Life Investments, Markston and Epoch under the Agreements and the profits realized by New York Life Investments and its affiliates and Markston and Epoch due to their relationships with the Fund. Because Markston’s and 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 addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 evaluating the costs of the services provided by New York Life Investments, Markston and Epoch and profits realized by New York Life Investments and its affiliates and Markston and Epoch, the Board considered, among other factors, each party’s continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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, Markston and Epoch must be in a position to attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the
Board recognized 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, including reputational and other indirect benefits. The Board recognized, for example, the benefits to Markston and Epoch from legally permitted “soft-dollar” arrangements by which brokers provide research and other services to Markston and 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, Markston and Epoch concerning other business relationships between either Markston and its affiliates or Epoch and its affiliates and New York Life Investments and its affiliates.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive. With respect to Markston and Epoch, the Board concluded that any profits realized by Markston and Epoch due to their relationships with the Fund are the result of arm’s-length negotiations between New York Life Investments and Markston and Epoch, and are based on fees paid to Markston and Epoch by New York Life Investments, not the Fund.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to Markston and Epoch are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
32 | MainStay MAP Equity 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, Markston and Epoch on fees charged to other investment advisory clients, including institutional separate accounts and other funds that follow investment strategies similar to those of the Fund. The Board considered differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of
allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of 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, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; 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 New York Life 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 MAP Equity Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1738973 MS126-18 | MSMP10-06/18 (NYLIM) NL030 |
MainStay Money Market Fund
Message from the President and Semiannual Report
Unaudited | April 30, 2018
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Message from the President
With few exceptions, investors saw modest gains from stocks and negative returns from bonds during the six months ended April 30, 2018.
According to FTSE-Russell data on U.S. stocks, microcap stocks provided the strongest overall performance during the reporting period and returns for stocks at all capitalization levels were relatively similar to each other. During the reporting period, growth stocks outperformed value stocks at all capitalization levels.
Several forces affected the U.S. stock market during the reporting period. The president signed a comprehensive tax bill into law on December 22, 2017. The tax reform offered tax benefits to many individuals and businesses, which helped foster widespread hope of higher employment, greater consumer spending and higher corporate profits.
The stock market continued to advance until late January 2018, when it faltered on the threat of a government shutdown. In early February, the Labor Department reported a substantial rise in average hourly wages, which was positive for workers but prompted inflation concerns among investors, and the U.S. stock market experienced a normal—but largely unanticipated—correction. After an extended rise in U.S. stocks, this correction began a period of increased market volatility that continued through the end of the reporting period.
By March 2018, the stock market had recovered somewhat, but talk of price sanctions on imported steel and aluminum led to fears of a possible trade war. On March 22, 2018, those fears escalated when the United States announced sanctions on $60 billion of Chinese imports, causing another dip in the stock market.
Although the performance of international stock markets varied during the reporting period, developed international markets tended to underperform U.S. stocks. Emerging-market stocks, on the other hand, tended to outperform stocks in the U.S. and developed international markets.
Although stocks in general ended the reporting period higher than where they began, several fixed-income asset classes provided negative total returns. The Federal Open Market
Committee (FOMC) raised the federal funds target range by 25 basis points on December 13, 2017, and by the same amount on March 21, 2018. Although these increases were modest, U.S. Treasury yields rose across the maturity spectrum during the reporting period, leading all but the shortest-maturity U.S. Treasury securities to decline. Asset-backed securities, mortgaged-backed securities and most corporate bonds also recorded negative total returns during the reporting period, but convertible bonds and leveraged loans recorded positive total returns. The U.S. high-yield bond market was mixed, with some portions advancing, while the asset class as a whole tended to decline.
Through the ups and downs of the stock and bond markets, MainStay portfolio managers seek to pursue the objectives of their individual Funds using the investment strategies and processess outlined in the prospectus. As a MainStay shareholder, your investments are guided by the market experience and professional insight of our portfolio managers as they seek to maximize long-term returns and manage the specific risks of their respective portfolios.
Whatever direction the markets may take, MainStay encourages shareholders to maintain a long-term investment perspective. The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the six months ended April 30, 2018.
At MainStay, we encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
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. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors.
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 nylinvestments.com/funds. 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 and other factors, 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 B2 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 nylinvestments.com/funds.
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, 2018
Class | Sales Charge | Inception Date | Six Months | One Year | Five Years | Ten Years | Gross Expense Ratio3 | |||||||||||||||||
Class A Shares4 | No Sales Charge | 1/3/1995 | 0.46 | % | 0.72 | % | 0.17 | % | 0.19 | % | 0.58 | % | ||||||||||||
Investor Class Shares4 | No Sales Charge | 2/28/2008 | 0.35 | 0.50 | 0.12 | 0.16 | 0.77 | |||||||||||||||||
Class B Shares4 | No Sales Charge | 5/1/1986 | 0.35 | 0.50 | 0.12 | 0.16 | 0.77 | |||||||||||||||||
Class C Shares4 | No Sales Charge | 9/1/1998 | 0.35 | 0.50 | 0.12 | 0.16 | 0.77 | |||||||||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above. 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 Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | 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. |
4. | As of April 30, 2018, MainStay Money Market Fund had an effective 7-day yield of 1.30% for Class A, 1.08% for Investor Class, 1.07% for Class B, and 1.08% for Class C shares. The 7-day current yield was 1.30% for Class A, and 1.07% for 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 1.30%, 1.07%, 1.07% and 1.07%, for Class A, Investor Class, Class B and C shares, respectively, and the 7-day current yield would have been 1.30%, 1.07%, 1.06% and 1.07%, 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. |
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 | ||||||||||||
Average Lipper Money Market Fund5 | 0.52 | % | 0.87 | % | 0.24 | % | 0.30 | % | ||||||||
Morningstar Prime Money Market Category Average6 | 0.52 | 0.87 | 0.24 | 0.31 |
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. |
6. | The Morningstar Prime Money Market Category Average is representative of funds that invest in short-term money market securities in order to provide a level of current income that is consistent with the preservation of capital. Results are based on average total returns of similar funds 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 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, 2017, to April 30, 2018, 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, 2017, to April 30, 2018.
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, 2018. 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 mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual 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 11/1/17 | Ending Account Value (Based on Actual Returns and Expenses) 4/30/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 4/30/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,004.60 | $ | 2.83 | $ | 1,022.00 | $ | 2.86 | 0.57% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,003.50 | $ | 3.97 | $ | 1,020.80 | $ | 4.01 | 0.80% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,003.50 | $ | 3.97 | $ | 1,020.80 | $ | 4.01 | 0.80% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,003.50 | $ | 3.97 | $ | 1,020.80 | $ | 4.01 | 0.80% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 181 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of April 30, 2018 (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 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, 2018?
As of April 30, 2018, MainStay Money Market Fund provided a 7-day current yield of 1.30% for Class A shares and 1.07% for Investor Class, Class B and Class C shares. As of the same date, the Fund provided a 7-day effective yield of 1.30% for Class A shares and 1.08% for Investor Class shares, 1.07% for Class B shares and 1.08% for Class C shares. For the six months ended April 30, 2018, Class A shares returned 0.46% and Investor Class, Class B and Class C shares each returned 0.35%. All share classes underperformed the 0.52% return of the Average Lipper Money Market Fund1 for the six months ended April 30, 2018. All share classes also underperformed the 0.52% return of the Morningstar Prime Money Market Category Average2 for the six months ended April 30, 2018. Performance figures for the Fund reflect certain fee waivers and/or expense limitations without which total returns and yields would have been lower.
What factors affected the Fund’s performance during the reporting period?
The Fund’s performance was helped by rapidly rising LIBOR3 levels, particularly 3-month LIBOR. The Fund was able to add several floating-rate assets indexed to LIBOR during the reporting period. On the other hand, as money-market rates continued to rise during the reporting period, the cost associated with maintaining liquidity in the form of overnight U.S. Treasury–backed repurchase agreements became a more significant detractor from the Fund’s performance.
What was the Fund’s duration4 during the reporting period?
The Fund’s duration was kept relatively short during the reporting period to take advantage of the rising interest-rate
environment. The Fund’s duration decreased from 36 days to 24 days during the reporting period, but this resulted more from additional available repurchase agreements than from a meaningful shift in strategy.
During the reporting period, which market segments were the strongest contributors to the Fund’s performance and which market segments were particularly weak?
During the reporting period, floating-rate assets in the certificate of deposit and corporate sectors contributed significantly to the Fund’s performance. (Contributions take weightings and total returns into account.) The Fund’s holdings in the agency sector, on the other hand, detracted from performance.
Did the Fund make any significant purchases or sales during the reporting period?
The Fund purchased a Toyota Corp. floating-rate bond, which allowed the Fund to reap a higher sector yield while maintaining a relatively short duration. Because the Fund typically holds securities until they mature, there were no significant sales during the reporting period.
How did the Fund’s asset-class weightings change during the reporting period?
During the reporting period, the Fund increased its weightings in certificates of deposit and corporate bonds. Over the same period, the Fund decreased its weighting in U.S. Treasury and agency securities.
1. | See footnote on page 6 for more information on the Average Lipper Money Market Fund. |
2. | See footnote on page 6 for more information on Morningstar Prime Money Market Category Average. |
3. | The London InterBank Offered Rate (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. |
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 days or years and is considered a more accurate sensitivity gauge than average maturity. |
The opinions expressed are those of the subadvisor 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, 2018 (Unaudited)
Principal Amount | Value | |||||||
Short-Term Investments 100.5%† | ||||||||
Certificates of Deposit 7.4% |
| |||||||
Bank of America NA | $ | 5,000,000 | $ | 5,000,000 | ||||
Bank of Montreal (a) | 5,000,000 | 5,000,000 | ||||||
2.117% (1 Month LIBOR + 0.22%), due 9/14/18 | 5,000,000 | 5,000,000 | ||||||
Canadian Imperial Bank of Commerce 2.156% (1 Month LIBOR + 0.26%), due 11/13/18 (a) | 4,000,000 | 4,000,000 | ||||||
U.S. Bank NA | 5,000,000 | 5,000,000 | ||||||
|
| |||||||
Total Certificates of Deposit | 24,000,000 | |||||||
|
| |||||||
Corporate Bonds 1.2% |
| |||||||
Toyota Motor Credit Corp. | 4,000,000 | 4,001,473 | ||||||
|
| |||||||
Total Corporate Bonds | 4,001,473 | |||||||
|
| |||||||
Financial Company Commercial Paper 14.2% |
| |||||||
Canadian Imperial Bank of Commerce 2.088% (1 Month LIBOR + 0.19%), due 8/22/18 (a)(b)(c) | 5,000,000 | 5,000,000 | ||||||
CPPIB Capital, Inc. | 5,000,000 | 4,996,403 | ||||||
GlaxoSmithKline Finance PLC | 5,000,000 | 4,999,746 | ||||||
JP Morgan Securities LLC (a)(c) | 5,000,000 | 5,000,000 | ||||||
2.117% (1 Month LIBOR + 0.23%), due 7/2/18 | 4,000,000 | 4,000,000 | ||||||
Massachusetts Mutual Life Insurance Co. | 2,000,000 | 1,997,725 | ||||||
National Rural Utilities Cooperative Finance Corp. | 5,000,000 | 4,996,597 | ||||||
Nationwide Life Insurance Co. (b)(c) | 5,000,000 | 4,997,361 | ||||||
1.862%, due 5/24/18 | 5,000,000 | 4,993,931 | ||||||
Toronto-Dominion Bank | 5,000,000 | 5,000,000 | ||||||
|
| |||||||
Total Financial Company Commercial Paper | 45,981,763 | |||||||
|
|
Principal Amount | Value | |||||||
Other Commercial Paper 47.8% |
| |||||||
Alabama Power Co. (b)(c) | $ | 3,857,000 | $ | 3,857,000 | ||||
1.979%, due 5/2/18 | 2,500,000 | 2,499,861 | ||||||
2.231%, due 5/7/18 | 3,000,000 | 2,998,900 | ||||||
American Honda Finance Corp. | 5,000,000 | 4,974,618 | ||||||
Apple, Inc. (b)(c) | 5,000,000 | 4,999,242 | ||||||
1.745%, due 5/9/18 | 4,000,000 | 3,998,382 | ||||||
Archer-Daniels-Midland Co. (b)(c) | 2,000,000 | 1,998,356 | ||||||
1.83%, due 5/21/18 | 4,000,000 | 3,995,778 | ||||||
Army & Air Force Exchange Service | 5,000,000 | 4,992,589 | ||||||
Canadian National Railway Co. (b)(c) | 4,000,000 | 3,994,244 | ||||||
1.93%, due 6/7/18 | 5,000,000 | 4,989,208 | ||||||
Caterpillar Financial Services Corp. (c) | 4,000,000 | 3,996,317 | ||||||
2.088%, due 6/5/18 | 5,000,000 | 4,989,694 | ||||||
Chevron Corp. | 5,000,000 | 4,992,750 | ||||||
Coca-Cola Co. | 2,500,000 | 2,478,876 | ||||||
Cummins, Inc. | 2,500,000 | 2,499,870 | ||||||
Eli Lilly & Co. | 5,000,000 | 4,999,750 | ||||||
Exxon Mobil Corp. | 2,500,000 | 2,498,894 | ||||||
Florida Power & Light Co. | 4,000,000 | 3,987,250 | ||||||
General Dynamics Corp. (b)(c) | 5,000,000 | 5,000,000 | ||||||
1.925%, due 6/6/18 | 4,000,000 | 3,991,800 | ||||||
Henkel of America, Inc. (b)(c) | 5,000,000 | 4,994,583 | ||||||
1.955%, due 6/12/18 | 4,000,000 | 3,990,573 | ||||||
Honeywell International, Inc. | 5,000,000 | 4,998,450 | ||||||
IBM Credit LLC (b)(c) | 5,000,000 | 4,994,011 | ||||||
1.857%, due 5/29/18 | 4,000,000 | 3,994,089 | ||||||
Intel Corp. | 2,500,000 | 2,493,139 | ||||||
John Deere Capital Corp. | 5,000,000 | 4,990,461 | ||||||
Kimberly-Clark Corp. | 5,000,000 | 4,998,500 |
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 | Value | |||||||
Short-Term Investments (continued) | ||||||||
Other Commercial Paper (continued) |
| |||||||
Province of Alberta Canada | $ | 4,000,000 | $ | 3,990,388 | ||||
Province of British Columbia | 2,500,000 | 2,497,769 | ||||||
Province of Ontario | 5,000,000 | 4,991,949 | ||||||
Roche Holdings, Inc. (b)(c) | 5,000,000 | 4,999,533 | ||||||
1.721%, due 5/4/18 | 3,800,000 | 3,799,424 | ||||||
Unilever Capital Corp. | 5,000,000 | 4,996,750 | ||||||
UnitedHealth Group, Inc. (b)(c) | 2,000,000 | 2,000,000 | ||||||
2.026%, due 5/8/18 | 4,000,000 | 3,998,429 | ||||||
2.064%, due 5/14/18 | 5,000,000 | 4,996,299 | ||||||
|
| |||||||
Total Other Commercial Paper | 154,457,726 | |||||||
|
| |||||||
Treasury Debt 6.5% |
| |||||||
United States Treasury Notes | 5,000,000 | 4,995,291 | ||||||
0.75%, due 7/31/18 | 5,000,000 | 4,993,272 | ||||||
0.75%, due 8/31/18 | 3,000,000 | 2,995,096 | ||||||
0.875%, due 5/31/18 | 5,000,000 | 4,998,797 | ||||||
2.312%, due 5/31/19 | 3,000,000 | 2,962,031 | ||||||
|
| |||||||
Total Treasury Debt | 20,944,487 | |||||||
|
| |||||||
Treasury Repurchase Agreements 23.4% |
| |||||||
Bank of America N.A. | 15,000,000 | 15,000,000 | ||||||
Bank of Montreal | 15,000,000 | 15,000,000 |
Principal Amount | Value | |||||||
Treasury Repurchase Agreements (continued) |
| |||||||
RBC Capital Markets LLC | $ | 30,733,000 | $ | 30,733,000 | ||||
TD Securities (U.S.A.) LLC | 15,000,000 | 15,000,000 | ||||||
|
| |||||||
Total Treasury Repurchase Agreements | 75,733,000 | |||||||
|
| |||||||
Total Short-Term Investments (Amortized Cost $325,118,449) | 100.5 | % | 325,118,449 | |||||
Other Assets, Less Liabilities | (0.5 | ) | (1,622,424 | ) | ||||
Net Assets | 100.0 | % | $ | 323,496,025 |
† | Percentages indicated are based on Fund net assets. |
(a) | Floating rate — Rate shown was the rate in effect as of April 30, 2018. |
(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) | Interest rate shown represents yield to maturity. |
The following abbreviations are used in the preceding pages:
LIBOR—London Interbank Offered Rate
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, 2018 (Unaudited) (continued)
The following is a summary of the fair valuations according to the inputs used as of April 30, 2018, for valuing the Fund’s assets.
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Short-Term Investments | ||||||||||||||||
Certificates of Deposit | $ | — | $ | 24,000,000 | $ | — | $ | 24,000,000 | ||||||||
Corporate Bonds | — | 4,001,473 | — | 4,001,473 | ||||||||||||
Financial Company Commercial Paper | — | 45,981,763 | — | 45,981,763 | ||||||||||||
Other Commercial Paper | — | 154,457,726 | — | 154,457,726 | ||||||||||||
Treasury Debt | — | 20,944,487 | — | 20,944,487 | ||||||||||||
Treasury Repurchase Agreements | — | 75,733,000 | — | 75,733,000 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | — | $ | 325,118,449 | $ | — | $ | 325,118,449 | ||||||||
|
|
|
|
|
|
|
|
(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, 2018, the Fund did not have any transfers among levels. (See Note 2)
As of April 30, 2018, 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. |
Statement of Assets and Liabilities as of April 30, 2018 (Unaudited)
Assets | ||||
Investment in securities, at value | $ | 249,385,449 | ||
Repurchase agreements, at value | 75,733,000 | |||
Cash | 403 | |||
Receivables: | ||||
Fund shares sold | 2,457,260 | |||
Interest | 148,765 | |||
Other assets | 61,544 | |||
|
| |||
Total assets | 327,786,421 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 2,976,125 | |||
Fund shares redeemed | 1,074,391 | |||
Manager (See Note 3) | 105,931 | |||
Transfer agent (See Note 3) | 46,315 | |||
Shareholder communication | 32,937 | |||
Professional fees | 31,679 | |||
Custodian | 16,947 | |||
Trustees | 589 | |||
Dividend payable | 3,444 | |||
Accrued expenses | 2,038 | |||
|
| |||
Total liabilities | 4,290,396 | |||
|
| |||
Net assets | $ | 323,496,025 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 3,235,472 | ||
Additional paid-in capital | 320,260,761 | |||
|
| |||
323,496,233 | ||||
Distributions in excess of net investment income | (75 | ) | ||
Accumulated net realized gain (loss) on investments | (133 | ) | ||
|
| |||
Net assets | $ | 323,496,025 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 229,878,204 | ||
|
| |||
Shares of beneficial interest outstanding | 229,908,861 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 27,311,474 | ||
|
| |||
Shares of beneficial interest outstanding | 27,323,451 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 40,193,900 | ||
|
| |||
Shares of beneficial interest outstanding | 40,199,774 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 26,112,447 | ||
|
| |||
Shares of beneficial interest outstanding | 26,115,076 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statement of Operations for the six months ended April 30, 2018 (Unaudited)
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 2,423,336 | ||
Other income | 827 | |||
|
| |||
Total income | 2,424,163 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 646,162 | |||
Transfer agent (See Note 3) | 272,072 | |||
Registration | 48,391 | |||
Professional fees | 35,308 | |||
Shareholder communication | 23,552 | |||
Custodian | 19,059 | |||
Trustees | 3,644 | |||
Miscellaneous | 6,859 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,055,047 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (21,050 | ) | ||
|
| |||
Net expenses | 1,033,997 | |||
|
| |||
Net investment income (loss) | 1,390,166 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 1,390,166 | ||
|
|
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. |
Statements of Changes in Net Assets
for the six months ended April 30, 2018 (Unaudited) and the year ended October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,390,166 | $ | 935,421 | ||||
Net realized gain (loss) on | — | 50 | ||||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 1,390,166 | 935,471 | ||||||
|
| |||||||
Dividends to shareholders: | ||||||||
From net investment income: | ||||||||
Class A | (1,054,944 | ) | (726,645 | ) | ||||
Investor Class | (91,149 | ) | (102,568 | ) | ||||
Class B | (144,807 | ) | (89,200 | ) | ||||
Class C | (99,267 | ) | (69,767 | ) | ||||
|
| |||||||
Total dividends to shareholders | (1,390,167 | ) | (988,180 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 167,355,512 | 311,082,298 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 1,355,249 | 902,460 | ||||||
Cost of shares redeemed | (174,055,440 | ) | (362,582,051 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (5,344,679 | ) | (50,597,293 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (5,344,680 | ) | (50,650,002 | ) | ||||
Net Assets | ||||||||
Beginning of period | 328,840,705 | 379,490,707 | ||||||
|
| |||||||
End of period | $ | 323,496,025 | $ | 328,840,705 | ||||
|
| |||||||
Distributions in excess of net investment income at end of period | $ | (75 | ) | $ | (74 | ) | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Financial Highlights selected per share data and ratios
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class A | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 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 | ‡ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
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 (b) | 0.46 | % | 0.35 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.93 | %†† | 0.32 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Net expenses | 0.57 | %†† | 0.59 | % | 0.43 | % | 0.13 | % | 0.11 | % | 0.15 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.57 | %†† | 0.60 | % | 0.64 | % | 0.64 | % | 0.64 | % | 0.65 | % | ||||||||||||||||
Net assets at end of period (in 000's) | $ | 229,878 | $ | 227,572 | $ | 226,181 | $ | 243,517 | $ | 230,330 | $ | 290,028 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Investor Class | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 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 | ‡ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
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 (b) | 0.35 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.70 | %†† | 0.18 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Net expenses | 0.80 | %†† | 0.73 | % | 0.43 | % | 0.14 | % | 0.11 | % | 0.16 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.84 | %†† | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | 0.90 | % | ||||||||||||||||
Net assets at end of period (in 000's) | $ | 27,311 | $ | 27,087 | $ | 58,658 | $ | 56,512 | $ | 56,177 | $ | 58,774 |
* | 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. For periods of less than one year, total return is not annualized. |
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 B | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 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 | ‡ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
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 (b) | 0.35 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.70 | %†† | 0.17 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Net expenses | 0.80 | %†† | 0.73 | % | 0.43 | % | 0.14 | % | 0.11 | % | 0.16 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.84 | %†† | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | 0.90 | % | ||||||||||||||||
Net assets at end of period (in 000's) | $ | 40,194 | $ | 43,351 | $ | 53,341 | $ | 58,152 | $ | 63,581 | $ | 73,803 |
* | 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. For periods of less than one year, total return is not annualized. |
Six months ended April 30, | Year ended October 31, | |||||||||||||||||||||||||||
Class C | 2018* | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Net asset value at beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income (loss) (a) | 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 | ‡ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
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 (b) | 0.35 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.70 | %†† | 0.17 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||||||
Net expenses | 0.80 | %†† | 0.73 | % | 0.43 | % | 0.13 | % | 0.11 | % | 0.15 | % | ||||||||||||||||
Expenses (before waiver/reimbursement) | 0.84 | %†† | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | 0.90 | % | ||||||||||||||||
Net assets at end of period (in 000's) | $ | 26,112 | $ | 30,831 | $ | 41,311 | $ | 41,050 | $ | 36,939 | $ | 33,254 |
* | 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. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
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 and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of 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 has five classes of shares registered for sale. 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 T shares were registered for sale effective as of February 28, 2017. As of April 30, 2018, Class T shares were not yet offered for sale.
Class A, Class I and Investor Class shares are offered at net asset value (“NAV”) without an initial sales charge. Class T shares are currently expected to be offered at NAV without an initial sales charge. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule. 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, as disclosed in the Fund's prospectus, Investor Class shares may convert automatically to Class A shares and Class A shares may convert automatically to Investor Class shares. Under certain circumstances and as may be permitted by the Trust's multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The 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. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share by using the amortized cost method of valuation, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund's liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 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 to the Fund at any time.
(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 of the Trust (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 Subcommittee (the “Subcommittee”) 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 Subcommittee 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 Subcommittee were appropriate. The procedures state 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 assess the appropriateness of security valuations, the Manager, the 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 Subcommittee 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 information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
18 | MainStay Money Market Fund |
“Fair value” is defined as the price the Fund would reasonably expect to 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 |
• | 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, 2018, 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, 2018, there were no material changes to the fair value methodologies.
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, 2018, there were no securities held by the Fund that were fair valued in such a manner.
(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 its 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 tax 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 at least 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 determinations using 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, to the extent the Fund held any such securities during the six-month period ended April 30, 2018, 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 pro rata to the separate classes of shares 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
19 |
Notes to Financial Statements (Unaudited) (continued)
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 (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty's failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund's custodian and 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 counterparty'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, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund.
(I) Debt Securities. The Fund's investments may include securities such as variable rate notes, floaters 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, among other things, 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 attributable to 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 a 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 the services performed and the facilities furnished at an annual rate of the Fund's average daily net assets as follows: 0.40% up to $500 million; 0.35% from $500 million to $1 billion; and 0.30% in excess of $1 billion. During the six-month period ended April 30, 2018, the effective management fee rate was 0.40% of the Fund's average daily net assets, exclusive of any applicable waivers/reimbursements.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding 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) do not exceed the following percentages of the Fund's average daily net assets: Class A, 0.70%; Investor Class, 0.80%; Class B, 0.80%; and Class C, 0.80%. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points of the Class A shares waiver/reimbursement to Class T shares, This agreement will remain in effect until February 28, 2019, 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 voluntarily waive or reimburse expenses of the Fund to the extent it deems appropriate to enhance the yield of the Fund's during periods when expenses have a significant impact on the yield 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.
20 | MainStay Money Market Fund |
During the six-month period ended April 30, 2018, New York Life Investments earned fees from the Fund in the amount of $646,162. Additionally, New York Life Investments reimbursed fees in the amount of $21,050, without which the Fund's total returns would have been lower.
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. Although 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, 2018, 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 $16,774, $99, $20,441 and $8,476, 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 DST Asset Manager Solutions, Inc. (“DST”), formerly known as Boston Financial Data Services, Inc., pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the six-month period ended April 30, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 99,474 | ||
Investor Class | 46,565 | |||
Class B | 74,432 | |||
Class C | 51,601 |
(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
The amortized cost also represents the aggregate cost for federal income tax purposes.
As of October 31, 2017, for federal income tax purposes, capital loss carryforwards of $133 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.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $—(a) | $— |
(a) | Less than 1,000. |
During the year ended October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets was as follows:
2017 | ||||
Distributions paid from: | ||||
Ordinary Income | $ | 988,180 |
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–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the six-month period ended April 30, 2018, there were no interfund loans made or outstanding with respect to the Fund.
21 |
Notes to Financial Statements (Unaudited) (continued)
Note 7–Capital Share Transactions
Class A (at $1 per share) | Shares | |||
Six-month period ended April 30, 2018: | ||||
Shares sold | 139,882,080 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,027,898 | |||
Shares redeemed | (142,488,360 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (1,578,382 | ) | ||
Shares converted into Class A (See Note 1) | 5,506,540 | |||
Shares converted from Class A (See Note 1) | (1,622,367 | ) | ||
|
| |||
Net increase (decrease) | 2,305,791 | |||
|
| |||
Year ended October 31, 2017: | ||||
Shares sold | 230,832,054 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 673,838 | |||
Shares redeemed | (267,898,343 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (36,392,451 | ) | ||
Shares converted into Class A (See Note 1) | 41,236,776 | |||
Shares converted from Class A (See Note 1) | (3,420,770 | ) | ||
|
| |||
Net increase (decrease) | 1,423,555 | |||
|
| |||
Investor Class (at $1 per share) | Shares | |||
Six-month period ended April 30, 2018: | ||||
Shares sold | 14,693,520 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 88,233 | |||
Shares redeemed | (10,746,215 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 4,035,538 | |||
Shares converted into Investor Class (See Note 1) | 1,660,404 | |||
Shares converted from Investor Class (See Note 1) | (5,471,252 | ) | ||
|
| |||
Net increase (decrease) | 224,690 | |||
|
| |||
Year ended October 31, 2017: | ||||
Shares sold | 40,171,786 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 86,374 | |||
Shares redeemed | (34,648,952 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 5,609,208 | |||
Shares converted into Investor Class (See Note 1) | 3,639,222 | |||
Shares converted from Investor Class (See Note 1) | (40,811,279 | ) | ||
|
| |||
Net increase (decrease) | (31,562,849 | ) | ||
|
| |||
Class B (at $1 per share) | Shares | |||
Six-month period ended April 30, 2018: | ||||
Shares sold | 1,638,778 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 142,849 | |||
Shares redeemed | (4,910,738 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (3,129,111 | ) | ||
Shares converted into Class B (See Note 1) | 34 | |||
Shares converted from Class B (See Note 1) | (27,805 | ) | ||
|
| |||
Net increase (decrease) | (3,156,882 | ) | ||
|
| |||
Year ended October 31, 2017: | ||||
Shares sold | 6,687,777 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 80,358 | |||
Shares redeemed | (16,508,386 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (9,740,251 | ) | ||
Shares converted from Class B (See Note 1) | (242,742 | ) | ||
|
| |||
Net increase (decrease) | (9,982,993 | ) | ||
|
| |||
Class C (at $1 per share) | Shares | |||
Six-month period ended April 30, 2018: | ||||
Shares sold | 11,141,134 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 96,269 | |||
Shares redeemed | (15,910,127 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (4,672,724 | ) | ||
Shares converted from Class C (See Note 1) | (45,554 | ) | ||
|
| |||
Net increase (decrease) | (4,718,278 | ) | ||
|
| |||
Year ended October 31, 2017: | ||||
Shares sold | 33,390,681 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 61,890 | |||
Shares redeemed | (43,526,370 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (10,073,799 | ) | ||
Shares converted into Class C (See Note 1) | 13,726 | |||
Shares converted from Class C (See Note 1) | (414,933 | ) | ||
|
| |||
Net increase (decrease) | (10,475,006 | ) | ||
|
|
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, 2018, events and transactions subsequent to April 30, 2018, 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.
22 | MainStay Money Market Fund |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited)
Section 15 of the Investment Company Act of 1940, as amended (“1940 Act”), requires that each mutual fund’s board of trustees initially approve and, following an initial term of up to two years, annually review and approve the continuation of the fund’s investment advisory agreement(s). At its December 12-13, 2017 in-person meeting, the Board of Trustees of the MainStay Group of Funds (“Board”), including Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (“Independent Trustees”) voting separately, unanimously approved for a one-year period the continuation of 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 decisions 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 2017 and December 2017, as well as other information furnished to the Board throughout the year as deemed relevant by the Trustees. Information requested by and furnished to the Board for consideration 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 other investment advisory clients of New York Life Investments and NYL Investors (including institutional separate accounts) that follow investment strategies similar to the Fund, if any, and, when applicable, 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 considered the information requested and received on the profitability of the Fund to New York Life Investments and its affiliates, including NYL Investors as subadvisor to the Fund, together with responses from New York Life Investments and NYL Investors to a series of requests encompassing a variety of topics prepared on behalf of, and in consultation with, the Board by independent legal counsel to the Board and its Independent Trustees. The Board considered information provided in advance of and during its meetings throughout the year including, among other items, information regarding the legal standards and fiduciary obligations applicable to its consideration of the Agreements and investment performance reports on the Fund prepared by the Investment Consulting Group at New York Life Investments as well as presentations from New York Life Investments and NYL Investors personnel, such as portfolio managers. The Board also considered information received from New York Life Investments throughout the year including, among other items, periodic reports on legal and compliance matters, risk management, portfolio turnover and brokerage commissions, sales and marketing activity, and non-advisory services provided to the Fund by New York Life Investments. The structure and format for this information and regular reporting were developed in consultation with the Board. 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 received information regarding the Fund’s distribution arrangements in response to a request letter prepared on behalf of, and in consultation with, the Board by independent legal counsel. 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. In connection with this June meeting, New York Life Investments also provided the Board with information regarding the revenue sharing payments made by New York Life Investments from its own resources to intermediaries that promote the sale, distribution, and/or servicing of Fund shares.
In considering the continuation of 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 factors: (i) the nature, extent 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 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 and/or NYL Investors. Although the Board recognized that the comparisons between the Fund’s fees and expenses and those of other funds are imprecise, given different terms of agreements, variations in fund strategies, and other factors, the Board 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. Throughout their considerations, the Trustees acknowledged the overall commitment of New York Life Investments and its affiliates to serve the MainStay Group of Funds, as well as their capacity, experience, resources, financial stability and reputations.
Although individual Trustees may have weighed certain factors or information differently, the Board’s decision to approve the continuation of 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. Throughout the year, the Trustees are also afforded an opportunity to ask questions of and request additional information or materials from New York Life Investments and NYL Investors. The Board’s conclusions with respect to the Agreements may have been based, in part, on the Board’s knowledge of New York Life Investments and NYL Investors resulting from, among other things, the Board’s consideration of the MainStay Group of Funds’ advisory agreements in prior years and the Board’s regular review of Fund performance and operations throughout the year. In addition to considering the above-referenced factors, the
23 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
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 decisions to approve the Agreements are summarized in more detail below.
Nature, Extent and Quality of Services Provided by New York Life Investments and NYL Investors
The Board examined the nature, extent 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 and managing Fund operations in a manager-of-managers structure, 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 and other non-advisory services to the Fund as well as New York Life Investments’ reputation and financial condition. The Board observed that New York Life Investments devotes significant resources and time to providing advisory and non-advisory services to the Fund, including its extensive oversight and due diligence reviews of NYL Investors and continuous analysis of, and interactions with, NYL Investors with respect to, among other things, Fund investment performance and risk as well as NYL Investors’ investment capabilities and subadvisory services with respect to the Fund.
The Board also considered the full range of services that New York Life Investments provides 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 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. The Board noted that the non-advisory services provided by New York Life Investments are set forth in the Management Agreement. In addition, the Board considered New York Life Investments’ willingness to invest in personnel, infrastructure, technology, operational enhancements, cyber security, information security, shareholder privacy resources and business continuity planning that are designed to benefit the Fund, and noted that New York Life Investments is responsible for compensating the Fund’s officers. The Board recognized that New York Life Investments has provided an increasingly broad array of non-advisory services to the MainStay Group of Funds as a result of regulatory and other developments. The Board 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, extent 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 and 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, resources and history. The Board considered that New York Life Investments’ and NYL Investors’ policies, procedures and systems are reasonably designed to assure compliance with applicable laws and regulations, and acknowledged the continued commitment to further developing and strengthening compliance programs relating to the Fund. 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 reviewed NYL Investors’ ability to attract and retain qualified investment professionals and willingness to invest in personnel to service and support 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 the 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, extent 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 over various periods in light of the Fund’s investment objective, strategies and risks, as disclosed in the Fund’s prospectus. The Board particularly considered investment reports on and analysis of 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 compared to relevant investment categories and Fund benchmark(s), the Fund’s risk-adjusted investment performance and the Fund’s investment performance as compared to peer funds, as appropriate, as well as the effect of current and recent market conditions. The Board also considered information provided by Strategic Insight showing the investment performance of the Fund as compared to peer funds.
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 seek to enhance Fund investment performance and the results of those actions. In considering the Fund’s investment performance, the Board generally places greater emphasis on the Fund’s long-term performance track record. The Board noted that the Fund’s investment performance had improved over recent time periods relative to peer funds and considered its discussions with representatives from New York Life Investments
24 | MainStay Money Market Fund |
regarding the Fund’s underperformance relative to the Fund’s benchmark index and peer funds over various other time 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 NYL Investors to seek to enhance investment returns, supported a determination to approve the continuation of 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, not the Fund, the Board considered cost and profitability information for New York Life Investments and NYL Investors in the aggregate.
In addition, the Board acknowledged the difficulty in obtaining reliable comparative data about mutual fund managers’ profitability, because 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 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 continued investments in personnel, systems, equipment and other resources and infrastructure to support and further enhance the management of 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 attract and retain experienced professional personnel and to maintain a strong financial position in order 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 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 funds in the MainStay Group of Funds, and among individual funds. As part of this engagement, the consultant analyzed: (i) the various New York Life Investments’ business units and affiliated subadvisors that provide services to the funds in the MainStay Group of 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 are reasonable, consistent with industry practice and likely to produce reasonable profitability estimates. Although the Board recognized 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, including reputational and other indirect benefits.
The Board observed 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 considered information about these other revenues, and their impact on the profitability of the Fund to New York Life Investments and its affiliates, which 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 incurred by New York Life Investments from its own resources.
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 were not excessive.
Management and Subadvisory Fees and Total Ordinary Operating Expenses
The Board evaluated the reasonableness of the fees paid under the Agreements and the Fund’s 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 subadvisory fees paid to NYL Investors are paid by New York Life Investments, not the Fund. The Board also considered the reasonableness of the subadvisory fees to be paid by New York Life Investments and the amount of the management fee expected to be retained by New York Life Investments.
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 that follow investment strategies similar to those of the Fund. The Board considered
25 |
Board Consideration and Approval of Management Agreement and
Subadvisory Agreement (Unaudited) (continued)
differences in the contractual management fee schedules of the Fund and similarly-managed MainStay VP Portfolios, taking into account New York Life Investments’ rationale for any differences in fee schedules. The Board took into account explanations provided by New York Life Investments about the more extensive scope of services provided to registered investment companies, such as the Fund, 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 considered that in proposing fees for the Fund, New York Life Investments considers the competitive marketplace for financial products. The Board noted that New York Life Investments may continue to provide support to the Fund in the form of voluntary waivers and/or reimbursements of fees and/or expenses, as disclosed in the Fund’s prospectus. The Board noted that, following discussions with the Board, New York Life Investments had proposed, and the Board had approved, a reduction in the management fee paid by the Fund, effective February 28, 2017.
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, an affiliate of New York Life Investments and 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 provision of sub-transfer agency services 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 tends 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 shareholders. 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. The Board noted that, for purposes of allocating transfer agency fees and expenses, each retail fund in the MainStay Group of Funds combines the shareholder accounts of its
Class A, I, T, R1, R2, and Class R3 shares (as applicable) into one group and the shareholder accounts of its Investor Class and Class B and C shares (as applicable) into another group. The Board also noted that the per-account fees attributable to each group of share classes is then allocated among the constituent share classes based on relative net assets and that a MainStay Fund’s Class R6 shares, if any, are not combined with any other share class for this purpose. The Board requested and considered information regarding New York Life Investments’ rationale with respect to these groupings. The Board also considered that NYLIM Service Company LLC had waived its cost of living adjustments during the past five years.
After considering all of the factors outlined above, the Board concluded that the Fund’s management 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.
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 shareholders. 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. Although the Board recognized 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, initially setting management fee rates at scale or making additional investments to enhance shareholder services. 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 in the MainStay Group of 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 shareholders. The Board noted, however, that it would continue to evaluate the reasonableness of the Fund’s expense structure over time.
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 continuation of the Agreements.
26 | MainStay Money Market 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, by visiting the MainStay Funds' website at nyinvestments.com/funds or 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 records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds' website at nyinvestments.com/funds; 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 New York Life 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).
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MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
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 Belgium S.A.4
Brussels, Belgium
Candriam France S.A.S.4
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC4
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC4
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY.
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. An affiliate of New York Life Investment Management LLC.
Not part of the Semiannual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life 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 by 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.
©2018 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 |
1737111 MS126-18 | MSMM10-06/18 (NYLIM) NL012 |
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/ Kirk C. Lehneis | |
Kirk C. Lehneis | ||
President and Principal Executive Officer | ||
Date: | July 5, 2018 |
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/ Kirk C. Lehneis | |
Kirk C. Lehneis | ||
President and Principal Executive Officer | ||
Date: | July 5, 2018 | |
By: | /s/ Jack R. Benintende | |
Jack R. Benintende | ||
Treasurer and Principal Financial and Accounting Officer | ||
Date: | July 5, 2018 |
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. |